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Marketing Management Assignment: DR - Shahnawaz Abdin
Marketing Management Assignment: DR - Shahnawaz Abdin
MANAGEMENT
ASSIGNMENT
DR.SHAHNAWAZ ABDIN
SUMITTED BY
GROUP E
JAMIA
HAMDARD
MBA SECTION B
Explain the Concept of shrinkflation from the perspective of pricing strategy?
what is Shrinkflation?
Shrinkflation is the practice of reducing the size or quantity of a product while the
price of the product remains the same or slightly increases. In some cases, the term
may indicate lowering the quality of a product or its ingredients while the price
remains the same.
British economist Pippa Malmgren is generally credited for inventing the term in
2009. The phenomenon has become quite common in the food and beverage
industry.
EXAMPLE:
In the case of rising inflation, manufacturers usually opt for shrinkflation. Instead
of hiking the price of any product, companies reduce the size of the item keeping
the price of the product untouched. According to the companies, shrinkflation
helps them to bear the brunt of higher input costs. The firms adopt this method as it
will not immediately affect the buyer and they hope the consumers will not be able
to notice the reduction in quantity at first glance
Ways of shrinking:
Reducing size
Reducing quantity,
Reformulating the products,
Removing ingredients from a product while maintaining the same price.
Causes of Shrinkflation
Due to the increase in the various elements of production costs such as raw
materials, labour, power cost, and so on, the manufacturers are compelled to follow
shrinkflation as the increasing costs eat up theirprofit margins. As a
countermeasure, they reduce the quantity of the product offered while maintaining
the retail price. It is done against immediate price increases as customers generally
do not pay attention to minor quantity reductions.
Another main reason that leads to shrinkflation is high competition in the industry.
To attract customers by maintaining the prices, the producers can maintain their
profit margins by adopting this strategy. An example is that the supermarkets have
a competitive edge due to their large-scale operations and do not pass on the
burden of increased cost to the customers. The only option available to the small
producers is to follow this strategy and retain customers by maintaining retail
prices.
Advantages of shrinkflation
It helps the producers to cope with intense competition and thereby retain
customers.
It also helps the manufacturers to maintain their profit levels even after the
increase in input costs.
Disadvantages of shrinkflation
The wholesale food price index inched up to 8.88% in April from 8.71% in March.
And Hindustan Unilever’s CFO Riteish Tiwari recently said that reducing the
volume in certain price-point packs is “the only way for us to take price increases.
The 10-rupee bar of the company’s Vim soap weighs 135 grams now, compared
with 155 grams about three months ago, Bloomberg reported. At the same price
point, a pack of the crunchy aaloo bhujia made by Haldiram’s is 42 grams now,
down from 55 grams. Making the products smaller while still maintaining the same
price is termed ‘shrinkflation’.
Akshaya D-Souza of retail intelligence platform Bizom also says that when a
company is very heavily exposed in terms of revenue to certain price points,
tinkering with them is a competitive risk that could result in loss of market share.
He said that for many in India, a tea and a small biscuit pack double up as their
meal.
Dabur India CEO Mohit Malhotra has called Rs 1, 5 and 10 as “sacred price
points” whereas HUL’s Riteish Tiwari referred to these as “magic price points”.
Taking a look at how much Low Unit Packs contribute to the sales of some of the
top FMCG companies will give a sense of how important these price points are for
them in India.
HUL gets almost 30% of its business from Rs 1, 5 and 10 packs, for Britannia this
moves up to 50-55% and Parle Products, which makes Parle-G and Hide and Seek
biscuits, derives a massive 70% of its revenue and volumes from 10-rupee packs
and below.
Speaking to Business Standard, Krishna Rao Buddha, Sr Category Head -
Marketing, Parle Products said their first step during high inflation is to try and
absorb the costs. Price points are extremely critical in biscuits and snacks industry,
he says adding that for Rs 10 packs and below, companies always go for weight
reduction.
Consumers are fine with price increases for packs beyond Rs 20, he says. In the
past 12-14 months, Parle hiked prices by 7 to 8% by weight cuts and direct hikes.
