Title Price Strategy

Sumbitted to Prof Mateen

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Submitted By Yasir Mehmood MBA-Spring 2010

ACKNOWLEDGEMENT
All My Words Dedicated With Respect and Reverence Love and Affection to

My Loving Parents & Teachers

Whose Love and Prays Always Accompanies Me Like a Shining Star Whenever I was in Darkness and Enable Me to Reach This Stage.

Introduction of topic:
Introduction

"Price" is one of the most important "P" of the marketing Mix. Pricing is important because it is a reward to the company and must be in hand to complete the other three "P" of the marketing Mix. The pricing of the goods and services performs a key strategic role in many firms because of the deregulation intense global competition, Slow growth in many markets and the opportunities for firms to strengthen market position. Pricing decision is very important because the survival of a company in the market depends upon Pricing decision. Pricing stratigy depends on pricing objectives.

Pricing Objective Maximize Increase Increase Match Company Obtain

Profit sale Volume market share price

competitors growth

a target rate of return on investment competitors from cutting prices

Discourage Social,

Maintain price leadership ethical, or ideological objective

Use the price to make the product visible

Development of new pricing strategy:

There is no single recipe to determine pricing; the following is a general sequence of steps that might be followed for developing the pricing of a new product:

1. Develop marketing strategy:

perform marketing analysis segmentation targeting positioning

2. Make marketing mix decisions:

Define the product

distribution and promotion tactics

3. Estimate demand curve: Understand how quality demanded varies with price.

4. Calculate cost: Include fixed and variable costs associated with the product

5. Understand environmental factors: Evaluate likely competitor action, understanding legal constraints, etc.

6. Set pricing objectives: For example, profit maximization, revenue maximization, or price stabilization

7. Determine pricing: Using information collected in the above step select a pricing method, develop the pricing structure, and define discount

Case Study
Price Strategy of Walls

Introduction of Company

Unilever Pakistan (70.4% Unilever equity) is the largest FMCG (Fast Moving Consumer Goods) Company in Pakistan, as well as one of the largest multinationals operating in the country. The company manufactures and markets home and personal care product, beverages, ice cream and spreads. Some of its brands are Supreme Tea, Clear Shampoo, Close Up, Comfort ,Fair & Lovely , Lipton Supreme Tea, Lifebuoy soap & shampoo, Lipton, Lux, Surf Excel, Walls, Wheel, Lipton, Sunsilk, Surf (detergent), Knorr, Rexona, Kissan, Lipton Ice Tea. Unilever is the worlds largest manufacturer of ice cream which in fact holds almost 18% of the global market share. And the brand is known as Wall`s ice cream. In Pakistan the Heart brand is called Walls and it is one of the most active players in the market and is striving to offer lighter, healthier products as well as providing old favorites, hence catering to a variety of diverse tastes

OBJECTIVES OF WALL'S
The objective of wall's as under: -

To defend current Mkt. share Sale Growth. Customer satisfaction. Continue product modification and improvement effort to increase customer benefit and reduce cost. Expand production capacity in advance of increasing demand to avoid stakeout. Develop a multiple line extension offering targeted to the need of several users segment in the market. Meet and beat lower prices or heavier promotional efforts by competitors.

Price Adjustment Strategies

Wall's uses the same price strategies for all regions. They are giving 5% discount to their wholesalers and 7% to their retailers. Company provides off-season quantity discount (3 extra ice cream pieces on the purchase of a cart on to their dealers.)

Pricing strategies
There are two main strategies for pricing, which the companies adopt. Market-Skimming Pricing Market-Penetration Pricing

Skimming Pricing
Market skimming involves setting a price that is high in the range of expected prices. This strategy is particularly suitable for new product because in the early stages of a product life cycle, price is less important and competition is minimum. Product user is from high-income group and they are financially strong and they are not price conscious. Profit margin is high. We can not set this strategy for a long period of time because after some time competitor arrives in the market and competition among them start.

Penetration Pricing
Establish distribution centers all the cities where the Ice-cream to be supplied, these distribution centres will have a storing facility i-e a large freezer room for storing the icecream, the temperature maintained in the freezer room will be -50 degrees Centigrade. These distribution centres will be responsible for the flow of product. They will take orders from a market, fill them and provide on time delivery to the retailers. These distribution channels will be run by the whole salers, they will required to keep a certain level of inventory to fill the customers orders promptly, completely and accurately. Each city will have one distribution centre that will cover the whole city.

Walls market Segmentation, Targeting and Product Positioning Process

The market

Segments (A, B, C, D, E, F)

Market targeted (A, E, F)

Marketing programming each Target segment

Product Positioning Each target segment

SEGMENTATION:
A market segment consists of a large identifiable group with a market. Buyers are differ in their wants, purchasing powers, geographical location, buying attitude and buying habits Walls have segmented market according to consumer characteristics and consumer response. Walls take advantage for both these strategies. In identical consumer characteristics those whose geographical, demographic and psychographic characteristics are common and from another those customer who give much attention to benefits, occasions and brand.

