Pricing Strategies

Pricing is one of the most important elements of the marketing

mix, as it is the only mix, which generates a turnover for the
organisation. The remaining 3p’s are the variable cost for the
organisation. It costs to produce and design a product, it costs to
distribute a product and costs to promote it. Price must support
these elements of the mix. Pricing is difficult and must reflect
supply and demand relationship. Pricing a product too high or
too low could mean a loss of sales for the organisation. Pricing
should take into account the following factors:

Fixed and variable costs.

Competition

Company objectives

Proposed positioning strategies.

Target group and willingness to pay.

Types of Pricing Strategies

An organisation can adopt a number of pricing strategies. The pricing strategies are based much on what
objectives the company has set itself to achieve.

Penetration pricing: Where the organisation sets a low price to increase sales and market share.

Skimming pricing: The organisation sets an initial high price and then slowly lowers the price to
make the product available to a wider market. The objective is to skim profits of the market layer by layer.

Competition pricing: Setting a price in comparison with competitors.

Product Line Pricing: Pricing different products within the same product range at different price
points. An example would be a video manufacturer offering different video recorders with different
features at different prices. The greater the features and the benefit obtained the greater the consumer
will pay. This form of price discrimination assists the company in maximising turnover and profits.

Bundle Pricing: The organisation bundles a group of products at a reduced price.

Psychological pricing: The seller here will consider the psychology of price and the positioning
of price within the market place. The seller will therefore charge 99p instead £1 or $199 instead of $200

Premium pricing: The price set is high to reflect the exclusiveness of the product. An
example of products using this strategy would be Harrods, first class airline services, Porsche
etc.

Optional pricing: The organisation sells optional extras along with the product to maximise
its turnover. This strategy is used commonly within the car industry.

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Big Bazaar: Brand's Identity, Personality & Symbolism

Big Bazaar is Indian personification of retail. It's like an Indian bazaar or mandi or mela, the environment
created by traders to give shoppers a sense of moment. Its personality is of being an entity away from fancy
or pretty and being authentically "no-frills". Kishore Biyani never hired any foreign consultant for Big Bazaar
which is evident from Indian-specific personality of the brand. The brand's personality is self-explanatory by
its tag-line only. This statement places Big Bazaar at the top of customer's mind. It reflects that
entrepreneurship and simplicity are the essence of character of Big Bazaar. To use predatory pricing is not in
the personality of Big Bazaar, they never sell goods below the price they have purchased it. Big Bazaar, the
"Indian Wal-Mart", is the modern Indian family's favorite store. Big Bazaar symbolizes modern retail, the
business which isn't looked up to in our country, is now in the eyes of many multi-national biggies. Big
Bazaar has shown a robust growth in recent years (.

Demerits of Marketing a Commodity Market

Brands evolve from ‘unbranded commodities' to references, where the name is used for identification. This is
also evident from the Goodyear's (1996) chronological brand categorization

There is lack of differentiation if marketing of commodity is done. Commodities and differentiated products
are the two ends of the product spectrum. Each unit of a commodity is exactly like every other unit. A
product is a commodity when all units of production are identical, regardless of who produces them.
Commodities tend to be raw materials like corn, wheat, copper, crude oil, etc. The stone marble is mined
and sold by many companies in Rajasthan; it's like an unbranded commodity, where each producer is selling
identical product.

People that produce commodities are referred to as "price-takers". This means that an individual producer
has no control over his/her price. On the other hand, people who are owners of brands or differentiated
products are "price-makers". Producer of a differentiated product creates a separate market for his/her
individual product.

Value of Branding

Branding plays a crucial role for all the products and services. A successful brand is an identifiable product
or service, and buyers or users perceive values in it which matches their needs.

There are certain advantages of branding. They are: -

• Product dies but a good brand never dies: The first car T-model is no more but the brand
'FORD' is still alive. 'Pears' soap that was launched somewhere in the end of 1800 is still alive
although they have changed the product. Even they are looking for line extension but basic brand
names are the same.

• Sales or market share: A brand generates familiarity and trust, and hence, leads to greater sales.
Branded products have an edge over unbranded products.
• Premium price: Brands generate trust, a brand manager can charge extra price and people pay for
that trust.
• Differentiation: Creating a brand is nothing but creating a strong association. This association
clearly differentiates the branded product from the rest.

