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MB0046 : a) Give a note on Product mix pricing strategies. b) What is Brand development? How is it done?

Posted on: September 27, 2011

MB0046  : a) Give a note on Product mix pricing strategies.
b) What is Brand development? How is it done?

Answer: –

Note on Product mix pricing strategies

The product mix is the collection of products and services that a company chooses to offer its market. When the product is a part of product-mix, there are five kinds of strategies involved

1. Product Line pricing: Strategy of setting the price for entire product line. Marketer differentiates the price according to the range of products, i.e. suppose the company is having three products in low, middle and high end segment and prices the three products say at Rs 10 Rs 20 and
Rs 30 respectively.

The three levels of differentiation create three price points in the mind of consumer. The task of marketer is to establish the perceived quality among the three segments. If the customers do not find much difference between the three brands, he/she may opt for low end products.

2. Optional Product pricing: this strategy is used to set the price of optional or accessory products along with a main product.

Organizations separate these products from main product so that customer should not perceive products are costly. Once the customer comes to the show room, organization explains the advantages of buying these accessory products.

3. Captive product pricing: Setting a price for a product that must be used along with a main product. For example, Gillette sells low priced razors but make money on the replacement cartridges.

4. By-product pricing: It is determining the price for by-products in order to make the main product’s price more attractive. For example, L.T. Overseas, manufacturers of Dawaat basmati rice, found that processing of rice results in two by-products i.e. rice husk and rice brain oil. If the company sells husk and brain oil to other consumers, then company is adopting by-product pricing.

5. Product bundle pricing: It is offering companies several products together as a bundle at the reduced price. This strategy helps companies to generate more volume, get rid of the unused products and attract the price conscious consumer. This also helps in locking the customer from purchasing the competitors’ products. For example, Anchor toothpaste and brush are offered together at lower prices.

Brand development

Company can develop the brand on the basis of product category and brand name. Some of the different strategies adopted by companies to develop the brands are as follows:

1. Line extension: Company uses its well known brand name to introduce additional items in a given product category such as new forms, flavours, ingredients or package sizes.

For example, Karnataka Milk Federation, uses its top brand name Nandini, to introduce new items like toned milk, full cream milk , curd and milk powder.

It is less risky and requires fewer investments to introduce the product. In the above example Nandini used the extension to meet the excess capacity that it has. The milk procurement was more than the demand from the customer. Hence it started producing the milk powder. But all the products introduced need not to be successful in the market. In case of KMF, Nandini ice creams didn’t click in the market. Another risk of line extension is brand cannibalization, i.e. company’s brand/items compete with each other.

2. Brand extension: A strategy in which company uses one of its familiar brand names for new product category’s items. For example, United Breweries (UB) Limited group used its flagship brand Kingfisher to different categories. Kingfisher was originally a beer brand extended to airlines.

Brand extension gives instant recognition to the brand. In the above example, people required very little time to know Kingfisher airline brand, because parent brand was very well known. Brand extension may hurt the parent brand reputation in the market if it fails.

3. Multi brands: The technique of introducing the product or items in existing product category with a new brand name.

For example, Hindustan Unilever uses different brand names for their home and personal care category. The above example shows us that HUL have Breeze, Dove, Liril, Lux, Lifebuoy and Pears in the bath soap segment itself. It helps the company to come out with new features in the product or product category. Organizations adopt this strategy to avoid brand cannibalization in the given category. The major disadvantage of this strategy is that none of the brands will enjoy major market share and result in lesser profitability.

4. New brands: The strategy indicates coming out with new brands for new category products. In this strategy, company believes that existing brands cannot be extended to the new category. The new brand strategy requires huge resources to build it. The new category, if it already has some brands of other companies, investment requirement will go up. For example, Hindustan Unilever launched Pure-It in the water purifier category. The category and brand are new to the company.

2 Responses to "MB0046 : a) Give a note on Product mix pricing strategies. b) What is Brand development? How is it done?"

Thanks for your support..best luck.

Thank You Sir..You Are The Great

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