RESEARCH ONRESEARCH ON

PRICING OF ACTIVE VISION TERMINALPRICING OF ACTIVE VISION TERMINAL

Submitted by

Rakshit KaulMarketing and Product development,

Mumbai 400063India

AGENDA● PRICING OF ACTIVE VISION TERMINAL WITH vWPSM.

● UNDERSTANDING DEMAND , ELASTICITY AND FORECAST OF AVG. REVENUE/MONTH.

● ANALYSIS OF FACTORS AFFECTING VALUE OF PRODUCT OFFERING.

● COMPETETIVE ADVANTAGES OF PRODUCTS.

Background

“Theory of Reasonable Prices,” which assumes buyers canexamine an item and formulate a rough notion of what theywould expect the item to cost or at least the range into whichthey would expect it to fall.

“Price Signaling Quality,” which assumes that some prices are“too low,” and that buyers will avoid products that are in thiscategory, fearing poor quality.

Van Westendorp Price Sensivity Meter

● At what price would it be so cheap that quality is doubted?● At what price would you consider this product to be a

bargain – a great value for the money?● At what price would it start getting expensive, but still

worth considering?● At what price is it so expensive that it would not be

considered at all?

Following were the responses collected from the survey...

RESPONSE OF DEALERS.

R1 R2 R3 R4 R5 R6 R7 R8 R9 R10 R113000 C C C C C C C C C C C3200 C C C C C C C C C3400 C C C C C C C B C3600 C C C C C C B C3800 B C C C C B C4000 B C B B B B C B4200 B G C B B B G C4400 B C B B B C4600 V C B B B4800 V G G5000 V G G G5200 G V B G G5400 G V G G V G5600 G V V G V G V B5800 V V V G V G V G6000 V V V V V V V V V V V

3500 3000 4000 4000 3300 2500 3300 3200 3500 4000 2500

PRICE POINTS

DEALER PRICE

C-CHEAP

B-BARGAIN

G-GETTING EXPENSIVE

V--VERY EXPENSIVE

LEGENDS

OUTPUTS FROM THE vWPSM

van Westendorp Indifference Price Point (IPP)

vW Indifference Price Point = Point at which the number of respondents consider the product a bargain= number of respondents who consider it to be getting expensive,but still worth considering.

The Indifference Price Point (IPP) tends to show the average price for the product in a market or, if there is a market leader with a predominant share,it can show the average price that manufacture is charging.

van Westendorp OPP and Range of Competitve Prices

The Optimum Price Point (OPP) is a point where you lose the fewest number of purchasers because it is either perceived to be too expensive or too cheap.

The Range of Competitive Prices helps show the full range of viable pricing strategies. At the high end of the range, producers will begin to lose market share, but reap higher-than-normal profits. At the low end of the range, producers will gain share through a low-cost strategy

OUTPUTS FROM THE vWPSM

van Westendorp Optimum Price PointvW Optimum Price Point = Point at which the number of respondents who reject the

productas too expensive = number who reject it for being too cheap. Some consider this to be the Ideal Price for this product.

van Westendorp Range of Competitive PricesThis calculation finds the range between two marginal equilibrium points

Point of Marginal Cheapness = Point at which the percent of respondents who find the price too cheap = the percentage of people who find the product a bargain.

Point of Marginal Expensiveness = Point at which the percent of respondents who find the price too expensive = the percentage of people who find the product expensive but still worth considering.

3000 3200 3400 3600 3800 4000 4200 4400 4600 4800 5000 5200 5400 5600 5800 60000

10

20

30

40

50

60

70

80

90

100

VAN WESTENDORP MODELVAN WESTENDORP MODEL

CHEAP %BARGAIN %EXPENSIVE %VERY EXP %

PRICE POINTS

CUMU

LATIV

E PE

RCEN

TAGE

S

PMC PMEIPP

OPP

Range of competitive prices

OBSERVATIONS FROM THE vWPSM FOR ACTIVE VISION TERMINAL

● Optimal price point : INR 4500.

● Indifference price point : INR 4700.

● Range of competitive prices : INR 3900 - 5500

Looking at the graph if we move on the left handside of PMC ,percentage of people who think that the product is cheap increases and percentage of people who think it is a bargain decreases so we should move on right handside.Agan if we move on right handside of the PME , percentage of people thinking that it is getting very expensive increases and who think it is just getting expensive decreases .Therefore we should ideally stay between PMC and PME .

UNIQUE TARGET PRICE AND DEALER PRICE

“Unique Target Point = Mid-point between the individual’s bargain price and his or her point of “getting expensive ”

UTP=[(C+V)/2+(B+G)/2]/2

Consumers have a tendency to buy maximum at the unique target price. Therefor UTP for all the responses have been calculated and knowing the dealer prices , we can calculate dealer margin , avg dealer price and avg unique target price .

UNIQUE TARGET PRICE AND DEALER PRICE

R1 R2 R3 R4 R5 R6 R7 R8 R9 R10 R11 BIASED UNBIASED

3500 3000 4000 4000 3300 2500 3300 3200 3500 4000 2500 3345.45 3533.33

4700 4125 5050 4825 4650 4825 4350 4625 4225 5275 4500 4650 4647.22

1200 1125 1050 825 1350 2325 1050 1425 725 1275 2000 1304.55 1113.89

25.53 27.27 20.79 17.1 29.03 48.19 24.14 30.81 17.16 24.17 44.44 28.05% 23.97%

DEALER PRICEUNIQUE TARGET PRICEDEALER MARGINDEALER MARGIN %

Further weighted average mean of all the responses is calculated and specific no.s for C,B,G, and V are calculated to have a better understanding of the product perception with respect to its pricing.

