Pricing Strategies of Parle Products: An MBA Marketing Analysis

This report provides an in-depth analysis of Parle Products' pricing strategies within the Indian confectionery and food products market. It examines Parle's mission, vision, and objectives, highlighting its focus on quality, nutrition, and taste, as well as its commitment to corporate social responsibility. The report delves into the company's market share, particularly that of its flagship brand, Parle-G, and its successful strategy of maintaining low prices to target a broad consumer base. It then explores various pricing strategies, including premium pricing, penetration pricing (which Parle-G effectively uses), economy pricing, and price skimming. The report also discusses pricing in the FMCG sector, including common pitfalls such as cost-plus pricing, misaligned pricing with brand positioning, and failure to consider category and competitive pricing. Furthermore, it analyzes Parle's pricing decisions, considering factors such as the level of competition, the availability of substitute products, and the target customer base. The report concludes by emphasizing Parle's strategic approach to maintaining its market leadership through low-cost strategies and effective distribution channels.

ASSIGNMENT
On
Pricing Strategies
By
Shivam Chauhan
(A0101918171)
ROLL NO-43
MBA Class of 2018-2020
Under the Supervision of
DR.RAHUL GUPTA
Department of Marketing
In Partial Fulfilment of the Requirements for the Degree of
Master of Business Administration – General
At
AMITY BUSINESS SCHOOL
AMITY UNIVERSITY UTTAR PRADESH SECTOR 125, NOIDA -
201303,
UTTAR PRADESH

PARLE
ABOUT PARLE
Parle is an Indian confectionary and food products company. It is the owner of
the famous biscuit brand Parle-G, which is also known as the perfect tea-
companion for Indians. The Parle name symbolizes quality, nutrition and
superior taste. They have grown to become India’s leading manufacturer of
confectionery and biscuits and the largest selling biscuit brand in the world as
per Nielsen ratings.
Mission
“To be the part of lives of every Indian”
Vision
“To Nourish, strengthen and delight millions.”
Objectives
 CSR agenda is integrated with the business.
 Focused efforts are made in the identified community development areas
to achieve the expected outcomes.

Market Share:
Parle-G, with its iconic yellow striped pack showing the ‘Parle girl’, continues
to hold 20% share of the Rs25,000 crore biscuit market by value.
It is now worth Rs5,000 crore, according to market research firm Nielsen, in a
market dominated by Britannia Industries Ltd that largely sells premium cream
biscuits like Treat and cookies like Good Day.
The secret to Parle G’s success is sticking to its position as a glucose biscuit
meant for the masses. In the decades since Parle-G’s launch in 1939, Parle
Products has kept the brand’s prices at the entry level, introduced only one
premium variation, and even kept the vintage Parle girl affixed on packets.
PRICING STRATEGIES
Price is the value that is put to a product or service and is result of the complex
set of calculations, research and understanding and risk taking ability. A pricing
strategy takes into account segments, ability to pay, market conditions,
competitor actions, trade margins and input costs amongst others. It is targeted
at the defined customers and against competitors.

TYPES OF PRICING:
Premium Pricing:
Use a high price where there is a uniqueness about the product or service. This
approach is used where a a substantial competitive advantage exists. Such high
prices are charge for luxuries such as Cunard Cruises, Savoy Hotel rooms, and
Concorde flights.
Penetration Pricing:
The price charged for products and services is set artificially low in order to
gain market share. Once this is achieved, the price is increased. This approach
was used by France Telecom. For eg. ParleG has adopted the Market
Penetrating Strategy i.e low price along with capturing the market. Parle, in
order to create large potential market, employs mass marketing for Parle-G.
Mass-production, mass-distribution and mass-promotion allows Parle to
maintain low-price for Parle-G while targeting all segments of the market.
It is available to customers from big metropolitan cities to the remotest and
smallest of villages with population of 1500.
However, when compared to its competitors, it has more focus and penetration

in rural and sub-urban areas than city areas. The major reason being the
strategic location of its manufacturing units, which are closer to rural and sub-
urban areas.
Through five-level of distribution channel, it has been able to meet its high
nationwide demands. Its distribution channel consists of 14 manufacturing
units, 31 depots and C&F agents, close to 1,500 wholesalers, 425,000 retailers
and 2.5 million outlets
Economy Pricing:
This is a no frills low price. The cost of marketing and manufacture are kept at a
minimum. Supermarkets often have economy brands for soups, spaghetti, etc.
Price Skimming:
Charge a high price because you have a substantial competitive advantage.
However, the advantage is not sustainable. The high price tends to attract new
competitors into the market, and the price inevitably falls due to increased
supply. Manufacturers of digital watches used a skimming approach in the
1970s. Once other manufacturers were tempted into the market and the watches
were produced at a lower unit cost, other marketing strategies and pricing
approaches are implemented.
Premium pricing, penetration pricing, economy pricing, and price skimming are
the four main pricing policies/strategies. They form the bases for the exercise.
However, there are other important approaches to pricing.
Parle has adopted a low-cost strategy in order to chase and establish a market
leader position. This is the major pricing strategy of the Parle brand as a part of
its branding. The low price of the Parle products with the promise of high
quality depress the competition.
Quality is the main focus of parle, and still has been able to maintain low cost
due to the high demand. The starting range of base pack is Rs 2 for biscuits
whereas the chocolates range from 1 to 2 rupees.
The pricing strategy of Parle has enabled it to retain its position as a market
leader despite several new confectionary brands coming in the market as its
competitors. Due to its high volume production, its prices are slightly lower
which helps to retain customers and reach maximum audience.

