Maggi

A
PROJECT REPORT
ON

MAGGI

UNDER
MARKETING MANAGEMENT

SUBMITTED TO: PROF: BHAVESH VANPARIA

PREPARED BY: KAVITA AIYER
ROLL NO: 10005
P.G.D.M 2010-12

TOLANI INSTITUTE OF MANAGEMENT STUDIES

TABLE OF CONTENT

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 Maggi

Sr. no Topic Page no

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1 Product 3
2 About packaged food industry 3
3 competitors 3
4 advertisements 6
5 Marketing strategies 7
6 Value delivery process 3
7 Gathering information 3
8 Buying behavior process 3
9 Company orientation 3
10 Product mix 3
11 Porters model 3
12 Market segments 3
13 Market targeting 3
14 Product life cycle 3
15 Product classification 3
16 Product strategy 36
17 Setting the price 38

PRODUCT
 Maggi noodles are a brand of instant noodles by Nestle. It was founded by
the Maggi family in Switzerland in the 19th century.
 Maggi is the iconic brand of Nestle.
 Maggi has been Nestlé’s flagship culinary brand not only in India, but
globally as well.
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 Maggi in India is best known for its flagship product noodles with its various
desi sub segments such as the traditional dal Atta, veg Atta and rice noodles
along with their various variants ,curry masala tomato ,chicken in the
traditional and shahipulao lemon masala and chilly chow in the rice noodles
segments.
 It took number of years and lot of money for NESTLE to establish its Maggi
brand in India.
 NESTLE wanted to explore the potential for such an instant food in Indian
market.
 Currently NESTLE MAGGI enjoys 90% market share in India.

ABOUT PACKAGED FOOD INDUSTRY

 The size of the packaged food market in India is estimated at $10 billion
and is expected to reach $20 billion by 2014, while the share of packaged
food in the food and grocery market is expected to touch 5 per cent by the
same time.

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 Factors that have fuelled this industry’s growth are the arrival of food
multinationals, rising popularity of quick-service restaurants, modern retail
trade, technological advancement, changing urban lifestyles and so on.
 The main categories of packaged food are bakery products, canned/dried
processed food, frozen processed food, meal replacement products and
condiments.
 Some emerging new categories in this segment are processed dairy
products, frozen ready-to-eat foods, diet snacks, processed meat, probiotic
drinks and so on.
 Some key players in this industry are Hindustan Unilever (tea, instant
coffee, biscuits, pulses, and instant beverages), Nestle (instant coffee, milk
and milk products, ready-to-eat foods), PepsiCo (aerated drinks, fruit juices,
cereals, snacks) and Haldirams (sweets, namkeens, syrups, crushes, snacks).

TOP COMPETITORS OF nestle MAGGI NOODLES

WAI WAI TOP RAMEN

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GSK FOODLES ITC

FEW ADVERTISEMENT OF NESTLE MAGGI

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DEVELOPING MARKETING STRATEGIES & PLAN AND

CREATING CUSTOMER VALUE, SATISFATCTION &
LOYALTY.
CUSTOMER PERCIEVED VALUE: (CPV)

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CPV is the difference between the customer’s evaluation of all the benefits and all
the cost of an offering and the perceived alternatives. If further clarify then

TOTAL CUSTOMER BENEFIT is perceived monetary value of the bundle of

economic, functional and psychological benefits customers expect from given
market offering because of the products, services, personnel and image involved.

TOTAL CUSTOMER COST is the perceived bundle of cost, customer’s expect to

incur evaluating, obtaining, using and disposing of the given market offering,
including monetary, time, energy and psychological costs.

CUSTOMER PERCEIVED

VALUE

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Value delivery process:
Maggi

We all know that now a day traditional view of business process will not work in
economies where people face abundant choices. So the smart competitor must
design and offer for well design target markets.

Here Nestle Company has also created a different value chain to fulfill
customer satisfaction and more marketing of their product.

Image benefit:

Nestle Maggi is a well-known brand all over the world and one of the oldest
companies in India. Nestle have created an image in the minds of customer and
were able to get the trust of customer towards the brand.

