Pricing

The AMA defines Price as the ratio of the money needed to acquire a given good or service.Cost on the other hand is the money expended to produce and market its product and service.Sellers sell at a Price and Buyers buy at a cost.

                                                 

POSSIBLE CONSUMER REFERENCE PRICES - Per Kotler

1	Fair Price-what the product should cost
2	Typical Price
3	Last Price Paid
4	Upper bound price-reservation price / what consumers would pay
5	Lower bound price- lower thresh hold price / the least consumers would pay
6	Competitor Prices
7	Expected future price
8	Usual discounted price

Purchase decisions are based on the relative worth of how the consumers perceive prices. Customers have a lower price threshold beyond which the prices signal inferior quality and a higher threshold  price above which prices are prohibitive and seen as not worth the money.

 

ANTISEPTIC LIQUID MARKET

PRICING FOR DETTOL AND SAVLON IN DIFFERENT SIZES

	DETTOL(Rs/-)	SAVLON(Rs/-)
50ML	13.74	12.5
100ML	21.02	19.5
200ML	33	42
500ML	74.79	83

There are two chemicals that are used for the making of Dettol,i.e Chloroxylenol  and Terpineol. These chemicals are cheap, however, despite the low cost of these chemicals, Dettol is comparatively priced at a high rate.

Due to the brand registration, customers are less price sensitive to Dettol.They do not readily notice the higher prices. Per a pharmacist, I learnt that Dettol increases the price in very little margins on a regular basis. Even if it increases its price only by 50 paise or 1 piase, it generates substantial profits for the company.Customers do not tend to change their buying habits. The high price is justified and is relatively considered to be a small part of the total cost of operating, and servicing the product over its life time.

Dettol Antiseptic Liquid’s Demand does not show many changes with a small change in Price, also it is a small proportion of the total expenditure of an household, from the economics point of view. An example of Inelastic Demand is shown below:

                                

                     

                                               

The various price adaptation strategies followed by Dettol over the years are:

1.Geographical Pricing.

Its a  pricing strategy where the seller must consider the cost of shipping. RB utilizes a uniform and widespread service and hence quote the same delivery price (i.e the same delivering price quoted to all distributors despite their location) for Dettol Antiseptic Liquid.

2.Price Discounts & Allowances.

In case of Hospitals & Clinics, where Dettol is bought in large volumes a Quantity, Price Discount may be offered. Certain Pharmacist may avail the discount too.

3.Differentiated Pricing

 

Customer Segment Pricing-Doctors and other medical professionals could get the product at a lower price.