Walls have divided market into these segments: 1. 2. 3. 4. Demographic segmentation. Geographically segmentation. Psychographic segmentation. Behavior to word Product.

The wall's segmented the entire market into such segments, which are differentiable through:-

Demographically Segmentation
Age: Family Size: Gender: Income: Occupation: Social Class: Teenage, 20to40 years. 4 to 5 members. Both male and female. RS 15,000 to RS 35,000. Professional, Technical and Students, businessman Middle Class.

Walls introduce the brands for the younger as well as the children's. Wall's targeted both high as well as low-income gourds. In simple word we can say that wall's introduce of all income and all age groups.

GEOGRAPHIC SEGMENTATION
Region Density Climate South Asian Region Pakistan, . Urban, rulers Both Northern & Southern region of Pakistan.

This is segmenting the market on basis of location the factors contributes in it is mainly, the number of population of that area and the living standard of that particular location. The wall's has been targeted both urban as well as rural areas.

Behavioral Segmentation
Occasions: Benefits: For regular occasion. Quality, taste

TARGET MARKET
It is the process of evaluating each market segmentents attractiveness and selecting one or more segments to enter. Some time companies are able to target every segment, because they are financially strong and they can arrange a vast product line.

Wall's have been introduce different verities with different pricing of which some of are has high price that can only attract high income group and wall's has also different brands with low price which can be easily purchase by low income groups. Wall's is easily available in urban and rural areas all over the country.

Wall's has been targeted every segment and we can say that wall's has a Fragmented market.

POSITIONING THE PRODUCT

After realizing the need, potential in market and rapidly increasing growth and market share of the product. The company launches a WALL ice cream and expands its product line. Company tries to position it as an economical, qualities, and variety of features. Which can be easily sell at any times anywhere in the country. Company existing position in the market also helps to position it successfully in Pakistan economy.

High Price

Low Price

Brand C

Brand B Brand D

Brand A Brand E

Low Quality

High Quality

Market Attractiveness
Wall has identified and described the various segments in given market, it must determine the attractiveness of each. Relevant factors to consider here pertain to the market, economic and technology, competition and the general environment Wall undertaking an attractiveness analysis would have added and delete factors according to its own needs.

Market Attractiveness Factors

Market
Size Growth including stage in product life cycle Differentiation possibilities Bargaining power of customers Cyclicality and Seasonality Distribution

Economic and technological

Investment intensity Industry capacity Technology Barriers to entry and exit Access to supplies

Competitive
Competitive structure Competitive groupings Substitute products Price Individual competitor analysis

POSITION OF WALL'S IN PRODUCT LIFE CYCLE

Wall's is standing on maturity stage with 65% of total market share and Wall's is a leader in ice cream market. To survive in the market Wall's introduce time to time their new flavors and different promotional schemes.

"Price" is one of the most important "P" of the marketing Mix. Pricing is important because it is a reward to the company and must be in hand to complete the other three "P" of the marketing Mix. The pricing of the goods and services performs a key strategic

role in many firms because of the deregulation intense global competition, Slow growth in many markets and the opportunities for firms to strengthen market position. Pricing decision is very important because the survival of a company in the market depends upon Pricing decision. Pricing stratigy depends on pricing objectives.

Product Line Pricing

Setting the price steps between various production in product line, based on cost difference between the production, consumer evaluation of features, and competitor's prices. Wall's has very long range of its line of products. The various product line of Wall's is as follows:

Products
Cornetto Feast Split Solo Mini milk Paddlepop Fruiti Topten Star Cup Family Pack (1 liter)

Flavors
Mango, Classico, Strawberry Chocolate, Kulfa Mango, Strawberry Mango, Kola Raspberry Samar, Kulfa Banana, Rainbow, Chocolate-Fudge ------------------------------------------------Vanilla, Mango Slash, Vanilla, Chocolate, Strawberry Mango, Chocolate

Price

Wall's Pricing Strategy

The management of Wall's intelligently using both the skimming and penetration pricing strategy.The brands witch having price more than Rs. 18 is skimming pricing stratigy and brands having prices less than Rs. 18 adopted penetration pricing strtegy. By adopting skimming they are earning more profit and by penetration they attract the customers and consolidating position in the market. They have to adopt both strategies because they are facing established competition in the market, e.g. In beginning the main competitors for wall's are Yummy & Polka, now their major competitor is Yummy after Purchasing Polka. It is necessary for company to purchase Polka, because "Nestle is well established company with good reputation they are willing to enter in Ice cream

market by purchasing polka, so it would be a thread for walls that they may not be able to achieve desired profits. Starting the production requires more time than purchasing of any already established business. "Keep in min the expected of Nestle, Lever Brother Purchased Polka.