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Product Benefit:

They are also providing Maggi in an attractive pack so kids are attracted by it.
Working people are using it as a convenience product.

Personal Benefit:

According to customer interest they are giving different type of flavor and
according to the varying tastes in India they are serving them accordingly.

Time Cost

Time cost means how much time customer is spending in choice, use & disposal
of product of that product. If we consider the case of Maggi, consumers are not
spending much of their time in consuming it but yes it does cost them.

Energy Cost:

When consumers prepare Maggi it is one kind energy is being wasted in that. So
it involves cost too.

Psychological Cost:

Too much consumption of Maggi is not good for health so it indirectly or directly
affects the individual’s health.

Value Delivering process:

The view of marketing is that the firm makes something and then sells it. In this
view, marketing takes place in the second half of the process. Companies that
subscribe to this view have the best chance of succeeding in economies marked
by goods shortage where consumers are not fussy about quality, feature, or style.
But now this tradition view totally changed and it’s become vast and wide. So

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they have to realized that what exactly value delivery process of product. The
Value Delivery and creation sequence can be divided into following three phrases,
VALUE DELIVERY PROCESS

Choose the value Provide the value Communicate the value

Customer Product development Sales force
segmentation
Service development Sales promotion
Market
Pricing Advertising
selection/focus

1) Choose the value:

For deciding the value, some special kind of research is required. From they can
survive market.

Customer segmentation: Before launched maggi in the market, the research has
been conducted by NESTLE and concluded that the customers of maggi products
would be.

 Kids in the age group of 5-10 years

 School children aged 10 to 15 years
 Working women, office goers

Market selection: Maggimainly focuses on mainly on where there are maximum

working class people.

Value positioning: To give customer satisfaction, great taste, attracting packing,

discounting, other offer to attract the target customer.

2) Provide the value:

Product development: Extensive researches have been conducted by NESTLE

about the tastes and preferences of customers of various regions.

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Service development: service means provide best feasibilities to the target market
for making loyal and regular customer.

Pricing: The most important element of Value Delivery Process is to decide price.
Maggi is available in different prices, e.g. Rs.5, Rs10, Rs 20 etc. Various prices of
packing have various quantities. Some factors affecting prices,

o Internal: Cost, Pricing objectives

o External: Customers, Suppliers, Competitors.

Sourcing making: It defines that sourcing of Maggi raw material and how the
supply chain had been managed, what are different sources to attract customer
for buying their product.

Distributing servicing: Maggi are distributed through a network of 4000

redistribution stockiest covering 6.3 million retail outlet reaching the urban
population and about 250 million rural consumers.

3) Communicating the value:

Sales forces: As above mention, through the distribution network the sales have
been made. Maggi is available in different packing with different prices and
varieties.

Sales promotion: Nestle Maggi have been promoting their product basically in
rural schools by arranging competition and distributing free samples.

Advertising: advertisement is essential for building brand awareness and

developing strong customer perception about the brand. Maggi using Television
as the medium of advertisement.

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GATHERING INFORMATION AND SCANNING THE

ENVIRONMENT
Marketers always have to observe external environmental changes, competitor’s
strategies and need extensive information about how consumption pattern of
customers changing across.

Here, my product is NESTLE MAGGI and from the Maggi marketer point of view
he must have to keep himself up to date with all below information:

1) Which are the decisions he has to make regular basis?

2) Which information does he need on regular basis?
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3) Which kind of special studies he has to do regularly or periodically?

4) What are the magazines and newspapers he has to see on
daily/weekly/monthly basis?
5) What data analysis program he want?

If one wants answer of all above questions then one must have rich source of
internal records and marketing intelligence.

