Strategies to Attract and Retain Price Sensitive Customer

Strategies to Attract and Retain Price Sensitive Customer:

Indian economy is an example of contradictions while it has continued to grow in the last two decades, albeit at a moderate rate of 6.7% and there are large numbers of consumers who are moving up the socioeconomic pyramid. Still India continues to remain a price sensitive market. This example the introduction of small unit packaging most often priced at less than Rs 10. Be it a chocolate bar, Shampoo, Soup or toilet soap or toothpaste. Whenever a price rise in a commodity is expected, there is a tendency of the consumer to buy it in a large quantity, so that impact of the price hike could be felt at a later date. Nobody understand it better than Big Bazaar Wednesday of each week, Big Bazaar run a special price promotion offering a flat discount of 5% on all its products. Wednesday sees the largest number of footfalls of housewives in Big Bazaar across all its stores in the country. To further soften the impact of high prices, Big Bazaar has launched its own brands to offer customer an opportunity to buy unpackaged and unbranded staple foods like wheat, rice, sugar and pulses.

Price sensitivity is not unique to India. Consumer all over the world exhibit price sensitivity for different products and brands. Also the price sensitivity differs based on the time of consumption. For example airlines have responded to price sensitive buyers by offerings to them lower fares. In order to keep themselves afloat the airlines in India had to cut down on the freebees including the free baggage allowance, meals, in-flight entertainment and even the newspaper. Today all airlines ask customer to pay for the meal on board and for self-selection of the seat, especially those that are considered to be the premium namely the front rows and the isle and the window seats. Though initially low cost airlines like GoAir, Indigo and Spice Jet offered no frill flights, today even the full service flights like those of Jet Airways and Air India also had to adopt no frill strategy as they did not want to lose the price sensitivity customers. Same is true with Tata which designed the water purifier ‘Swatch’ for the price sensitive Indian market.

Though competitors should drive price down, in such cases they join hands to fix the price and in turn assured profits.

Pricing is one of the most important elements of the marketing mix, but lately it has come to occupy center stage In marketing wars. The reasons for this are:

a)Diminishing Products Differentiation : 

As technologies get standardized , differentiation among firms on the basis of the products is diminishing. More products and brands will transcend to a commodity situation. Knowledge of what constitutes price and its meaning to the customers can make pricing decisions more meaningful and help firms fight the price war.

b) Inter-firm Rivalry: 

The intensity of inter firm rivalry increase as entry and exit barriers in the industry are lowered. With an increase in the rivalry we find that a firm cost of operation also increases as it now has to spend more money to lure customer and middlemen.

c) Mature Products and Markets:

 When products and markets enter the maturity stage, the only way to differentiate various offers is on the basis of augmented service or price cuts. Many firms opt for the latter and then find their bottom lines getting eroded. Once again, pricing decisions relevant as leverage with firm is low unless it embarks upon non-price strategies.

d) Customers value perception:

 Another factor contribution to the importance of pricing decisions is the customer’s perception of the products current and potential value.

e) Inflation In the Economy: 

Pricing decisions become important in an inflationary economy. Inflation affects pricing in two ways- one it lowers the purchasing power of the customer and hence a search for low priced substitutes and two it increases a firm cost because of inputs costing more. This forces the price of products upwards. The firm now finds itself in a dilemma; if it passes the increases in input cost to the customer in the form of a price increases and there are equally attractive alternatives available at lower prices, the firm may lose the customer. And if it does not increases the price it may incur losses or find a reduction in profit margins.