Price sensitivity of indian consumers
Published on: Mar 4, 2016
Transcripts - Price sensitivity of indian consumers
Roll no. 13001532049
MBA 2yr. (2nd sem.)
PRICE SENSITIVITY OF INDIAN
HOW TO DEFINE PRICE
The degree to which the price of a product affects
consumers purchasing behaviors. The degree of
price sensitivity varies from product to product
and from consumer to consumer.
WHY INDIAN CONSUMER PRICE
A consumer want to have maximum satisfaction
from his limited income and want to purchase the
product which could do so.
A consumer is RATIONAL.
The Indian consumer is extremely value conscious
consumer and makes very considered purchasing
Indian customers are less price sensitive to low
cost item or the items they buy frequently.
They are also less sensitive when:
There are few or no substitutes or competitors.
Buyers are less aware of substitutes.
They are slow to change their buying habits.
They think the higher prices are justified.
The expenditure is smaller part of the buyers total
The product is assumed to have more quality,
prestige and exclusiveness.
INCOME AS A FACTOR OF PRICE
A consumer is defined as price sensitive when he
has a limited income.
For ex. A consumer buys a product his income is 15
When 100 units of product costs Rs. 15
But the price of the product increases to Rs. 20 for
100 units then he would:
Purchase less of the units or purchase a substitute
of the product.
But if the prices are less then he would go with the
product with more of its quantity.
STRATEGY TO BE USED BY
Downsize or Price Increase, Which Strategy is
There are revenue drivers and there are volume
drivers, but deciding with tactic works best is
dependent on the price sensitivity of the category.
Three strategies should be considered:
“Passing the Buck” – consistently cut costs by
either down-sizing or taking a price increase to
“Making Money” – introduce premium packs or
small packs with a higher cost per serving to drive
“Share Play” – offer appealing value packs and
promotions to drive volume.
To decide which strategy is the best fit for the
Manufacturers need to take a portfolio approach
across brands by identifying where the brands fall
in the sensitivity grid.
Brands that have a high sensitivity to price and
low sensitivity to deals, benefit from a low shelf
price without promotions. Products like butter and
cheese fall in this quadrant.
Products like juices, carbonated soft drinks and
salty snacks, however, while sensitive to price,
also respond well to deals. These brands will
benefit most when low prices are coupled with
For pure profit-play categories like shampoos,
fragrances, chocolates and skin care,
manufacturers can retain or even increase the
shelf price and offer no promotions. And the
products that do not benefit from a low shelf
price, but gain the most from promotions include
detergents, confectionary products and
FIVE TIPS FOR SUCCESS
Down-sizing (reduction) minimizes the volume loss for
impulse and non-essential products versus increasing
The premium segment is the strongest revenue growth
Small packs are less sensitive to pricing changes and can
gain higher revenue during price increases.
Larger packs tend to be highly sensitive to pricing
changes. Price increase will result in both volume and
Distribution is critical in mitigating inflation risks and direct
distribution channels are significantly better in driving
volume share for your brands.
During tough economic times, manufacturers and retailers
need to continue to focus on penetration and consumption
strategies. Deciding the best approach, however, takes
careful consideration to protect revenues. Taking a
portfolio approach to pricing will mitigate future inflation
An Indian consumer is price sensitive, he needs the
best out of his limited income. According to
today's scenario Indian consumers have less
income but the prices of the products are
increasing day by day, so the consumers are
shifting to another substitutes or they are
purchasing less units of the product.