Internal Records and Marketing Intelligence

For taking any kind of information about internal things then a marketer must
require data regarding orders, sales, prices of competitors, inventory levels,
receivables and payables and so on. So for that he must have-

1) The order-to-payment cycle:

Many seller of maggi like small Karana shops normally purchases Maggi
packets on wholesale basis. So, the payment is on credit basis and the
payment will be made after decided time by both parties which may be of
15 days and may be of 1 month also. Generally as per the order to pay
concept if the payment cycle is not properly maintained then a seller or a
marketer need to take care of it and make it on time so that the order to
payment cycle and move smoothly. Also purchasers of such wholesale
products get some benefit on bulk purchase. Sometimes they get some
quantity free of cost and sometimes the get other things free, like jar, wall-
clock, key-chains etc.
2) Sales Information System:
Whenever any customer purchases Maggi packets from any retail shop
then the marketer will be able to have information regarding how much
total number of sales is happened and according to this information he get
idea about how much to produce and how much inventory should be
maintained.
3) Data base, Data warehousing, Data mining:
The data which is collected for an example of available stock- if he had
140 Maggi noodles then he has to categories that data accordingly like he
had 140 packets of Maggi noodles.

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Analyzing the Micro-environment

The Demographic Environment:

The demographic environment includes worldwide population and population age

mix. Population is directly affecting factor on the demand of Maggi, the more the
number of people the more who are working and younger generation and thus
the demand of the Maggi will increase. We can also say that the population age
mix also affecting the demand of Maggi noodles. The age group between 15 and
35 is the target customer.

Economic Environment:

As the per-capita income of citizen increase their living standard will go up and
relatively their lifestyle changes. The stressful working hour will increase and it
will directly lead people to search for something which will relief them from
cooking for long hours. So, as the country gets its growth the demand of
Maggiwill increase as the stress level will increase.

Social-cultural Environment:
The social-cultural environment largely includes people will different religion
and of different culture. As we all are aware about western culture, the people
living over there consume products like Maggi in normal life. People in India
now a day blindly follows culture of western nation and try to be like them.

BUYING BEHAVIOR PROCESS:

The buying behavior process is a five step model.

PROBLEM RECOGNITION:

Following are the reasons why people buy Magginoodles?

 Convenient cooking
 Alternative to snacks
 To reduce stress

Information search:

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It includes from where people get information about maggi.

PERSONAL

 Family
 Neighbor
 Friends

COMMERCIAL

 Advertisement
 Display

PUBLIC

 Media (newspaper, books)

EXPERIENCE

 From the experience of someone who has already used Maggi noodles.

Evaluation of Alternatives:
Total Set Awareness Set Consideration ChoiceSet Decision
Set Maggi
Maggi Maggi Maggi Maggi

Top ramen Top ramen Foodless Top

ITC ramen
ITC Top ramen
Foodless
Foodless
WaiWai

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Brand/Criteria Tast Brand Price Flavor Total

e
Maggi 9 8 9 10 36

Top ramen 8 7 8 8 31

Foodless 8 6 7 6 27

Total 91

According to my survey I have given weight to each brand according to criteria

its 40% to Taste, 30% to Brand, 10% Price and 20% to flavor.

Maggi = 9*(.40) +8*(.30) + 9*(.10) + 10 *(.20) = 33/91 = 8.9 Highest Marks

Top Ramen = 8*(.40) + 7*(.30) + 8*(.10) + 8* (.20) = 30/91 =7.7

Foodless = 8*(.40) + 6*(.30) + 7*(.10) + 6*(.20) = 28/91 = 6.9

1) Purchase decision
According to evaluation we will choose NESTLE MAGGI as it contains 8.9
marks.In evaluation of alternative also decision it’s MAGGI. So decision is
MAGGI

2) Post Purchase Behavior

POST PURCHASE SATISFACTION

Post purchase behavior is behavior of person after use of the product. In
case of MAGGI person may get habituated toward that product. Person
may also give result according to problem.If person is not satisfied then
marketer need to take post purchase action.

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POST PURCHASE ACTION:

If consumer is not satisfied then they may return the product. Consumer
may also take legal action and can also complain other groups.

For Ex: Consumer is using MAGGI and suddenly consumer realize that
quality is different than regularity then first he will complain to that shop
from where he used to buy and if he still not satisfied then he may wrote
letter to COMPANY.

POST PURCHASE USE AND DISPOSAL:

How buyer use and dispose that product. If disposal is not appropriate and
affecting the environment then marketer needs to work upon that.

EX.Consumer is using MAGGI and packing of product is not a concern so

marketer should need not worry.