"I believe that in 2025 Rs 10 will the new Rs 5," he says.
Another strategy that has started to come up is ‘bridge packs. Giving an example,
HUL said it introduced a new size between its Rs 10 and Rs 35 Lifebuoy soap
which gives better value for consumers while ensuring affordability and at the
same time gives scale to the manufacturer. HUL is trying to introduce bridge packs
across all categories impacted by commodity prices. Although companies
incorporate a range of tactics to overcome inflationary pressures, they have no
option but to go for grammage cuts for smaller packs so they do not lose out on
market share in a competitive segment where significant volumes are dependent on
price-sensitive consumers.
If the product is in introductory phase shrinkflation would not be the ideal strategy
to deal with the inflation . It should be done in the growth stage when the product
is well established in the market.
What is pricing?
Price is not just a number on a tag. It comes in many forms and performs many
functions. Rent, tuition, fares, fees, rates, tolls, retainers, wages, and commissions
are all the price you pay for some good or service. Price also has many
components. If you buy a new car, the sticker price may be adjusted by rebates and
dealer incentives.
Throughout most of history, prices were set by negotiation between buyers and
sellers. Bargaining is still a sport in some areas. Setting one price for all buyers is a
relatively modern idea that arose with the development of large-scale retailing at
the end of the nineteenth century. F. W. Woolworth, Tiffany & Co., John
Wanamaker, and others advertised a “strictly one-price policy,” efficient because
they carried so many items and supervised so many employees.
Buyers can:
• Check prices at the point of purchase.Customers can use smart phones to make
price comparisons in stores before deciding whether to purchase, pressure the
retailer to match or better the price, or buy elsewhere.
• Name their price and have it met.On Priceline.com, customers state the price
they want to pay for an airline ticket, hotel, or rental car, and the site looks for any
seller willing to meet that price.3 Volume-aggregating sites combine the orders of
many customers and press the supplier for a deeper discount.
• Get products free.Open source, the free software movement that started with
Linux, will erode margins for just about any company creating software. The
biggest challenge confronting Microsoft, Oracle, IBM, and virtually every other
major software producer is: How do you compete with programs that can be had
for free? “Marketing Insight: Giving It All Away” describes how firms have been
successful with essentially free offerings.
Sellers can:
PRICING OBJECTIVE:
The company first decides where it wants to position its market offering. The
clearer a firm’s objectives, the easier it is to set price. Five major objectives are:
survival, maximum current profit, maximum market share, maximum market
skimming, and product-quality leadership Survival Companies pursue survival as
their major objective if they are plagued with overcapacity, intense competition, or
changing consumer wants. As long as prices cover variable costs and some fixed
costs, the company stays in business. Survival is a short-run objective; in the long
run, the firm must learn how to add value or face extinction.
Maximum Current Profit Many companies try to set a price that will maximize
current profits. They estimate the demand and costs associated with alternative
prices and choose the price that produces maximum current profit, cash flow, or
rate of return on investment. This strategy assumes the firm knows its demand and
cost functions; in reality, these are difficult to estimate. In emphasizing current
performance, the company may sacrifice long-run performance by ignoring the
effects of other marketing variables, competitors’ reactions, and legal restraints on
price. Maximum Market Share Some companies want to maximize their market
share. They believe a higher sales volume will lead to lower unit costs and higher
long-run profit, so they set the lowest price, assuming the market is price sensitive.
Price Mechanism:
Definition: Price mechanism refers to the system where the forces of demand and
supply determine the prices of commodities and the changes therein. It is the
buyers and sellers who determine the price of a commodity.
For example, the Government of India recently passed an order to decontrol the
prices of diesel and remove it from the jurisdiction of the government. Now the
prices will be determined by the demand from consumers and supply from the oil
companies.
