RESEARCH ON

PRICING OF ACTIVE VISION TERMINAL

Submitted by

Rakshit Kaul
Marketing and Product development,

Mumbai 400063
India
 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 can
examine an item and formulate a rough notion of what they
would expect the item to cost or at least the range into which
they 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 this
category, 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.

PRICE
POINTS R1 R2 R3 R4 R5 R6 R7 R8 R9 R10 R11
3000 C C C C C C C C C C C
3200 C C C C C C C C C
3400 C C C C C C C B C LEGENDS
3600 C C C C C C B C
3800 B C C C C B C C-CHEAP
4000 B C B B B B C B
4200 B G C B B B G C B-BARGAIN
4400 B C B B B C
4600 V C B B B G-GETTING
4800 V G G
EXPENSIVE
5000 V G G G
5200 G V B G G
5400 G V G G V G V--VERY
5600 G V V G V G V B EXPENSIVE
5800 V V V G V G V G
6000 V V V V V V V V V V V
DEALER
PRICE 3500 3000 4000 4000 3300 2500 3300 3200 3500 4000 2500
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 Point

vW 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 Prices

This 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.
 VAN WESTENDORP MODEL
100

90

80

70

60
CUMULATIVE PERCENTAGES

CHEAP %
50 BARGAIN %
EXPENSIVE %
VERY EXP %
40
PMC PME
30 IPP

20
OPP
10

0
3000 3200 3400 3600 3800 4000 4200 4400 4600 4800 5000 5200 5400 5600 5800 6000

PRICE POINTS

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

DEALER
PRICE 3500 3000 4000 4000 3300 2500 3300 3200 3500 4000 2500 3345.45 3533.33
UNIQUE
TARGET
PRICE 4700 4125 5050 4825 4650 4825 4350 4625 4225 5275 4500 4650 4647.22
DEALER
MARGIN 1200 1125 1050 825 1350 2325 1050 1425 725 1275 2000 1304.55 1113.89
DEALER
MARGIN % 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%
 WEIGHTED AVERAGE MEAN OF vWPSM

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 3468

Bargain : INR 4243
Getting Expensive : 5220
Very 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 to
to the bargain perception of the consumer.
 W A M OF v W M
100 1

C B G E

0 0
3468 4243 5220 5696
PRICE
FOLLOWING IS THE VOLUME COMMITMENT OF THE
DEALERS AT VARIOUS PRICE POINTS

PRICE POINTS R1 R2 R3 R4 R5 R6 R7 TOTAL UNITS

3500 0 100 100 200 300 500 1000 2200
4000 200 100 70 170 0 300 600 1440
4500 0 70 50 125 0 150 400 795
5000 0 60 0 100 0 100 250 510
5500 0 40 0 80 0 0 150 270
6000 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
DEMAND ELASTICITY
100
100

90
7% dy/dx=elasticity
80

70 65
60
5%
50
% DEMAND

% DEMAND
40
38

30 3%
22
20 2%
10 1%
10
4
0
3000 3500 4000 4500 5000 5500 6000 6500

PRICE
 AVG VOL(NO.S) & REV (INR)/ MONTH
100000
91666 28
90000

80000 24

70000 68571
20
60000
16
50000 AVG REV PER MONTH
42589 AVG UNITS/MONTH
40000 12

30000
30357
8
20000 17678
11071 4
10000

0
26.17 17.08 9.42 6 3.17 1.83 0
3500 4000 4500 5000 5500 6000

PRICE
RATING FOR OVERALL PRODUCTS AND SERVICES ON A
SCALE OF 5.
QUALITY PRICE BRAND DESIGN VALUE 1 POOR
R1 2 4 1 2 2
R2 4 4 4 3 4 2 OK
R3 2 2 2 2 1 3 FAIR
R4 2 3 2 2 2
4 GOOD
R5 2 3 2 3 3
R6 3 4 4 3 4 5 EXCELLENT
R7 2 3 2 2 3
R8 3 4 3 2 3
R9 2 4 3 3 3
R10 4 2 3 3 2
R11 3 3 3 2 2 OVERALL
AVERAGE 2.64 3.27 2.64 2.45 2.64 2.73
MEDIAN 2 3 3 2 3 3
MODE 2 4 2 2 2 2
SKEW 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
 OBSERVATIONS
Overall 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.

RATING FACTORS
QUA LITY

PRICE
FACTORS

BRA ND

DESIGN

V A LUE

0 0.5 1 1.5 2 2.5 3 3.5 4 4.5 5

RATING SCALE
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.

CORRELATION ANALYSIS
100
90
As can be seen in the graph
80
price has the maximum
70
correlation with the percieved
60
value by the customer and
PERCENTAGE 50 CORRELATION
second in line falls brand , WITH VALUE
40
That means price and brand are
30
the major factors in determining
20
the percieved value by the
10
customer. 0
QUALITY PRICE BRAND DESIGN
FACTORS
 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

PRODUCTS VTS VDP C TALK RDU 4 ZONE PANIC SWITCH PORCH UNIT
AVERAGE 3.73 3.09 2.73 2.73 2.91 2.82 2.55
COMPETITIVE ADVANTAGE FROM PRODUCTS
5
4.5
4
3.5
3
2.5
RATING

2
1.5
1
0.5
0
VTS VDP C TALK RDU 4 ZONE PANIC SWITCH PORCH UNIT
PRODUCTS
BIBLIOGRAPHY.

MARKETING RESEARCH BY DAVID AKER.

SOCRATIC Inc.

WIKIPEDIA.

RESEARCHINFO.COM

SURVEYZ.COM