Chapter 7
Pricing Strategies
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Rural Marketing, 3/Ed Pradeep Kashyap
Learning Objectives
• Discuss the fundamentals of pricing in rural markets
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• Describe the factors considered while setting the prices for
rural products and services
• Understand the various pricing strategies adopted in the
rural markets
Rural Marketing, 3/Ed Pradeep Kashyap
Pricing in Rural India
• Affordability a major issue in rural India
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• Growing purchasing power raising aspiration levels
• Premium brands making inroads into rural markets
• How do companies price?
Rural consumers look at value for money
• Consumer psychology and pricing
Good quality at cheap price
Fancy features not appreciated
Compare prices to a reference price
Rural Marketing, 3/Ed Pradeep Kashyap
Setting the Price for Rural Products and
Services
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Internal External
Factors Factors
• Cost • Price sensitivity
• Pricing objectives of customers
of the company • Channel costs
• Competition
• Environment
Rural Marketing, 3/Ed Pradeep Kashyap
Internal Factors
Cost
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• Fixed and variable
Cost of marketing mix in rural markets
• Promotional costs which can be brought down by use of
collective platforms like haats, melas and mandis.
• Distribution costs due to vastness of market and large
number of intermediaries. ITC’s e-Choupal
Rural Marketing, 3/Ed Pradeep Kashyap
Internal Factors
Pricing objectives of the company
• Profit maximization in the long run through penetrative
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pricing.
• Minimum returns on sales turnover basically to recover
costs.
• Deeper penetration of the market for faster market
expansion.
• Keeping up with the competition especially regional and
local
• Increasing sales volume and market share through
investments
Rural Marketing, 3/Ed in the marketing mix.
Pradeep Kashyap
External Factors
• Price sensitivity of customers who want “value for money”
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and are reluctant to try new products
• Channel costs due to more levels and need for credit at
village level
• Competition and the “price standard”
• Environment
Preference to small scale sector
Vagaries of weather
Innovative technologies for cutting costs
Rural Marketing, 3/Ed Pradeep Kashyap
Price Setting Strategies
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Market Product
entry mix pricing
strategies strategies
Rural-
Price
specific
adjustment
pricing
strategies
strategies
Rural Marketing, 3/Ed Pradeep Kashyap
Market Entry Strategies
Penetration
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Skimming Pricing
Pricing
• Create the image • To gain wide
of a superior market acceptance
product • Reduction in
production and
distribution costs
• Suitable for
products where
demand is elastic
Rural Marketing, 3/Ed Pradeep Kashyap
Product Mix Pricing Strategies
• Optional product pricing
Pricing of optional or accessory products along with the
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main product.
• Captive product pricing
Setting of price for products that must be used along with
the main product.
• Product bundle pricing
Offering a bundle of products at reduced prices
• Price adjustment strategies
• Rural-specific pricing strategies
Rural Marketing, 3/Ed Pradeep Kashyap
Price Adjustment Strategies
Discounts and allowance • Cash and quantity
pricing
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Freebies along with the • Problem of lack of awareness of such schemes in rural
purchase of a product.
Special event pricing • During harvest, wedding season or during festivals
Economy pricing • No frills low price
Value pricing • During economic recession
Psychological pricing
Discriminatory pricing
Rural Marketing, 3/Ed Pradeep Kashyap
Discriminatory Pricing
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Customer Product form
Location pricing
segment pricing pricing
• Different sets • Different • At nearby
of customers versions of towns
charged products • At haats
different prices charged at • By village
different rates retailer
Rural Marketing, 3/Ed Pradeep Kashyap
Rural-specific Pricing Strategies
• Low price points through smaller pack sizes
Encourages trial
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Maintain freshness
Variety options
• Low cost packaging which is durable and aesthetic
• Refillable/reusable packs
• Highlight value not price
• Coinage pricing for convenience of consumers and retailers.
• Product-sharing services: HPCL Rasoi Ghar
Rural Marketing, 3/Ed Pradeep Kashyap
Rural Marketing Case
Coca-cola’s Strategy for Rural
Markets
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1. What were the critical factors for Coca-Cola in rural
markets? How did the competition respond to this
strategy?
2. Identify two major brands which adopted a similar pricing
strategy to crack rural markets.
Rural Marketing, 3/Ed Pradeep Kashyap
Successful Mantra in Rural
Pricing
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Not Cheap but Value for Money
Rural Marketing, 3/Ed Pradeep Kashyap