Pricing products in India can be tricky for people who haven’t worked much in India. A country with large number of country-sized states is a vibrant, multi-cultured & multi-religion nation. People from different backgrounds, financial status and lifestyles live across the country.
Pricing products has some general, universal rules. No matter what product you sell the price you fix for your customers or clients will have a direct impact on the success of your business. They must take care of the following:
- Prices must cover costs and profits.
- To lower price, lower your costs.
- Review prices frequently.
- Prices must be established to assure sales.
India specific rules regarding pricing:
- India is vast, with world’s second highest population so it includes diverse population. People from extremely low annual income to ultra-rich, India has it all. Pricing in India, must be kept as per the target audience of the product.Low priced but value sensitive products have high demand.
- Long life-span products like Consumer Electronics, Mobile Phones or automobiles must be priced considering service delivery costs, warranty costs & service setups. Indians are highly demanding on services, warranty and replacements etc.
- Different pricing for Urban India/ Rural India. Stark differences in how Indiansbuy are common. People in rural India are very calculative and value driven. They could spend a lot of time to bargain to get a product at a lower cost. People in urban India would like to spend more for a good quality product and may perceive higher prices with a higher quality product.
- Indians do not like cheap products. India is a very price conscious market, very competitive and sensitive. But trying to sell cheap products at the cost of quality or service could be highly detrimental for success in India.
- Indians are smart buyers. They calculate the value from the product rather than price. If your product gives them higher value during its life, they will be happy to buy your product. So if a product has a short-life cycle with not much of importance they will ideally go for a cheap product. On the other hand, if the product is for a longer duration say for a few years, they will opt for a good quality product with a good after sales service, though at a reasonable price.
- Unreasonable pricing doesn’t last long. Indians remember the price that they buy the product for. They are happy if the buy at the lowest price. Variations in pricing or charging higher at some places could be detrimental to business.
- Category specific pricing. Example: High end Party wear dresses for women in metros. Extremely high margins and higher prices are welcome.
- Food consumption in India rising: As the young Indians earn decent amount of salaries, primarily in the top 20 cities of India. Eating out is becoming a norm. People don’t mind paying high bills at restaurants, pubs etc. This is a recent trend, very visible from 2017 onwards.
- Online VS Offline pricing: A similar pricing in offline & online channel helps in creating brand value. Consumers check the prices online to compare with offline stores. Their interest still remains to buy offline. But if cheaper online, the consumer will buy online.
- Channel-wise cost difference: Generally in all categories, India has an established offline channel. This channel would consist of 2 to 4 layers of sellers including the wholesalers, distributors & retailers. Online on the other hand would have 1 to 2 layers of sellers. The cost of offline channel is 1.5 to 2 times higher than the channel cost of online. So keep this in mind while preparing a price list in India.