Pricing strategy
Best for: products with natural, complementary add-on options. SaaS companies
have used the captive pricing strategy successfully. For instance, a web analytics
software company charges $50 a month for its basic version. However, throughout
their time using the product, customers will find that they absolutely need the add-
ons — like more saved reports per seat, more data modelling capabilities and more
monthly tracked users — to enable the core product. So, they buy the add-ons.
Example: A colour printer costs $225. However, in order for the printer to work, it
needs ink cartridges from the same company. Four-packs of cartridges cost $115,
and you’ll need to purchase them on a recurring basis throughout the printer’s life.
Price Skimming
Definition: This strategy entails pricing new products at the highest initial price
that customers will pay, then gradually lowering it over time.
Best for: products that are innovative or trendy, have very little competition and
appeal to early adopters. To use this strategy, a company and its products usually
have to be wellknown — and known for quality — in order to justify the hefty
price tag. Price skimming is typically effective in sectors like technology and
fashion.
Penetration Pricing
Best for: a price-sensitive market, unlike the one appropriate for price skimming.
Products should have broad appeal with clear economies of scale, since this
strategy relies on customers volume to help cover costs prior to the planned price
hike.
Premium Pricing
Freemium Pricing
Definition: Companies that use the freemium pricing strategy offer a basic product
for free and an enhanced version with more features, services and/or content for a
fee. The enhanced version can also be considered premium due to a lack of
features — like ads.
Best for: products that appeal to a large audience with a natural progression from
“free” to “premium.” Freemium conversion rates generally fall between 2–5%,
which means that a company needs a large user base and an effective conversion
strategy.
Example: An IT management software offers a completely free IT help desk.
Included are unlimited tickets, users, devices, agents and technicians. However, the
free version is ad- supported. If a customer wants to get rid of the ads, it can pay
$50 a month. The paid version also allows customer companies to display their
logos in the ad space and in report PDFs.
Free Trial
Definition: Free trials let customers try an offering at no cost for a limited time. A
user can continue using the free version of the offering indefinitely, versus, say, 30
days with a trial subscription. Free trials are classified as either opt-in or opt-out.
An opt-in free trial allows a user to access the trial without providing any
information up front. An opt-out free trial requires users to provide a payment
method and explicitly leave the program prior to the end of their free trial to avoid
being charged.
Best for: companies that want to provide prospects with their full service, not the
stripped-down version common in the freemium strategy. With a free trial, users
receive every feature they would get with the paid version of the offering — but
only for a short amount of time.
Introduction
Unacademy is one of India’s largest online learning platforms. The business Model
of Unacademy involves its business Plan, Revenue model, its competitors, SWOT
Analysis and many more.
Unacademy has a wide range of services. Apart from education, multiple
accusations have significantly increased the areas of services for the startup.
Unacademy has more than 20 million students currently learning through the app,
with almost 2.5K+ free live classes held every day. Anybody with a smartphone
and a good internet connection can learn from anywhere in the country. Also,
Unacademy is making its ever-possible move to reach the remotest parts of the
nation.
Business Plan
Unacademy operates on B2B and B2C business models.
Relevel: This new platform is designed to help job seekers find their jobs within 15
days of application. Relevel claims of having more than 2.35 lakh users and boasts
of a 100% placement rate. Frontend Development, Backend Development, and
Business Development are the 3 tests that Relevel conducts for job seekers as of
now. The platform successfully raised $20 mn from Unacademy on October 1,
2021. In terms of revenue, Relevel crossed $10 million in Annual Recurring
Revenue (ARR) in June 2022.
Pre-recorded videos
LIVE session
Unacademy marketing strategy
Running a business with a strong marketing strategy allows the business to reach
and survive among the big competitors present in the market. With the presence of
various strong competitors in the market, Unacademy is using various strong
marketing strategies such as online marketing campaigns, Tv advertising, and
ambush marketing for attracting various users.
Ambush marketing:In this IPL season, Unacademy was also listed among various
other sponsors for conducting the game. As we all know that cricket is one of the
most loved games for the Indians. So, doing ambush marketing by sponsoring the
cricket event must have got a positive result that would definitely help in position
its brand image among various viewers.