According to brand evolution model developed by Kunde (2000) (as the value of brand becomes stronger
and more relevant to customers, the brand becomes more involving, and thus, managers need to make
their brand values more relevant to increase customer's involvement. This is explained by religion model
also. The model distinguishes 5 types of brands: -
 • Product Brand: Products without any form of added value connected to the generic element.
• Concept Brand: Brands that are driven by emotional values - as opposed to product
characteristics.
• Corporate Concept Brand: Brands that merge with the company and present themselves in a
sustained and consistent way.
• Brand Culture Brand: Brands that are so strong that they - in the eyes of the consumer - have
become equated with the function they represent.
• Brand Religion Brand: The ultimate brand position is that of brands that - in the eyes of the
consumer - have become a "must", a faith to which they profess.

Big Bazaar: Positioning & Establishment

Big Bazaar has established itself in the first quadrant of Organization Value and Customer Value Matrix
(Exhibit 5). The SWOT Analysis (Exhibit 6) of current strategy of Big Bazaar elaborates the core
competencies and areas of improvement. The key features that have shaped in establishing of brand
includes: -

• Big Bazaar ensures that no other kirana store / departmental store are offering considerable
discount compared to its own price. This helped Big Bazaar in being the "value for money" store.
• Big Bazaar scores high on product mix as compared to kirana store.
• Cheap and local products are heavily stocked in Big Bazaar which make it easier to attract lower
middle class category of customers.
• Promotion of kirana is rare event but Big Bazaar used this channel efficiently to establish itself as
national brand.

• Customer loyalty resulting in high up sell, i.e., selling to existing customers.

• Big Bazaar refrains from high-end locations for business which reduces its rental budget and
provides competitive advantage over competitors. Kishore Biyani has taken "early movers
advantage" in many retail spaces.

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7P Analysis of Big Bazaar

7P Marketing Mix is more useful for services industries and knowledge intensive industries. Successful
marketing depends on number of key issues. The seven keys issues are explained as: -

Product

Big Bazaar offers a wide range of products which range from apparels, food, farm products, furniture, child
care, toys, etc. . Products of all the major brands are available at Big Bazaar .Also, there are many in house
brands promoted by Big Bazaar. Big Bazaar sold over 300,000 pairs of jeans, 50,000 DVD-players and
25,000 microwave-ovens. In all, the fashion, electronics and travel segments made up about 70% of sales.
Last year, these categories made up only about 60%.
Price

The tag-line is "Is se sasta aur accha aur kahin nahi". They work
on the model of economics of scale. There pricing objective is to
get "Maximum Market Share". The various techniques used at Big
Bazaar are: -

• Value Pricing (EDLP - Every Day Low Pricing): Big

Bazaar promises consumers the lowest available price
without coupon clipping, waiting for discount promotions, or
comparison shopping.
• Promotional Pricing: Big Bazaar offers financing at low
interest rate.
• The concept of psychological discounting (Rs. 99, Rs. 49,
etc.) is used as promotional tool.
• Big Bazaar also caters on Special Event Pricing (Close to
Diwali, Gudi Padva, and Durga Pooja).
• Differentiated Pricing: Time pricing, i.e., difference in rate
based on peak and non-peak hours or days of shopping is
also a pricing technique used in Indian retail, which is
aggressively used by Big Bazaar.
• Bundling: Selling combo-packs and offering discount to
customers. The combo-packs add value to customer.

Place

• Big Bazaar stores are located in 50 cities with 75 outlets.Big Bazaar has presence in almost all the
major Indian cities. They are aggressive on their expansion plans.

Promotion
Big Bazaar started many new and innovative cross-sell and up-sell strategies in Indian retail market. The
various promotion techniques used at Big Bazaar include "saal ke sabse saste teen din", Future Card (the
card offers 3% discount), Shakti Card,

Brand Endorsement by M. S. Dhoni, Exchange Offer - ‘Junk Swap Offer', Point-of-Purchase Promotions.

Advertising has played a crucial role in building of the brand. Big Bazaar advertisements are seen in print
media, TV, Radio (FM) and road-side bill-boards.

People

They are one of the key assets for any organization. The salient features of staff of Big Bazaar are: -

• Well-trained staff, the staff employed by Big-Bazaar are well-suited for modern retail.
• Well-dressed staff improves the overall appearance of store.
• Employees are motivated to think out-of-the-box. Retail sector is in growth stage, so staff is
empowered to take innovative steps.
• Employs close to 10,000 people and recruits nearly 500 people every month.
• Use of technology like scenario planning for decision making.
• Multiple counters for payment, staff at store to keep baggage and security guards at every gate,
makes for a customer-friendly atmosphere.

