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Managerial Economics Price penetration policy: case study of a product An individual report

Submitted to:Ms. Smita Das By:Akanksha Arora -07 2011-2012

Price penetration policy Penetration pricing is a strategy employed by businesses introducing new goods or services into the marketplace. With this policy, the initial price of the good or service is set relatively low in hopes of "penetrating" into the marketplace quickly and securing significant market share

Established in 1929 1st brands - Parle Glucose and Parle Monaco Market leader in many products 35% share of the total biscuit market. 15% share of the total confectionery market. 14 manufacturing units for biscuits & 5 manufacturing units for confectioneries Parle has largest such manufacturing units in India Annual turnover 2000 crores. It has provided its products to the mass with the affordable range.

HIDUSTAN KI TAKAT - PARLE G


Largest manufacturer of biscuits since 80 years Quality, nutrition and great taste. Faith and trust More than 1500 Wholesalers an 1.3 Million retail outlets Example of marketing brilliance for Competitors 70 % of Glucose Biscuit market.

PRICING STRATEGY
Appeal

to all income

groups Low and mid range price segments Value for money Strict cost control at every point in supply chain

PARLE G PRICING STRATEGY


Market Penetration strategy Profit margin for distributors is 4% and for retailers is 10-12% Parle G is available in Re 1,Rs 2, Rs 4 to Rs 25 packet Rs.4.00 for the last 25 yrs Increase in price by mere 50p

HOW PARLE-G MAINTAINED ITS PRICE OF RS.4.00FOR THE LAST 25 YRS????


Low

profit margin. Decrease in weight per biscuit. Bulk purchase of raw material. Reduced wastage- 1% of the 115 tones. Increased productivity. Availability in remote places. Avoid sophisticated packing. Parle-G has seen the variation in sales due to increase in price. By mere 50 paise in 1995.

SWOT ANALYSIS OF PARLE


Strengths Diversified product range, Parle Brand Extensive distribution network. Low and mid price range Catering to mass, Better understanding of consumer psyche Opportunities Estimated annual growth of 20% Changing consumer preference, Increasing demand for sugar free, Diet biscuit, Weakness Dependence on retailers & grocery Stores for displaying diversified Parle Products on shelf, induce impulsive buy Dependence on Parle G (flagship brand) Threats Hike in cost of production due to hike in Raw material cost Increasing distribution cost Local bakery products Entry of various new entrant, ITC etc

CONCUSION

This shows that products even at low prices can earn substantially considerable profits. Importance of Parle G in comparison with its competitors, local and imitation brands. The views of the consumers on the Parle G biscuits also put light on its vitality. To sum up in general, the Indian rural market has grown in recent years in size, range and sophistication. The company wants to continue having that strong emotional connect with consumers and doing social deeds such as offering scholarships is part of its corporate social responsibility initiatives, which should keep the biscuit major on its pedestal. Successful rural marketing calls for a review of the nature and profile of rural consumers, designing the rural products to appeal to them, and adopting suitable media as well as appropriate strategies for communication and distribution.

Thank you