Page 182 - DMGT509_RURAL MARKETING

Unit 9: Pricing Strategies

Notes

M anufacturer’s +W holesaler’s +D ealer’s +R etailer’s
price m argin m argin m argin

C ustom er

When the firm offers its price to the customer as Maximum Retail Price (MRP), it includes the
margins of the channel members, which could be as shown above or differently. Besides, the
firms offer, cash discounts if the channel members pay cash. Discounts on offer could be in the
following situations:
1. Cash discount on cash purchases.
2. Turnover discounts given on the basis of the channel member achieving a given and
accepted turn over in product sale.
3. Inventory clearing discount is given when the firm has large inventory and the discount
acts as incentive for the dealer to buy more.

4. Quantity discount is offered for purchase of a minimum specified quantity.
5. Advertising subsidy is actually the money given as share of common advertising by the
firm and the channel member.

6. Off-season discount for buying the product when it is not needed like buying woolens
during summers and air conditioners during winters. (In fact, for air conditioners there is,
at times a premium during summer).
Prizes for super achievers among the channel members are offered to those dealers who have at
the end of the year done remarkably well. It could be a gift or a free trip to some exotic location
at the firm's expense.
Price changes can be made due to special circumstances also. At times, firms want to generate
extra cash and they off-load products at a much lower price, often even at a loss. In exhibitions,
melas in rural India special prices are offered to exploit the buying mood of the people visiting
these places. Cash discount to the channel members can be extended further to the customer/
user, which would ultimately reduce stocks in the distribution channel, and the firms can than
have additional sales.
A major cost related incentive offered these days is low cost finance to the buyer, who can buy
the product on borrowed money and pay to the financier in installments. In rural India, tractors,
seeders, harvesters are bought on financing basis. Cars, houses and several consumer durables
are being sold in large quantities, which have affected the sale of second-hand goods in India.
Extra help can be provided by way of extended payment terms making buying easy and with no
worry for making early payments.

Service marketing offers different types of challenges to the sellers. For example, a hotel or an
inn may get two types of customers.
1. One person who comes alone, stays for a day in one year and spends about 5000.

2. Another person comes three times in a month, brings three to four colleagues with him
and spends about 500000 per annum.
3. It is said that the customer is the King. Can we say that the second customer is definitely the
King? What about the first one? Is he only a prince? Maybe he will become a King in time.

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