Process

The goods' dispatch and purchasing area has certain salient features which include: -

• Multiple counters with trolleys to carry the items purchased.

• Proper display / posters of the place like (DAL, SOAP, etc.).
• Home delivery counters also started at many places.

Physical Evidence

It deals with the final deliverable or the display of written facts. This includes the current system and
available facilities.

Big Bazaar: Brand Extensions Actually Made & Future Possibilities

Future Group is planning to split Big Bazaar into two entities. One will be front-end consumer-oriented entity
and other will be for back-end operations. Back-end entity may enter into joint venture with leading
international cash and carry retailers. Foreign partners like Carrefour, Metro, Costco, etc., are in the race,
and their role will be to improve efficiency in sourcing and logistics, which will help drive down prices and
boost margins.

The front-end operations will be further divided in three categories, Big Bazaar Express with store area
less than 40,000 sq. ft., Standard Big Bazaar with store area between 40,000 to 75,000 sq. ft., and Big
Bazaar Supercentres with store area more than 75,000 sq. ft. . Future Group is also planning to distribute
financial products like consumer loans and insurance through Big Bazaar outlets.
Consumer Insights & Perceptions

Big Bazaar is based on 3-C theory of Kishore Biyani. The 3-C symbolize Change, Confidence and
Consumption, and according to this theory, "Change and confidence is leading to rise in Consumption". They
divided Indian customers in three categories: -

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India One

• Consuming class, constitutes only 14% of Indian population.

• They are upper middle class and most of customers have substantial disposable income.
• Initial focus of Big Bazaar.

India Two

• Serving class which includes people like drivers, house-hold helps, office peons, washer-men, etc.
• For every India One, there are at least India Two and have around 55% of Indian population.

India Three

• Struggling class, remaining population of India.

• Cannot afford to inspire for better living, have hand-to-mouth existence.
• Needs cannot be addressed by current business models.

The potential customers of Big Bazaar are India One and India Two. The customer insights were developed
by close observation of the target set. The insights that came out were: -

• The clean and shiny environment of modern retail stores creates the perception that such store are
too expensive and exclusive, and are not meant for India Two.
• India Two finds moves and find a lot of comfort in crowds, they are not individualistic. They prefer
to be in queues.
• Indian-ness is not about swadeshi, it's about believing in Indian ways of doing things.
• Indian customers prefer to purchase grains, grams, etc., after touching them, so it's better not to
sell in polythene packs. Big Bazaar has counters where you can touch wheat, rice, sugar, etc.,
before purchasing.

• Advertisements about schemes and offers through local newspapers, radio in local languages,
inspires customer more than the traditional ways.
• The guards, salesman at the Big Bazaar outlets should not look smarter than customer, so they
prefer not to have tie, etc., in their uniform.
• Hypermarkets in India should be situated in city unlike western countries where they are located
away from city.

• Purchased bags / goods should be sealed at check-out as customer can enter and exit multiple
times.
 • For Indians, shopping is an entertainment; they come in groups, with families so Big Bazaar should
offer something for every section of family. That also led separate section for clothes, vegetables,
food, etc., that is multiple clusters within a bazaar.

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• Developed a diversity tracing cell to cater local patterns, demands, festivals, as every region of
customers has unique demands.

Advertising: The Essential of Brand Building Process

Advertising is an essential component of brand building. The advertisement and brand building is done
through various ways, the techniques used are: -

Tag-line: Big Bazaar tag-lines are the key components of advertising. These tag-lines are modified
according to demographic profile of customers. These catch-phrases appeared on hoardings and newspapers
in every city where Big Bazaar was launched. Everybody understood and connected easily with these simple
one-liners. The catch-liners include "Hindi - Chane ke bhaw kaaju", "Bengali - Rui er dame illish", "Hindi -
Stall ke bhaw balcony", etc.

Print Ads: Big Bazaar newspaper advertisements are present just before launch of any new scheme. This
creates aura about the Big Bazaar brand in the minds of customers.

TV Ads: Kishore Biyani spends a lot of money in brand building exercise. Big Bazaar commercials are shown
on various channels in India. Presently, Fashion@Big Bazaar commercial is aired.

Road-side Advertisements: Big Bazaar bill-boards are displayed on prime locations in various cities as a
brand building exercise. They display the catch-phrases now-a-days.