PRICING IN FMCG SECTOR:
1. Consumer price based on Product Cost only. Make a product for
$1 and sell it for $1.50 (50% mark-up) based on some internal
guideline. This is more common with less sophisticated organisations
and they end up Pricing too Low resulting in lost profit, or Pricing too
high which results in lower sales units. Either way, it is a lottery,
though the only saving grace is that the product does not make a loss.
2. Issue Price Guidelines without limits on percentage of units sold
on Promotional Prices. This is more common than many would like
to believe. Sales and Marketing teams issue these types of guidelines
in larger organisations. At times they do not place a limit on the
percentage of units that can be sold at promotional prices, or simply
do not communicate them clearly or install checks in the system. Sales
teams tend to oversell at the lower promotional prices, which then
erodes profitability.
3. Do not align Pricing with Brand Positioning. In some
organisations Marketing finalizes the Brand Positioning and suggests
Pricing at an overall level while Category Management or Trade
Marketing own the detailed pricing strategies and tactics. This can be
detrimental unless there is very close alignment between sales and
marketing. Price is probably the most important Positioning tool in the
marketers armory. Think about your quality and features perception of
two cars without knowing anything else about them. One is for
$20,000 and the other is for $120,000. Which one will most consumers
believe to have better quality with many value added features etc.?
Misaligned Pricing with Positioning results in diffused consumer
perceptions and sub-optimal sales and market share.
4. Decide Pricing without understanding the Category and
Competition pricing. Sometimes in smaller, less sophisticated
organisations management does not spend the bare minimum money to
buy category and competition data. A walk down to the supermarket
and pricing is decided. They do not recognize how sophisticated
brands use deep pricing at times to drive trial without adversely
impacting brand equity over a large period of time. And occasionally
in large global multi-nationals there are stark errors in the analysis,
not because they don't have the data (in fact many such large
organisations have been sold excessive and irrelevant data by their
data/analytics/research providers, but more due to internal tunnel
visioning (biases) which tends to disregard critical metrics and

sometimes even ends up looking at an irrelevant competitive set
(market segment).
5. Do not have a working P&L to evaluate various Price Levels &
Unit Sales mix. While this appears to be elementary, you will be
surprised how many organisations run large and complex spreadsheet
based models which only a specific analyst can drive to extract
relevant metrics. Every Brand Manager and Sales Manager must have
a simple spreadsheet to evaluate various pricing scenarios by simply
changing a few of the variables.
PRICING DECISIONS TAKING INTO CONSIDERATION THE
FOLLOWING: -
LEVEL OF COMPETITION:
Parle has one of the bestselling and the most widely distributed product in the
biscuit market – Parle G. The product has won many distribution awards in the
past few years and it is known for its packaging as well as for its variants in
price. Hence the biscuit sells in low end as well as middle level markets.
Others like Marie, Hide and seek and Monaco also sell in huge amounts.
However, Britannia has some power house products in its portfolio like
Bourbon, good day, little hearts, 50 50 and others. The competition amongst
these two brands is evident when each has a variant of Marie biscuits. Parle’s is
known as “Marie” and Britannia’s is known as “Marie gold”
SUBSTITUE PRODUCTS:
There are numerous substitutes to chocolate product that transcend by consumer
categories. Based on these result, it can be determined that the threat of
substitutes in FMCG industry for biscuit products is high. Furthermore, other
product substitutes that can be threatening the biscuit industry including non-
biscuit snacks such as biscuits, crisps, frozen dairy products, savoury snacks.
These snacks pose a threat as indulgent foods are based purely on consumer
preference. Frequently, customer purchase substitutes product to seek
alternatives from obesity due the biscuit products. For example, for those
customers with a sweet tooth taste are preferred to purchase both fresh products
such as dried fruit and yoghurt and who favour savoury snacks they like to eat

popcorn, nuts, rice cakes and seeds. Moreover, as we know biscuit also have
advantages for our health with supply energy in body. In this context,
competitors can implement new product that provide energy by increasing
insulin level with water such as energy drinks also can be considered substitutes
as they have similar affects as chocolate. So the Parle sets its prices to an extent
that it sustains in the market.
TARGET CUSTOMERS:
Parle mainly focusses upon targeting people from rural and semi-urban areas.
The target market segment is from people of middle income age groups.
Consumers of parle are from all age groups. Thus, it aims at catering to the
needs of market that occupies people from low/mediocre disposable incomes.