Company orientation toward the marketplace

Production concept:
The production concept is one of the oldest concepts in business. Nestle also
used this concept for brand named Maggi. They concentrated on achieving high
production efficiency, low cost and mass distribution.

Product concept:
The product concept proposes that consumers favor products that offer most
quality, performance or innovative feature.Nestle has over the years tried to offer
its product in various flavors depending upon the tastes in various regions of
India.

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Selling concept:
The NESTLE most, therefore, undertakes an aggressive selling and promotion
effort for Maggi. This concept aim is to sell what they make, rather than make
what the market wants. Maggi brand doing the attractive promotional activities
like distributing free samples in schools at rural market.

Marketing concept:
Selling is only focuses on needs of seller while marketing is focuses on needs of
buyer. Marketing concept hold that the key to achieving organizational goals is
being more effective than the competitors in creating, delivering, communicating
the superior customer value to your chosen target market.

Holistic Marketing:
The holistic marketing concept is based on the development, design and
implementation of marketing programmed, process and activities that recognize
their breadth and interdependencies. Its provides a schematic overview of four
broad components characterizing holistic marketing: internal marketing,
relationship marketing, integrated marketing.

Relationship marketing:

Nestle maggi brand Marketing network consist of the company and its
supporting stakeholder- customer, employee, supplier, distributor, retailer, ad
agency, research. They properly manipulate these all component very well
through various. Its products are widely distributed across India including
penetration in rural market also.

Integrated marketing:

The marketer’s task is to devise marketing activities and assemble fully integrated
marketing programs to create, communicate, and deliver value for customers.
Marketing has a four broad tool that called ‘4P. That is price, promotion, place,
and product. Maggi considers very widely concept in term of customer

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perspective. Nestle maggiare available in various size, different design, affordable

price, different packaging, qualitative, and you can find everywhere with
appropriate list price, size, shape. That is called excellent marketing mix that why
they got.

 Internal marketing:

Smart marketer recognizes that marketing activities within the company can be as
important as or even more important than marketing activities directed outside
the company.

PRODUCT MIX WIDTH

NESTLE HOME

Candy and Frozen Backin Ice- Pet bevera Specialty Baby Maggi Maggi
chocolate foods g cream foods ges items foods soup noodles

PROD Baby Ruth Lean La Dreyer’s( Alpo Coffee- Maggi Cerelac Cook up Chicken
UCTIN
cuisine lecher ice mate seasoning soups
LINE Butterfing Frosty Nestum Vegetab
creams, s
LENTH
er Hot Libby’s frozenyo paws(do Jamba( Instant le
pocket pumpk g ice bottled Maggi soups
Carlos V gurts, Pizza
s in fruit cream smoot taste of
Chunky treats) hie and Asia Rice
Nestle bars)
juices) Atta
Nestle tollhou Nestle Gourmet Nestle
crunch se one Nescaf good start Curry
push ups
morsel e

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Nips s The Naquin

skinny
Raisinets cows(ice Nestea

Kit Kat cream) Nestle

juicy
Bar one juice
Runts Nestle
Sweet milk
tarts chocol
ate

Porters Five Force Model

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1) POTENTIAL ENTRANTS:
In the market there are so many brand of national and international
noodles are available so competition is highso here in this condition entry is
not too tough and too easy but it’s moderate. But after entry create a good
image is little tough. So today it is tough for new company to with stand in
this market with government rules regulation and increasing tax rate.

2) Threat of substitute:
Chowmeen, fast food and pizza can be a substitute for Maggi. Customers
may think of these options at some point of time.

3) Threat of buyers’ bargaining power:

Nestle Maggi noodleshave low price and high quality. It is affordable by the
consumer in rural and urban area so alltype of people can buy it .It is also as
per the consumer aspirations, specification and taste. Company is also

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maintaining steady margin of its sale volume. So here no need for buyer to
bargain.

4) Threat of suppliers’ bargaining power:

If company has its manufacturing plant in favorable placesthan suppliers
bargaining power is less because some cities may have cheaper resources
available.

