What Is The Meaning Of Price

Published Date: 02 Nov 2017

The amount of money which something is offered or brought is called as price. The result of the price is negotioable between price and seller. The price allocates services and goods to the buyer.It also provides financial resources among producers by which they satisfy the customers need.

The price is the main determinant to the marketer.The importance of price to the Marketer

It is the only element to the marketer that he can change quickly in response to demand shifts.

Price directly relates to the total revenue. Total Revenue is the product of Price and Quantity.

The price can use as symbolically, emphasize quality or bargain

Price Competition and Non Price Competition:

Price competition:

Rivalry among business on the basis of price and value is called price competition. If we look in the local newspaper at the various grocery store advertisement, it is a god example of price competition. Restaurants use price competition with their lunch or early dinner specials. Another example of price competition is airfares. If a new airline enters a market, it will often offer very low fares for the first weeks or months. In response usually the competing airlines offering flights between the same cities will also lower their fares.

Price competition is nothing but competing on the basis of price which may involve price cutting. The price competition may not involve in maximization of profits because price cut by one firm will force others to do the same.In this way every player is more or less having the same market share and no profits or less profits. A monopolistic market is very competitive and a price competition will exist or can sustain only in the short run like the monopolist, the monopolistically firm maximizes short run profit by following the MC=MR rule. As under the monopoly, if the price equals the ATC curve, the firm earns a short run normal profit. If the price is below the ATC curve, the firm suffers a short run loss, and if the price is below the average variable cost curve curve, the firm shuts down.

The compete effectively the organization must be the lowest cost producer.It also able to change the price frequently.The organization must respond quickly and aggressively.The customers have to follow the ability to adopt brand switching to use the lowest priced brand.The sellers have to move along the demand curve by raising and lowering prices.

Non price competiton:

The opposite of price competition is non price competition which occurs when business decide to emphasize factors of their marketing mix other than price. Those factors might include product quality, brand name , location, or special customer service. Non price competition occurs for several reasons. First of all, some business do not have a great deal of control over their price in relation to competitors. Insurance companies may not have much control over the price they can charge for policies because a state government agency regulates the industries prices. Therefore, they focus on non price issues, such as easy to complete application, personalized services from an insurance agency, and prompt claims service when the policyholder suffers a loss.

Another reason a comp[any might choose to use non price competition is because its product is higher priced. A small business may not be able to compete with large companies due to higher costs and lower volume. The small business may want to identify a specific market segment that is looking for factors other than price when making a purchase. The small business could emphasize individualized attention, delivery, set up, and after sales service, or even the long history of the business owners in the community as a balance for higher prices.

Non price competiton is effective when the market segment values something other than price. The consumers must reorganize a unique quality in the product that leads to a product preference regardless of the price. These qualities might be service, quality, credit, location, guarantees, or a unique image.

Customers emphasize product features, servies, quality etc.The companies can built customer loyalty towards the brand.They must able to distinguish brand through unique product features.They have to comprehend the differences in brand and view them as desirable.It is difficult for the competitiors to emulate the difference.

Non price determinants of demand:

Non price determinants of demand include any factor other than price.They are Tastes and preferences,income,prices of substitutes and complements,number of buyers,future expectations of buyers about product price.Some of the factors that influence non price demand are advertising and promotion, location and distribution chaneels, market segmentation, loyaltypogrammes,product extension and new products,special customer service,product lock in or tie in.

The economic analysis when the time period is short run.

Increase in demand causes equilibrium in price and quantity to rise

Decrease in demand causes equilibrium in price and the quantity to fall.

Increase in supply causes equilibrium price to fall and equilibrium in quantity to rise.

Decrease in supply causes equilibrium price to rise and equilibrium quantity to fall.

The economic analysis when the time period is long run.

The initial change makes decrease in demand from one point to another.

The result gives reduction in equilibrium price and quantity.

The change in price result in change in quantity it shows as movement along the supply. The change in nonprice determinant result in change in supply,this shows a shift in supply curve.

The elasticity of demand measures the responsiveness of demand to changes in an underlying factor,such as the price of the product , income, the prices of related product, or advertising expenditure.There is an elasticity corresponding to every factor that affects demand.

The own price elasticity of demand measures the responsiveness of the quantity demanded to changes in the price of the item.With the own price elasticity, a manager can tell the extent to which buyers will respond to a price increases or reduction.

To address the issue of whether to raise price, we need a measure of buyers sensitivity t price changes.The own price elasticity of demand provides this information.The own price elasticity of demand is the percentage by which the quantity demanded will change if the price of the item rises by 1%,other things equal.Equivalently, the own price elasticity is the ratio,

Percentage change of quantity demanded ÷ percentage change in price

Or

Proportionate change in quantity demanded ÷ proportiate change in price

Understanding the own price elasrticity of demand is fundamental to the management of a business. Indeed this concept s so basic that it is often called simply the price elasticity or demand elasticity.

Generally there are two ways of deriving the own price elasticity of demand. One is the arc approach, in which we collect records of a price change and the corresponding change in quantity demanded.Then we calculatethe own price elasticity as the ratio of the proportionate change in quantity demanded to the proportionate change in price.

