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Pricing strategies

Pricing strategies. How to price the ultimate commodity. Dalina Ferrante Ralph Ho Yoji Suetsugu Daniel Hall Ernesto Ferrero Stian V Lofstad. Group A2 27 March 2003. Introduction. What will we present today?. Our presentation is divided into two parts:

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Pricing strategies

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  1. Pricing strategies How to price the ultimate commodity Dalina Ferrante Ralph Ho Yoji Suetsugu Daniel Hall Ernesto Ferrero Stian V Lofstad Group A2 27 March 2003

  2. Introduction

  3. What will we present today? Our presentation is divided into two parts: • We will try to answer two questions: • Why do people pay for water? • What decides how much people will pay? • How do you price a new product in a mature market? • Using Kotler’s six-step pricing model to price a water product

  4. Why pay for water ? • Physical reasons • Convenience of carrying water in bottles • Tap water is polluted in some regions • You may be unaccustomed to the bacteria flow in the water • Other water sources may be unavailable

  5. Why pay for water? (contd) • Psychological reasons • Fear of impure tap water • Spring water is conceived as healthy • Status from using certain brands • Consumer survey =>

  6. Interview in the supermarket

  7. Is bottled water all the same? CATEGORY I. Spring II. Treated III. Tap SOURCE Natural Spring Natural Spring or Artesian (well) Processed Municipal BRANDS

  8. How is tap water processed? The Service The Process Municipal Processing + • Reverse Osmosis • Carbon Filtration • Added Minerals The Product

  9. The productIntroducing Dasani

  10. So what is Dasani anyway? • Produced by Coca-Cola • Ranked 2nd in the US • Unique character • “State-of-the-art” bottling techniques "can't live without it"

  11. How to price Dasani in France? • Pricing objective • Demand • Costs • Competitors’ offers • Pricing method • Final price sell value, not price

  12. 1. Pricing objective VALUE IDENTIFICATION Where should Dasani be priced? PRICE

  13. Quick Revision on Costs…. • Fixed Costs (High) • Variable Costs (Low) • Total Costs (Low) • Average Costs (Very Low) 3. Costs

  14. Prestige Good - Dasani P Q 2. Demand D

  15. 4. Competitors’ offer Direct competitors: bottled-water brands 0.57 1 Liter bottle (6 ltr bundle-price) Price range 0.17～0.57€/liter 0.17 €/liter

  16. 4. Competitors’ offer (cont’d) Substitutes: tap filters, water filtration € 17.99 (including one filter for 100 liter) € 5 per additional filter for 100 liter Assume we use 400 liters (Person average consumption/year ) =€ 0.08 /liter

  17. 5. Pricing method • Perceived-value pricing • Educate customers about the value of Dasani • Quality: = or > • Price : < • Psychological pricing • Set price higher than that of water filtration • Higher price may imply higher quality • Avoid mixing the image with water filtrations

  18. 0.17 Perceived pricing Value Psychological pricing 0.08 6. Final price Price 1 Liter bottle (6 ltr bundle-price)

  19. Conclusion • Price is the only component of the component mix affecting revenues • To price a commodity, brand status must be achieved • Kotler’s six steps provide a good framework • Price must be flexible and adjustable

  20. Questions?

  21. Backup slides

  22. World Consumption

  23. Miscellaneous Production Raw Material Cost Structure

  24. Estimating Demand …..Bottom Up Demand Actual % Potential Population

  25. Pricing objective Demand Costs Competitors’ offer Pricing method Final price Charts

  26. Bloopers – it’s not easy making videos…

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