Ans 1

Pricing Strategies
Premium Pricing
When the product is priced higher than its competitors because it has competitive advantage in
terms of quality, features and value that it provides to the customers. Premium pricing is usually
done at the beginning pf the product cycle and to create an premium image of the product it
has to be consistent with packaging, promotions, store décor etc.

Penetration pricing
Penetration pricing is used to gain market share by offering the goods and services at lower
prices than the products of competitors. Marketers want to get their products out in the market
so that the products raise consumer awareness and induce buyers to try the products.

Economy Pricing
An economy pricing is when the prices are set at the bare minimum to make a small profit
coupled with minimizing marketing and promotional costs. The key to a profitable economy
pricing program is to use economies of scale i.e. sell a high volume of products and services
at low prices.

Price Skimming
Price Skimming is a strategy of setting prices high to gain maximum profit, by introducing
new or unique products or by leveraging high brand value in a market that has few or no
competitors. It allows businesses to maximize profits till the competitors enter the market and
untill prices then drop.

Psychological Pricing
Psychological pricing is to encourage consumers to buy products based on emotions rather than
on common-sense logic. The best example is when a company prices its product at $199 instead
of $200.
Bundle Pricing Strategy
Bundle pricing is used to sell combinations of products together at a lower price than the price
at which they are sold they were purchased separately. This is an effective strategy to move
unsold items that are increasing inventory cost. Bundling also creates the perception in the
mind of the consumer that he's getting a very attractive value for his money.
Value Based Pricing
This pricing method utilizes the setting up a price based on the consumer perception of the
value of the product rather than the cost of the product.
Goods Value Pricing
This pricing method utilizes the consideration of the economic conditions and consumer price
perceptions while setting the price of the product – offering the correct combination of
quality/good service at a fair price.

Value Added Pricing: This method involves addition of value-adding and differentiating
features in order to increase the value of their product and charge a premium over competitors.
Cost-Plus Pricing: This is a simple pricing method that involves utilization of a standard
markup over the cost of the product.

Examples of application

Penetration Strategy
One Plus used penetration pricing strategy to price their smartphone in premium category in
such a way that it appears very attractive to consumers and to gain the market share. One plus
saved their advertisement and promotional costs by using invite-only as well as online
community members for selling. They priced the smartphone at price which made the
smartphone very attractive to a large number of prospective customers as they were looking to
buy a new or upgrade their current smartphone and this was the price at which people felt that
they were not taking a lot of risk of trying a new phone.

Premium Pricing Startegy

While cutting prices is widely accepted as the best way to keep customers during tough times,
the practice is rarely based on a deeper analysis or testing of an actual customer base.
Starbucks has followed premium pricing strategy and increased prices throughout the
company’s history which have always deterred the most price sensitive customers, leaving a
loyal, and higher-income consumer base. In order to compensate for the customers lost,
Starbucks raises prices to maximize profits from these price insensitive customers who now
depend on their strong gourmet coffee. This is also called value based pricing. Starbucks uses
price hikes to separate itself from the others and reinforce the premium image of the brand.
Due to their loyal and price sensitive customers, Starbucks has maintained a fairly inelastic
demand curve, and small price increases cause a huge positive impact on their margins without
decreasing the demand.
 Ans 2
Market Segmentation

A market is segmented to identify the correct consumers to cater a product or service to by

grouping them on the basis of geographic, demographic, psychographic and behavioural factors
which have different needs and characteristics. This process is called Market Segmentation.
Geographical

The Geographic factors primarily pertain to the location and how that affects consumer interest
in a product.
Demographic
It includes segmentation on the basis of age, gender, income and lifestyle.
Behavioural

This sort of segmentation divides the consumer into categories based on their behavioural
characteristics such as decision roles (decider, initiator, influencer, buyer and consumer)
benefits sought, loyalty, rate of usage, user status( ex-user, regular, first timer, potential etc.
buying on special occasions, readiness to buy( unaware, aware, informed, interested etc.)
Psychographic
The Psychographic segmentation involves dividing the consumer into market segments based
on lifestyles, attitudes, opinions and personalities.

Ans 3

 Intensive Distribution – The strategy is used to distribute lower priced products that are
impulsively purchased or buyer does not differentiate between brands much for such
products. Items are stocked at a large number of outlets and usually include things such
as biscuits, gum, candy, tongue cleaners as well as basic supplies and necessities.

 Selective Distribution – This strategy falls between other two where a product is
distributed to selective number of outlets. These may include items such as daily use
products, computers, household appliances that are costly but need to be extensively
available for consumer to compare.

 Exclusive Distribution – Higher priced items are sold at exclusive outlets located at
significant distances from each other. Example:Cars, specially premium ones.
Ans 4
Product

NESCAFÉ‘s primary target market are coffee drinkers, specifically those whom are
looking for a quick solution to quality coffee. People that want to enjoy their coffee without
any hassle/ready in a jiffy, all in the comfort of their own home.

USP- Instant pure coffee with distinctive taste and rewarding experience
Nescafe caters to the taste buds of each and every coffee lover. Nescafe introduced
various types of coffee, which is their product mix strategy. Taste preferences and
demographic needs of customers are also kept into consideration. The company provides
various blends like Nescafe Original Blend, Gold Blend, Gold Blend Decafe, etc. The
Cappuccino has various flavours like unsweetened, Decaffeinated etc. There are
espresso, green blend, Latte, Latte with various blends, Vanilla, Mocha, Irish Cream, etc.

Price

Different Nescafé brands come with different prices depending on cost inputs.
Nescafe has considered economic pricing by mass producing in order to reduce the price
and increase affordability in India. Being one of the premium brands it enjoys a high brand
value and acceptability at a comparatively high cost than its competitors like Bru etc.

Promotion

Advertising

Nestle has mainly used persuasive advertising, with an emotional aspect, to make the
brand a success. Nestle runs a number of advertisements and TV commercials with
Deepika Padukon as brand ambassador, and Karan Johar.

Place

Nestle company follows the following two channels which are mix of direct and indirect
channel of distribution.

1. Manufacturing AgentDistributorsRetailers

2. ManufacturingBulk buyersConsumers

Nestle enjoys a stronger distribution and sales network and frequently offers bulk buyers
trade discounts to maintain the sales at high. It offers generous discounts to its distributors.
The company also uses other famous products like Maggi and KitKat to push sales.
Example, when a merchant purchases one product, he might get a discount
for purchasing an additional product. This is intensive distribution as due competition from
other brands Nestle wants its products to be widely available so that chances of being
chosen over other brands increases in case of not so selective buyers.