An alternate way of calculating the own price elasticity of demand is the point approach, which sets up a mathematical equation with quantity demanded as a function of the price and other variables.The own price elasticity can then be derived from the coefficient of price in this equation. The point approach calculates the elasticity at a specific point on the demand curve. By contrast the arc approach calculates the elasticity between two points on the demand curve.In principle as consider shorter and shorter arcs the estimate from the arc approach will tend to the point estimate. Thus, for an infinitesimally short arc, the arc and point approaches will provide identical numbers for the elasticity.

The arc and point approaches are the two ways of calculating the elasticity of demand with respect to all the factors that affect demand.

Managers ay consider srveral intuitive factors to guage whether demand will be relatively more elastic or inelastic.

Availbilty of direct or indirect substitutes: The fewer substitutes that are available, the less elastic will be demand. People who are dependent on alcoholic drinks or cigarettes feel that they cannot do without them; hence, the demand for the se products is relatively inelastic.

Buyer’s prior commitments: A person who has bought an automobile becomes a captive customer for spare parts. Automobile manufactures understand this very well.Accordingly, they set relatively higher prices on spare parts than on new cars. The same applies as well in the software business.

Benefits/costs of economizing: Buyers have limited time to spend on searching for better prices, so they focus attention on items that account for relatively large expenditures.

Elasticity and Slope:

When comparing the demands for different products or even quantities demanded of the same product at different prices, it is important to remember that these comparisons are relative. The reason is that the own price elasticity describes the shape of only one portion of the demand curve. A change in price, by moving from one part of a demand curve to another part, may lead to a change in own price elasticity.

As per my observation and in interaction with the store manager the observations are made.

The entire store occupied 2850 square feet. Out of these area the shampoos are allocated an area of 20 square feet. The shampoos are displaced in the front area at the right side of the entrance. As the shampoos are tiny items and are valuable they are displaced in the front area, which does not give any chance to thieving.

Different brands of shampoos are displayed which gives a good look of large and small bottles. There are many brands and with in a brand there are many varieties. Lets discuss about the different companies in the shampoo market. For a market which has high potential, the shampoo market in India is being dominated by few players only. From scores of brands five years ago, the shampoo market has now been whittled down to a handful. New entrants are probably discouraged by the formidable task of establishing a distribution network from scratch. HLL's long established ties with retailers and its extensive distribution reach probably acts as an entry barrier for new entrants.

The Hindustan Unilever is the market leader having a market share of 47% with brands such as Clinic Plus , Clinic All Clear, Sun silk. The Procter and Gamble takes the second place with a market share of 23% It includes brands such as Pantene pro-v, Head and Shoulders. The other major player In this category is Cavincare with a market share of 19%.The other brands include Dabur Vatika, Godrej, Himalaya, Johnson and Johnson, ITC, Colgate Palmolive. The following are the different products under the same company.

Hindustan Unilever

Dove Clinic plus Clinic All clear Sun silk

Procter and Gamble

Head and shoulder,Pantene, Rejoice

Cavin care

Meera , chick, nyle

Himalaya

ITC vivel ultra pro

Godrej

Colgate Palmolive

Dabur Vatika

Loreal

Garnier fruties, Matrix, Loreal

The shampoos can be categeroised into 3 types.

Normal shampoos like chik,clinic plus,sunsilk.

Herbal Shampoo like Ayush,Nyle,Dabur vatika

Anti Dandruff Shampoo like Head and shoukders, All Clear, dabur Vatika

As per my observation in the super market the shampoos are displayed according to the planogran of the store.IN this planogram along with many products the shampoos are also allocated certain space in the store.With in this space all the shampoo brands are displaced , this is known as garanda.Apart from this there are paid outlets which is called as Floor Stock Unit.It is a unit with in the store where a outlet is displayed by the desired company by paying certain amount to the store.There company products can be displayed separately from the garanda.In this More store Meera shampoo brand has taken the floor stock unit, for which the company has to pay RS.2500 per month.

There are different variations with in a each brand.

Sunsilk

Stunning Black Shine-Lusciously thick and long-Dream Soft and Smooth-Hair Fall Solution

Head and Shoulders

Anti dandruff hair solution-antidandruff hair fall-Smooth and silky-Cool Menthol

Pantene Pro-V

Smooth and Silky-

Dove Therapy

Dnadruff therapy –Intense repair- Damage Therapy-Hair fall Rescue-Daily shine-Dryness care-

Garnier

Fall fight-Dry and Damage-Long and Strong-Normal-Anti dandruff-Sleek and Shine-Fortifying shampoo-Dry and Damaged-

Enriche

Antidandruff-Extra strength-Extra Shine

Loreal Paris

Smooth intense-Nutrigloss-Total repair-Smooth intense-Colour protect-

Himalaya

Anti hair fall-Protein shampoo

Clear

Clear Active Care- Clear Ice Cool-Clear Hairfall Defence- Clear Soft Gloss-Clear Radiant Black

Now considering the prices of various brands and volume in which these brands are available.

BRAND

VOLUME(ml)

PRICE IN RS.

Sunsilk

100

56

200

105

400

179

Head and Shoulders

90

69

200

139

400

224

Pantene

90

59

400

199

Hair and Care

100

135

Dove Therapy

100

69

200

135

Garnier

200

117

Enriche

100

45

Nyle

450

45

Halo

1000

124

Vatika

200

99

Loreal

100

72

200

130

Himalaya

100

105

200

120

400

200

Clear

100

69

200

134

Clinic Plus

35

10

100

47

200

48

400

158

Meera

100

54

200

105