Sunday, August 26, 2012

PRICE DEATH.


Price is a sensitive issue for any product life cycle. It destroys brand values and other core activities if price is being designed just to ride on growth numbers. Rising cost of production has forced companies to split prices into two aspects 1) Increasing the price and 2) Splitting the price and value.

Increasing the price was not taken as a prudent decision since that might reduce the sales number was hitting back on the management table. Hence the only option left was to split the value and drive prices accordingly. What failed among the management while adopting this universal policy was this principal was applicable for every product and secondly competition easily gobbled up the value proposition factors. To make my statement to be very clear to my readers I would like to give a live example. When we go to any shopping mall like Pantaloon or BigBazar we buy goods and at the time of getting the Carry Bag we are being asked to buy the same for Rs.5 irrespective of the value of the goods.

I remember that during 5 years back even the same shopping mall was giving us the Carry Bag free of cost. Now many will find reasons to justify among which the most common one will be price has increased. But even in 2004 and 2008 when inflation was high these shopping malls were giving the carry bags free of cost along with purchase. This is how value has been splitted and price has been introduced in a product sale.

But with changing times consumers are also changing fast along with markets. Consumers not only reject the products but also the brands also collapse with pricing inefficiencies. It is correct that through Carry bag sales at Rs.5 the company might have earned some more money but at last consumers might shift which will affect the company and its brands over the long term. Companies have taken brands for granted and also prices matched with the brand to be a fixed pie. Companies have identified that they are owners of the value creation but failed to understand that value is created and built by consumers. Consumer doesn’t take an minute to dump an product and replace it with some other one in these competitive market sphere.

Exploiting consumer disadvantage is the prime motive to earn money in today’s market. Banks are the prime teachers for the market of exploiting consumer disadvantages. Now I find the telecommunication companies re the new members of the same game.

Companies who built Brands and values have shared it equally with the consumer and company. Billions are being spent to build a value and Brand for a product. More is being spent during the life cycle of the product. A splitted pricing policy is enough to destroy and shift the consumer from the product for ever.

Focus on relationship is the most important thing for reduced cost of spending on Brand and Value creation and emphasizing more on pricing policy. Better pricing and value can be designed just from building healthy relationship with consumers. Just like if tomorrow LG comes with an policy of calling all the consumers to avail warranty service even after the period of warranty is over just by paying the money of Rs.2000 fro LED TV (currently provided by LG) will give an stupendous sales increase to the company. In other words many consumers don’t know about the current service of LG in terms of this product.

Financial companies particularly the ones engaged in B2C business can derive stupendous growth just by designing prices and not splitting the same. One might take the advantage of consumer for an short time but once the theory is being proved the company will find its products being dumped.

Prices should not be designed on competition based theory. Consumer centric prices are the ideal way to keep the competitive advantage of the business alive over the periods of the company. The business model of Amazon is being discussed a lot among the management schools but how many follows the same theory in real life.

Pricing of products, needs to be flexible over the period of the product. If raw material prices comes down how many companies passes the benefits to the consumer is hardly being remembered. Moreover companies try to fix up one unique price for a product which will alone make them a winning horse. But different consumers have different perception towards prices hence price flexibility needs to be on the top of the priority. Value needs to be rightly matched with prices like in case of an computer where even of the best price if after sales service remains an draw back profits are bound to live for an short term.

Pricing needs to be transparent so that consumer disadvantage is not being taken into the business process of making revenue. Banking is the biggest example which fits well into the picture. Companies should treat consumers as an part of their product then only revenues will grow despite of any economic down turn or any other economical factors damaging the price or product life cycle.

Companies should try themselves as benchmark of product value and price rather than becoming short term profit generators. Companies often find that their product are being dumped after an short time frame where the burden of the failure is being thrusted upon the product life cycle and another fresh millions are being spent for new product. Companies fail to identify that their price made their product replace from the market space. Despite of healthy branding and marketing the product dies before it could flourish. Pricing plays an very important role in deciding the fate of an product over the life cycle of the product itself. Companies need to understand that pricing needs to be a part of consumers and not for generating revenues. Revenue is the byproduct of consumption derived from consumers.

Moreover if your price and value are not matched efficiently then in today’s competitive market companies will find very difficult to survive.

1 comments:

sandhya bizconn

Thanks for sharing. Multiflex is a pioneer in the field of packing materials manufacturing and providing packing solutions to our valued clients. We are renowned since 2003 for our products such as Shopping Carry Bags, Plastic Carry Bags, Food Packaging Bags, Polythene Bags, and Chemical Packaging Bags that fulfills the packing needs of our customers with maximized efficiency and quality. Shopping Carry Bags

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