5) Threat of competitors
ITC, Top Ramen are the main competitor of Gold flake cigarette Because
these companies are famous at international level and also famous as a
brand with affordable price so consumer prefer to buy it.

IDENTIFYING MARKET SEGMENTS AND TARGETS

Market segment are two different words where by market means
people/organization with certain needs/wants and the ability & willingness to buy
goods.

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At the same time segment means nothing but “A sub group of

people/organization sharing one or more characteristics that cause them to have
similar product needs”

Here we would like to throw some light on the meaning of market segmentation
which means “The process of dividing a market into meaningful, relatively similar,
identifiable segments or groups”.

Bases for segmenting consumer market.

Some researchers try to define segments by taking into consideration different
characteristics and then try to examine segments with needs or product
responses.

Mainly there are four bases for segmentation which are as follows

 Geographic
 Demographic
 Psychographic
 Behavioral

Let’s have brief look in each segment with the example of NESTLE MAGGI.

GEOGRAPHIC SEGMENTATION:

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G
R
O
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Y
P
A
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N
T
I
As stated above in the diagram Geographic segmentation includes region, city and
rural & semi urban area. In NESTLE MAGGI Geographic segmentation can be all
the three ways.

For ex: Region & States & Metro cities: South India, Western Region, North, and
East .As consumer preference and purchase habits change across different
regions, across different countries, and across different states in this countries but
MAGGI is global brand so it’s available in each and every region though taste and
preferences of people towards instant food is different from region to region and
cities to cities.

DEMOGRAPHIC SEGMENTATION:

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MAGGI has following demographic segmentation basis:

Age: All age groups.

Family size: All like single, young, married all can eat it.

Gender: Regardless of the gender, MAGGI is accepted by all.

Income: Due to its competitive pricing, it is affordable to all.

U
T
P
O
C
N
D
E
I
S
Y
M
F
G
A
Occupation: Initially it was targeted at working women, but it still is a boon for
office goers and working women.

Education: Now a day everyone knows what MAGGI is all about and irrespective
of education it is preferred by all.

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PSYCHOGRAPHIC SEGMENTATION:

If we take example of MAGGI in terms of psychographic segmentation then it will

be as follows.

Socioeconomic classification: A1, A2 which indicates highest purchase potential

Life style: Generally people who are busy in their hectic schedules and have
outdoor oriented jobs prefer MAGGI.

Personality: As quoted above that MAGGI is global brand so person who will
consume it will be having ambitious kind of personality.

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R
E
P
Y
F
N
T
A
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S
used in daily life.

USER.
Maggi

Behavioral segmentation:
T
F
N
E
B
I
S
C
O
A
R
IO
H
E
B
Occasions: Nowadays MAGGI is being preferred even in breakfast for kids. So it is

Benefit: People consume MAGGI because it is a convenient way of cooking and

also saves considerable time and energy in this fast paced life.

User status: Some don’t know name of MAGGI called Nonuser, some people are
trying it First time who called first time user and consumers who are consuming it
on daily basis are Regular user, In case of MAGGI there are lot many REGULAR

Usage rate: There are lots of users using it regularly called Medium usage rate
and consuming daily called Heavy usage rate.

Loyalty status: Generally people are loyal to MAGGI but if there is large difference
in price then there are people change the brand so segmentation of MAGGI is
medium and Strong

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Attitude toward product: as per observation consumers are always Enthusiastic

about their habits and they take this habit as Positive. So people are having
positive attitude towards MAGGI.

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MARKET TARGETING
Effective segmentation criteria: Market segments must rate favorably on five key
criteria:

 Segmentation must be MEASURABLE in terms of size, purchasing power

and profile of segment.
 Segment must be LARGE enough to attract those customers who are having
purchasing power ability and interest in your product.
 Segment must be ACCESSIBLE in each and every part of the world.
 One of the most important criteria that segment must be DIFFERENTIAL in
terms of services and schemes.
 Last thing that segment must have ACTIONABLE activity.