Introduction
Paytm is a subsidiary of One97 Communications Limited–a mobile internet
company. It was founded by Vijay Shekhar in August 2010, with a startup funding
of $2 million. noida-based company initially offered direct-to-home (DTH) and
prepaid mobile services. Paytm has since expanded its service, offering partner-
based lending and loan repayments. These services increase revenue via EMI
(equated monthly installment) payments and collection fees. Let’s consider some
significant moments in Paytm’s growth
MDR is a percentage fee, usually between 1-2 percent, that merchants and vendors
pay to use a platform’s debit/credit card services. Paytm’s MDR for wallet, net
banking, and credit card is 1.99 percent. It charges INR 5-65 for annual UPI
subscription.
Convenience Fees
Commission
For instance, it earns a percentage sourcing fee for loan disbursal. This contributed
to its financial service business growth which increased by six percent in Q1 2022.
The FinTech company earns commission from insurance partners and an upfront
fee for distributing cards from financial partners.
This time-limited event had two offer periods between October and November
2021. This incentive encourages customers to increase their usage of Paytm’s
services. Besides event sponsorship, Paytm deploys ads for promotion. The
FinTech company uses social media channels like Facebook and Twitter for
advertising. Also, it promotes brand awareness via traditional channels like TV and
newspaper.
The “Paytm karo,” a short ad film, has become a memorable brand tagline. Besides
ads, brands need organic ways to engage with their target audience. Paytm’s
campus ambassador program injects human connection into its brand promotion
effort.
In 2021, the brand had an initial public offering (IPO) that attracted $1.1 billion in
investor funds. Canada Pension Plan (CPP) Investment Board, Blackrock, and
Birla MF were some investor partners in this anchor round.
Paytm's partners include Visa, HDFC bank, Shopify, Zoho, and Shopmatic. The
brand helps merchants grow their business and connect them to the right
customers. This occurs via the Paytm Partner Program.
Marketing Strategies
Paytm introduces cashless transaction schemes:The potential market for online
marketing as well as cashless transactions has also increased with the growth of
mobile phone users in the world. The company has been able to hit the customers
with smart phones with its cashless transaction schemes.
• Paytm had also announced an incentive including Rs. one crore grand
prize along with additional prizes like motorcycles, smartphones, laptops
and other exciting gifts. All users transacting between 1st December 2016
and 31st March 2017 were eligible to win these prizes.
• The ‘Scan any QR to pay using Paytm’ scheme has been launched in seven
languages which are Bengali, Marathi, Gujarati, Tamil, Telugu, Kannada,
and Malayalam
Paytm is the official sponsor and supporter of India's cricket team, which would
give the brand worldwide publicity and exposure.
The company has got 120 seconds of airtime for each match played on the
tournament, and the brands popularity increased during the World Cup has resulted
in the launch of new TV advertisements during the IPL 8 season.
Paytm was made a household name, using a phrase from the catchy word "Paytm
karo"
Paytm's Discount Offers:The biggest selling point for paytm was without
question motivating people to use the offers that have been run by the company.
Add to these the cashback offers and discounts offered by mobile wallets like
Paytm, as well as the reward points and loyalty benefits on existing credit and store
cards.
Here is a list of the successful campaigns and partnerships with leading brand run
by Paytm:
Paytm Karo:This is one of the key announcements that rapidly gained populism.
The company has become active in social media. #PaytmKaro is being added to
almost every conversation that is being driven on Facebook and Twitter. The ad
rolls out some life situations such as money transfer, online shopping, mobile
recharge which are made easy by Paytm services.
Facebook Live:Paytm has imbibed its customers with details about the value of
user account security and how they are protected against hacking. Paytm
conducted a series of live Facebook training series, “Paytm Merchant Connect-
Training Series” which turned out to be a great success.
References
https://unacademy.com/lesson/business-model-channels/PE2A7INU
https://www.ciim.in/unacademy-marketing-strategy-and-case-study/
https://corporatefinanceinstitute.com/resources/economics/shrinkflation/