Radio Ads: This technique is used in cities like Sangli (Tier 1 / Tier 2 cities). Now-a-days, it is replaced by
advertisements on FM channels. This informs customers about all new happenings at Big Bazaar.

Fashion Shows: "FASHION @ BIG BAZAAR - Desh Badla, Bhesh Badlo" is the latest invention of the Indian
iconic brand. In an effort to take the Fashion to the masses, Big Bazaar, the flagship hypermarket brand of
retail chain of Future Group, organized a three-day Fashion Show on the streets of Bandra, Mumbai.

Brand Endorsement by Celebrity: Big Bazaar is always associated with celebrities for advertising and
marketing of its brand name. The current campaign is starred by Brand Ambassador and Indian Cricket ODI
Captain Mahendra Singh Dhoni. Earlier Himesh Reshammiya and Sanath Jaisuriya were associated with Big
Bazaar.

Factors that Shaped Big Bazaar During its Life Cycle

The Big Bazaar brand name is in its growth stage Pantaloon Group faced various small and large scales
troubles in the introductory stage of the brand.

Present years are the high growth years in retail sphere as market has high potential to sustain growth. The
sales are increasing, more and more firms are coming to market, foreign players are entering into retail
sector, and pie of organized retail is increasing in retail sector.
The factors that shaped the brand during its life cycle are: -

• Influence of Sarvana Stores Located in Theyagraya Nagar, Chennai

Many people think that Big Bazaar was inspired by Wall-Mart but the truth is that Kishore Biyani and
his team members are neither inspired by US ways of doing retailing nor they have been to US
much. The credit for foundation and inspiration goes to Saravana Store, a family-run 25-years-old
store, whose philosophy was - low margin, high turnover. In that store, food, groceries, clothes,
everything had a separate section. It had around 120 people just to manage crowd. The single shop
was doing business of more than INR 200 Crore per year. This shop was the template for Big
Bazaar.
• Observing Customers Regularly
Regular customer feedback is also an influential factor for the success of Big Bazaar. The Big Bazaar
has a separate team that looks for customer's purchasing pattern and how they like or dislike
products, how they approach particular products. For example, unlike other stores where the most
expensive and catchy item is placed at the front display, Big Bazaar places the "Value for Money"
items at check-out points.
• Imbibed Entrepreneurial Spirit in Organization
Decision making power is given to every level of employees at Big Bazaar. Kishore Biyani has given
risk-taking power, which led to exposure of entrepreneurial spirit in every employee. Everybody in
Big Bazaar operates with speed and confidence when it comes to decision making.
• Building on Core Values
Core values of Indian-ness, valuing and nurturing relationships, and simplicity shaped the brand.
Kishore Biyani always believes in long-term relationships, with customers, suppliers and employees.
Once thinking about offering gifts to employees close to Diwali, Kishore Biyani suggested giving
them wall-paints to keep their house clean. The paint is used in Indian culture to keep house clean
and brings freshness. The motive behind this was to keep everything clean and bring freshness in
organization.

Strategic Decisions Taken to Build the Big Bazaar Brand

The strategic decisions that lead to building of Big Bazaar were: -

Real Estate Game

For a retailer, location is one of the most important things. According to Kishore Biyani, real estate cost
should be less than 5% of total sales of store in order to provide maximum benefits to customer.

The strategic decisions to secure spaces before other retailers join in have resulted in cost-saving. Also, it
has created early presence in market.

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Nurturing Relationships
Kishore Biyani follows strategy to develop trust and nurture relationships with suppliers. This trust led to
strategically correct decisions most of the time. Whoever works with Future Group, either leaves in initial
deals or continues forever.

Use of Technology, Scenario-Planning & Story-Telling

Big Bazaar planning and design used advance technologies like scenario-planning and story-telling. These
techniques were mainly used for store-design layout, store-location selection. The strategy to use user-
focused, prototype-based development tool made the brand adapt to the fast-changing external
environment.

Design Management

Design-led thinking helped Big Bazaar to achieve ‘customer-first' objective and ultimately led to better
financial performance. Big Bazaar strategy to focus on design led to creation of Idiom, an independent
design and consultancy firm, based in Bangalore. They are one of the few organizations in India having
economists, ethnographers and sociologists working across various teams as a part of Design Management
team.

Back-end Operations, Supply Chain

Harvard Business School just did a case study on Pantaloons' Supply Chain and it says that Pantaloons' is
the most cost-effective supply chain in the world. India may not have a modern supply chain but it definitely
has a cost-effective one. Retailers have made use of the existing supply chain

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