PRICING

Consumer Psychology and Pricing

AMA defines price as - "the formal ratio that indicates the quantities of money goods or services needed to acquire a given quantity of goods or services.” 

It is that element of marketing mix that creates revenue. Price usually depends on Customer value for a particular product and the competition on the same product.

There are 3 key topic on the basis of which consumer arrive to a perception of price.

1. Reference price: Consumer in their mind, set a price range in which they expect the product price to fall. This may be due to research,past experiences,society etc. A consumer tend to buy the product if the actual price is somewhat near to his reference price
2. Price-Quality Inferences: Consumer tend to associate price with the quality of a product. He thinks a product priced high has a better quality.This strategy go very well with products like perfumes,cars etc.
3. Price Endings: This deals with products priced in odd numbers, say 49,99,549,999 etc.This is done to play with the customer's psychology as he will prefer a product priced 999 rather than 1000

5 Star has been priced between Rs5/- to Rs30/- making it affordable for all sections of the society.

The price is really appropriate for this product because due to direct and indirect competition in the chocolate industry. If Cadbury tries to increase the price, consumer will start shifting towards the competitor and this will reduce the market share of 5 Star.

From the perspective of a firm following steps must be kept in mind while setting up a price for a particular commodity :

1. Selecting Pricing Objective
2. Determining Demand
3. Estimating Costs
4. Analyzing competitors' costs,prices and offers
5. Selecting a pricing method
6. Selecting the final price

Price is linked to buying decision as :

• alternatives of 5 Star are Barone and Mars,so consumer will compare prices of all 3 and will choose the best

 Customer Value Linked to Price :

• 5 Star being a cadbury product has a huge image benifit. Also the customer perceived value is high because of affordable price and easy availability.

 Price linked to ILC stage :

• 5 Star is in its maturity stage and hence to remain the market leader it has launched its new variant Chomp and kept the price of other variants constant.