It’s the killing question
that hits every consumer before a budget – will the prices rise or will they fall? While the Devil is in the detail, the price movement is in the interpretation. 4Ps B&M, in its inaugural post budget issue, took up six sectors – automobiles, real estate, white goods, computers and gems & jewellery – to give you the dummy’s guide to price movements post budget.
One of the core concepts of marketing theory and practice is that consumers act as value maximisers, and relentlessly make cost benefit analyses before they make a decision on any purchases. Despite that genuine intent, though, value maximization is obviously a very utopian concept. While every marketer puts his best foot forward into the market with his positioning, communication and distribution strategies, the consumer has to move through this intricate maze and seek out what’s best for him. Various factors could help clear the way or even make it hazier, like brand perception, social and economic background, cultural influences, inputs from family and friends, et al. Also, consumers have an upper limit (which is largely psychological) to which they research for the best value, which also varies with respect to the nature of the product they are buying. After that, they tend to simply sign on the dotted line. Moreover, our society is not that advanced in terms of consumer activism as compared to the US. In the US, there are associations like Consumers Union, which are not only keeping marketers and retailers alert through consistent scrutiny of products and services, but are also playing a key role in shaping consumer oriented policies. In that sense, the very notion of the consumer being the king, particularly in India, may be quite distant from reality.
Even if it is assumed that you have decided upon the best possible product, the other critical aspect of value is price, and the entire effort that goes into extracting the best deal. Moreover, pricing is in itself a very strategic tool today, and the ‘cost plus margin’ approach looks centuries old. Companies look at a lot towards factors like perceptions that pricing builds, price elasticity of demand, the stage in the product life cycle, competitor pricing strategies, their positioning strategy, overall company policies, et al. Even the salesperson you interact with has gone through multiple training programmes in negotiation theory. He is taught to make a quick judgment about the kind of customer you are and the values you seek and also use this judgement to decide what price to offer you at the start and at what price to stop.
Conversely, there is a lot that customers need to understand about how they can formulate their own price negotiation strategy. A lot of it comes from experience, but then, if you understand how companies behave today, you can bypass years of bad experiences and non-value maximizing transactions and significantly improve your consumer experiences here and now. It matters to understand, for instance, that if you cannot afford a premium brand like Sony, there are a lot of brands who can give you an acceptable or even remarkably similar experience at a lower price. Or the fact that coffee chains adopt a price differentiation strategy to target multiple customer segments, which is why the Mocha that you drink may be Rs.10-20 more expensive in terms of price over the Cappuccino, but there is hardly any difference with respect to cost of production.
Consequently, the focus of this cover story of 4Ps B&M is on one specific and critical aspect of a consumer’s pricing strategy – the right time to buy, a decision that is hugely dependent on the FM’s budget speech every year. Especially during these days of dizzying inflation, any buying strategy that is even a wee bit lighter on the wallet is definitely worth considering. Through first hand analysis and industry interactions, this cover story discusses ongoing and anticipated price movements across sectors, due to budget announcements or due to specific sectoral trends, to act as a guide to your purchase planning in the coming months. We’ve selected a handful of industries that garners the maximum interest of the investor population and have attempted to give an analysis that, despite going deep into numbers, keeps it simple for your understanding. While there are no guarantees that the prices would move exactly in the way we are postulating, what is true is that the probability of your making the right informed choice – of whether to buy now or later – increases. And now, jump right on to the 4Ps B&M Annual Consumers’ Guide to Post Budget Price Movements.
that hits every consumer before a budget – will the prices rise or will they fall? While the Devil is in the detail, the price movement is in the interpretation. 4Ps B&M, in its inaugural post budget issue, took up six sectors – automobiles, real estate, white goods, computers and gems & jewellery – to give you the dummy’s guide to price movements post budget.One of the core concepts of marketing theory and practice is that consumers act as value maximisers, and relentlessly make cost benefit analyses before they make a decision on any purchases. Despite that genuine intent, though, value maximization is obviously a very utopian concept. While every marketer puts his best foot forward into the market with his positioning, communication and distribution strategies, the consumer has to move through this intricate maze and seek out what’s best for him. Various factors could help clear the way or even make it hazier, like brand perception, social and economic background, cultural influences, inputs from family and friends, et al. Also, consumers have an upper limit (which is largely psychological) to which they research for the best value, which also varies with respect to the nature of the product they are buying. After that, they tend to simply sign on the dotted line. Moreover, our society is not that advanced in terms of consumer activism as compared to the US. In the US, there are associations like Consumers Union, which are not only keeping marketers and retailers alert through consistent scrutiny of products and services, but are also playing a key role in shaping consumer oriented policies. In that sense, the very notion of the consumer being the king, particularly in India, may be quite distant from reality.
Even if it is assumed that you have decided upon the best possible product, the other critical aspect of value is price, and the entire effort that goes into extracting the best deal. Moreover, pricing is in itself a very strategic tool today, and the ‘cost plus margin’ approach looks centuries old. Companies look at a lot towards factors like perceptions that pricing builds, price elasticity of demand, the stage in the product life cycle, competitor pricing strategies, their positioning strategy, overall company policies, et al. Even the salesperson you interact with has gone through multiple training programmes in negotiation theory. He is taught to make a quick judgment about the kind of customer you are and the values you seek and also use this judgement to decide what price to offer you at the start and at what price to stop.
Conversely, there is a lot that customers need to understand about how they can formulate their own price negotiation strategy. A lot of it comes from experience, but then, if you understand how companies behave today, you can bypass years of bad experiences and non-value maximizing transactions and significantly improve your consumer experiences here and now. It matters to understand, for instance, that if you cannot afford a premium brand like Sony, there are a lot of brands who can give you an acceptable or even remarkably similar experience at a lower price. Or the fact that coffee chains adopt a price differentiation strategy to target multiple customer segments, which is why the Mocha that you drink may be Rs.10-20 more expensive in terms of price over the Cappuccino, but there is hardly any difference with respect to cost of production.
Consequently, the focus of this cover story of 4Ps B&M is on one specific and critical aspect of a consumer’s pricing strategy – the right time to buy, a decision that is hugely dependent on the FM’s budget speech every year. Especially during these days of dizzying inflation, any buying strategy that is even a wee bit lighter on the wallet is definitely worth considering. Through first hand analysis and industry interactions, this cover story discusses ongoing and anticipated price movements across sectors, due to budget announcements or due to specific sectoral trends, to act as a guide to your purchase planning in the coming months. We’ve selected a handful of industries that garners the maximum interest of the investor population and have attempted to give an analysis that, despite going deep into numbers, keeps it simple for your understanding. While there are no guarantees that the prices would move exactly in the way we are postulating, what is true is that the probability of your making the right informed choice – of whether to buy now or later – increases. And now, jump right on to the 4Ps B&M Annual Consumers’ Guide to Post Budget Price Movements.
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Source : IIPM Editorial, 2011.
An Initiative of IIPM, Malay Chaudhuri and Arindam chaudhuri (Renowned Management Guru and Economist).
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