Following are the results..The product at and around these price points will look..

Cheap : INR 3468Bargain : INR 4243Getting Expensive : 5220Very Expensive : 5696

Now while pricing the product looking at the graph on next page, clear cut picture can be ascertained as to where does the product lie on the perception map of the consumer.

For eg: if we price it at 4000 then product is lying between cheap and bargain but nearer toto the bargain perception of the consumer.

WEIGHTED AVERAGE MEAN OF vWPSM

3468 4243 5220 56960

100

0

100

W A M OF v W M

PRICE

RESP

ONSE CC BB GG EE

FOLLOWING IS THE VOLUME COMMITMENT OF THE DEALERS AT VARIOUS PRICE POINTS

PRICE POINTS R1 R2 R3 R4 R5 R6 R7 TOTAL UNITS3500 0 100 100 200 300 500 1000 22004000 200 100 70 170 0 300 600 14404500 0 70 50 125 0 150 400 7955000 0 60 0 100 0 100 250 5105500 0 40 0 80 0 0 150 2706000 0 30 0 65 0 0 60 155

DEMAND AND ELASTICITY

From the above responses avg revenue per month and avg units per month can be calculatd at various price points for all the responses from which demand as a function of the price can be drawn and demand elasticity can also be found out.For the graph given below demand is max for price 3500 and then reduces gradually . Price band 3500-4000 has the highest elasticity(7%) signifying that a unit change in price there wil have a greater impact on demand than in any other band , say between band 5500-6000, where elasticity is only 1% ,so not much change in demand will happen there.

AVERAGE REVENUE AND VOLUME

From the above data it is possible to calculate the avg revenue per month and avg units sold per month .

For eg. At price point INR 3500 (dealer price) revenue per month will be INR 91666 and units sold per month will be around 26.14.

DEMAND & ELASTICITY AS A FUNC OF PRICE

3000 3500 4000 4500 5000 5500 6000 65000

10

20

30

40

50

60

70

80

90

100100

65

38

22

104

DEMAND ELASTICITY

% DEMAND

PRICE

% DE

MAND

7 %

5 %

3 %

2 %1 %

dy/dx=elasticity

3500 4000 4500 5000 5500 6000

0

10000

20000

30000

40000

50000

60000

70000

80000

90000

100000

0

4

8

12

16

20

24

2891666

68571

42589

30357

1767811071

26.17 17.08 9.42 6 3.17 1.83

AVG VOL(NO.S) & REV (INR)/ MONTH

AVG REV PER MONTHAVG UNITS/MONTH

PRICE

RATING FOR OVERALL PRODUCTS AND SERVICES ON A SCALE OF 5.

QUALITY PRICE BRAND DESIGN VALUER1 2 4 1 2 2R2 4 4 4 3 4R3 2 2 2 2 1R4 2 3 2 2 2R5 2 3 2 3 3R6 3 4 4 3 4R7 2 3 2 2 3R8 3 4 3 2 3R9 2 4 3 3 3R10 4 2 3 3 2R11 3 3 3 2 2 OVERALL

AVERAGE 2.64 3.27 2.64 2.45 2.64 2.73MEDIAN 2 3 3 2 3 3MODE 2 4 2 2 2 2SKEW 0.85 -0.57 -0.02 0.21 -0.02 0.45

STD DEV 0.81 0.79 0.92 0.52 0.92 0.79

1 POOR2 OK3 FAIR4 GOOD5 EXCELLENT

OBSERVATIONSOverall on an average and most commonly , products and services are rated more close to FAIR.PRICE being the only parameter rated more than FAIR all others being rated close to FAIR.

QUALITY

PRICE

BRAND

DESIGN

VALUE

0 0.5 1 1.5 2 2.5 3 3.5 4 4.5 5

RATING FACTORS

RATING SCALE

FA

CT

OR

S

CORRELATION ANALYSIS:Value is a very vague term and may mean different to different people. correlation analysis helps us to understand as to what factors from quality,price,brand and design affect most the value perception of the customer,or in other words what factors among q,p,b and d have maximum positive correlation with the value perception of the customer.

QUALITY PRICE BRAND DESIGN0

10203040506070

8090

100

CORRELATION ANALYSIS

CORRELATION WITH VALUE

FACTORS

PERC

ENTA

GE

As can be seen in the graph price has the maximum correlation with the percieved value by the customer and second in line falls brand ,That means price and brand are the major factors in determining the percieved value by the customer.

COMPETITIVE ADVANTAGE OF THE PRODUCTS

Following is the response of the dealers for the products offering the competitive advantage and rating them on a scale of 5

VTS VDP C TALK RDU 4 ZONE PANIC SWITCH PORCH UNIT0

0.5

11.5

2

2.5

3

3.5

4

4.55

COMPETITIVE ADVANTAGE FROM PRODUCTS

PRODUCTS

RATIN

G

PRODUCTS VTS VDP C TALK RDU 4 ZONE PANIC SWITCH PORCH UNITAVERAGE 3.73 3.09 2.73 2.73 2.91 2.82 2.55

BIBLIOGRAPHY.

MARKETING RESEARCH BY DAVID AKER.

SOCRATIC Inc.

WIKIPEDIA.

RESEARCHINFO.COM

SURVEYZ.COM