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Drishti is preparing to become a marketing manager at an e-commerce firm and wants to understand pricing strategies. Pricing is important because 80% of purchasing decisions are driven by competitive pricing and 90% of online shoppers hunt for deals. Common pricing strategies include cost-based pricing, market-based pricing, dynamic pricing, bundle pricing, penetration pricing, and loss leader pricing. Excel solver can be used for price optimization by trying different solutions to maximize profit. For example, a printer can be sold individually at $85.75 per unit or in a bundle with cartridges at a $9 loss to earn more through high cartridge sales volume. Competitor analysis provides leverage in supplier negotiations and focusing marketing

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Sanchit Kaushal
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191 views

Case Study

Drishti is preparing to become a marketing manager at an e-commerce firm and wants to understand pricing strategies. Pricing is important because 80% of purchasing decisions are driven by competitive pricing and 90% of online shoppers hunt for deals. Common pricing strategies include cost-based pricing, market-based pricing, dynamic pricing, bundle pricing, penetration pricing, and loss leader pricing. Excel solver can be used for price optimization by trying different solutions to maximize profit. For example, a printer can be sold individually at $85.75 per unit or in a bundle with cartridges at a $9 loss to earn more through high cartridge sales volume. Competitor analysis provides leverage in supplier negotiations and focusing marketing

Uploaded by

Sanchit Kaushal
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
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Case Study Summary

 This paper discusses How Drishti, an MBA in marketing, is willing to grab knowledge
regarding the pricing strategies for an e-commerce firm.
 She is going to join as a marketing manager and wants to develop some
understanding of pricing strategy.
 Understand how costing, demand, value, competition affect pricing.
 How pricing strategies, such as skimming pricing, bundle pricing, demand-based
pricing works. In addition, can she use some analytics in pricing?
IMPORTANCE OF PRICING
 Google’s consumer barometer below shows how much time is spent on a product before a purchasing decision is made.
 As you can see only 21% start their research moments before a purchase. The rest starts from hours to more than months!
 To emphasize that even further, let’s look at some stats:
 The most important store features driving the purchasing decision (80%) is competitive pricing.
 Around 90% of e-commerce shoppers are masters of hunting deals. Thanks to technology and comparison-shopping engines, consumers get alerts in
multiple items from multiple stores.
 Price comparison engines are a key part of the e-commerce marketing stack, as they constitute around % 20 of e-commerce traffic for all sorts of
product categories.
TYPES OF PRICING STRATEGIES
 Cost-based pricing : This method requires the company to write down its unit product costs for
each of its products in its portfolio, and then set a target profit margin for each of those products.
The formula is below:

Some common costs most e-commerce businesses have are:


 Your domain
 Your website hosting
 Your rent (if you have an office space)
 Sourcing products
 Storing your products in a warehouse
 Platform fees
TYPES OF PRICING STRATEGIES

 Market-based pricing: If you’re not the single player in the market you definitely need to
be aware of your competitors. There are tons of active e-commerce companies in the
industry, around 860,000 to be exact. As part of this huge jungle, each company directly
competes with at least 15-20 businesses.

 Dynamic pricing:  is a very profitable e-commerce pricing strategy in which marketers set
flexible prices by taking into account costs, targeted profit margins, the demand of the
market and your competitors’ prices. In other words, it allows you to set the optimal
prices at the right time in response to real-time demand and competition status while
taking into account your business goals.
TYPES OF PRICING STRATEGIES

 Bundle pricing: Product bundling is fairly simple. You sell a range of products together
for a discounted price. For example, many products require accessories. Some are
mandatory (like a lens cap on a camera that usually comes with the camera), but some are
highly desired, but optional, like a tripod for a camera.

 Penetration pricing: Penetration pricing is a marketing strategy where a business enters a


new product market with below-average prices.
TYPES OF PRICING STRATEGIES
 Loss leader pricing : Loss leader pricing strategy involves setting a few products to be
sold at a lower price – a price that actually puts you at a loss – in order to get your
customers through the door (or on your website). Loss leaders hope that once customers
are on the website, they’re more likely to buy your other (normally priced items).
Price Optimization Using Excel Solver Tool

 Excel Solver tries all reasonable solutions that fit the specified model and is used to
construct useful pricing models.
 Data Available:
Price Optimization Using Excel Solver Tool
Price Optimization with a tie-up project

 Before Optimization:
Price Optimization with a tie-up project

 After optimization:
RESULTS

 From the above study, after using Solver tool it is visible that when printer is sold
individually, they should be sold at a price of $85.75 per piece which will attract a total
profit of $95,415.

 On the other hand, when the printer is sold in tie-up with cartridges, it should be sold at a
loss of $9 over its manufacturing cost. This is done to attract customers and to sell high
volumes of printer. In this scenario, the profits are earned because of the margins in
cartridges and the firm will earn $525,112, which is $429,697 more than earlier profits.
RECOMMENDATIONS

 If a competitor has better prices than yours for a particular brand, but it’s more expensive
for all the other brands you match with. Most likely, she got a better deal with the supplier.
Another possibility is that she has lower overhead costs, but it would likely be reflected in
the rest of the brands’ prices if that were the case.
 Now that you have this information, you’ll have leverage when negotiating with the
supplier.
 Even if you don’t get a better deal, you can focus on your weak side and put a greater
effort into that brand’s marketing. Or, you can decide on directing your efforts away from
that brand into a one that you have a competitive advantage. Either way, you’ll be able to
make a well-informed decision.
Thank You!!

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