Pricing is the method adopted by a firm to set its selling price. It usually depends on the customer's perceived value of the product in comparison to his perceived value of the competing products. Different pricing methods place varying degree of emphasis on selection, estimation, evaluation of costs, comparitive analysis and market situation.
Consumer Psychology and Pricing
The cost of a product or service is relative to what the buyer thinks that cost should be. Based on his previous experiences, the customer will judge whether prices are too high, too low or on target.
1. Reference Price- The cost that consumers anticipate paying or consider reasonable to pay for a particular good or service is known as reference price. The marketing department of a business often attempts to assess the reference price for each of the products or services they are promoting in order to set pricing levels appropriately to achieve their marketing goal.
Example- Top Ramen is priced at Rs. 79 for 600 gms whereas Maggi 2-Minute Noodles is priced at Rs.76 for 600 gms. So the buyer will keep in mind that the price range should be somewhere between Rs 75 and Rs 80. Hence the company has to price the product in this range taking into consideration the competition, its profit, etc.
2. Price-Quality Inferences- Consumers develop beliefs about the correlation between price and quality from their own consumption experiences. Some brands adopt exclusivity and scarcity as a means to signify uniqueness and justify premium pricing.
Example- Luxury watches,perfumes
3. Price cue- A price cue is defined as any marketing tactic used to persuade customers that prices offer good value compared to the competitor's prices, past prices or future prices.
Example- The common use of Rs.2999 over Rs.3000 has long been a matter of pricing psychology and studies show that odd numbers are more commonly associated with lower prices than even prices;
Prices ending in 5 or 0 are easier for the customer to process and retrieve from memory
Other factor that plays into the perception of pricing includes availability. For example, in a one-day sale, the idea that availability is limited will encourage the customer to act quickly rather than mull over the purchase.
Pricing Of Maggi 2-Minute Noodles
Maggi has faced lot of hurdles in its journey in India. It came at a time when the Indian psyche was not prepared to accept noodles as a substitute for their evening snack. Thus Nestle had initially adopted a low-cost price strategy to make Maggi affordable to the consumers by guaranteeing them value for money. Despite stiff pricing competition from noodle brands like Top Ramen, Foodles, Wai Wai, Nestle ensured that it will continue providing Maggi at a basic and affordable price to appeal to the common masses. This helped Maggi to become a household name in India.
These are the current prices that Nestle is offering for Maggi 2-Minute Noodles:
50 gm- Rs.5
75 gm-Rs.10
150 gm-Rs.20
300 gm-Rs.40
450 gm-Rs.60
600 gm- Rs.76
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