DESIGNING PRICING STRATEGIES: FOR CLOSE UP BLUE

Procedure is: Select pricing Objectives. Determine demand. Estimate costs. Analyse competition costs/prices/ offers. Select pricing method. Select final price.
Selecting Pricing Objectives: Close up blue is the product and which is in growth stage so its sales are at the growing pace. Objectives that could be pursued are: Survival: In this case prices are very low. Price has to covers Variable cost first. Since the close up blue is in the growth stage so it cover its variable cost and lots of fixed cost. Maximizing Current Profit: Company tries to estimate demand/ cost associated with alternate pricing plans and see whether by increasing price may get more profit. Here HUL close up is in growth stage so company has consider the another price plan which may give higher profit Maximizing Current Revenue: Price set to maximum current revenue based on demand forecast but since product is in introduction stage so it is difficult to get more revenue. Maximise Sales Growth (Market penetration pricing): Market is penetrated by doing extensive advertising to increase the sales . Determining Demand:

 Price has a direct impact on demand & hence on other marketing objectives. Close up Blue is not new product so we have to do market survey and check the demand by concentrating on the customer choices. Demand of Pepsodent kids can be estimated thru:: Market survey Delphi Method. Time series analysis Based on above, demand curves created to forecast demand. Estimating Costs: In this step HUL determine the cost of Close up blue. In this level the cost is not so high because the product is in growth stage and high sales is happen. Costs should cover cost of Manufacturing/production. Distribution. Selling products. Return on Investment/ Risk. Total cost = Fixed Cost (over-heads) + Variable Cost. Analysing Competitors Costs/ Prices / Offers: HUL needs to benchmarks its costs against its competitor product in the same category. HUL also needs to learn about competitors product quality. Selecting Pricing Method:

HUL is used pricing method that is given Mark up price. Going rate pricing. Close up blue : Variable cost/ unit = Rs.10/-.

below: Mark Up Pricing:

Fixed cost = Rs. 2, 00,000/-. Expected sales = 60,000 units. Unit cost = Variable Cost + Fixed Cost/Sales. = 10 + (2, 00,000/60,000). = Rs. 13/-. Suppose mark up price = 20%, i.e., (Desired return= 0.2). Price = Unit Cost/ (1-desired return). = 13/ (1-0.2). = 16.75/-. This is Net dealer price (NDP). To this trade margin are added to get final customer price. Going Rate Pricing: Here HUL pays attention to its own costs/ demand. Price is based on competitions prices. Company charge same/ less than competition. This would depend on: Product type. Going rate pricing: Reflects industry collection wisdom. Maintains industrial harmony. Selecting Final Price: In this step the HUL is decide whether to continue with current price or go to another pricing plans. To select final price company should also consider: Psychological Pricing: Here HUL has to understand the consumer psychology and decide the price. Influence of Other Marketing Mix Elements: Final price must take in account of products quality & advantage relative to competition. Brands with average relative quality & high relative advantage are normally able to charge a premium. Customer, normally are willing to

pay higher prices for known products than for unknown products. Since the Close up is well known brand of the HUL so customer may accpect it at higher price so HUL profit in increased.

HULs Pricing Policy: Products price should be consistent with HULs pricing policies. Price of others products also need to be seen in this content to position product suitably.