Evaluating and selecting the market segment

M1 M2 M3

P1

P2

P3

NESTLE is covering full market segment because they are concentrating on

each and every product like chocolates, beverages, FMCG, etc. so we can say
its covering full market they are not concentrating on one product or segment

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PRODUCT LIFE CYCLE

A company‘s positioning and differentiation strategy must change as the
product, market, and competitors change over the Product Life Cycle (PLC).
To say that a product has a life cycle is to assert four things;

1. Products have a limited life

2. Product sales pass through distinct stages, each posing different
challenges, opportunities, and problems to the seller
3. Profits rise and fall at different stages of the product life cycle
4. Products require different marketing, financial, manufacturing,
purchasing, and human resource strategies in each life cycle stage .

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Product Life Cycle

Life cycle have four stages

Introduction: A period of slow sales growth as the product is introduced in
the market. Profits are nonexistent because of the heavy expenses of
Product introduction. Also there is frequent modifications and high
production costs.

Nestle India ltd, the global FMCG subsidiary of Nestle India launched maggi
in India with maggi two minutes’ noodles. With this launch Nestle entered
the instant food industry in the Indian market.

Growth: A period of rapid market acceptance and substantial profit

improvement.

In the early 1990, the demand for maggi started to fall due to entry of Top
Ramen another instant food producer.

In the march 1999, NESTLE INDIA re-launched the older version of maggi
after which the sales revived.

Maturity: A slowdown in sales growth because the product have achieved

acceptance by most potential buyers. Profits stabilize or decline because of

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increased competition.Heavy promotions to dealers and consumers.Also

extending product lines.

In 2003, NESTLE launched liquid snack named ANAPURNA in competition to

Nestle’smaggi. Like maggi, soupy snax also targeted children and office
goers.

Decline: Sales show a downward drift and profits erode. Unnecessary

marketing expenses are removed.

Style, Fashion, and Fad Life cycles

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Style:We can say that a style is a basic and distinctive mode of expression
appearing in a field of human endeavor. As the product like Maggi young
generation consume it may be for style.

Fashion:A Fashion is a currently accepted or popular style in a given field.

We can say that now a day’s young people follow because of some factors
are influencing.

PRODUCT CLASSIFICATION
 Durability and Tangibility

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1. Non-durable goods are tangible goods which generally consumed one or

a few uses. For instance; food, soft-drinks, shampoo, soap. These kinds of
goods are consumed frequently and usually maybe we can say some of
them are on the daily basis.
In case of Nestle Maggi, a person is purchasing it frequently and once it
is consumed then he has to purchase other so we can say that Maggi is
non-durable goods.

 Consumer-goods Classification

1. Convenience goods are frequently, immediately and with a minimum of

effort purchased. If a person wants to have something instantly then he
will purchase it easily as it is available at the corner of each road, with
mostly negligible price! He need not have to put extra effort for having one
pack of Maggi is a convenience type of product.
 Staple goods: Maggi is a staple product because it is purchased
frequently on the routine basis by consumers.
 Emergency goods: Some kids are addicted to Maggi so much that
sometimes if they want to have it then nobody can stop them and
they will some anyhow at that point of time so we can say according
to some situations and persons cigarette is emergency product also.
Because it has been said that too much consumption of Maggi is not
good for the health.

PRODUCT DIFFERENTIATION
FORM:

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Ready to eat noodles are now a days being offered by many companies so
differently with different flavors, more flavors and with variety in size and price.
So, what happens is more competition NESTLE have to face as a marketer of
Nestle Maggi. Maggi is available in variety of size, with different size filters,
flavors, price and shapes.

FLAVOURS:

As per the different varieties Maggi have wide varieties with different features
with we can say pioneer in this field by providing instant noodles.

PACKAGING:

The packaging of Maggi itself makes it an attractive option for consumers. NESTLE
makes its packaging which differentiates the product from other company items.

SETTING PRODUCT STRATEGY

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Product levels: the Customer-Value Hierarchy

POTENTIAL PRODUCT
AUGMENTED PRODUCT
EXPECTED PRODUCT

BASIC PRODUCT
CORE
BENEFIT

1) CORE BENEFIT:

Core product basically includes what customer is actually demanding. A person

who is consuming Maggi is expecting a core benefit as a stress buster or relief
from cooking.
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2) BASIC PRODUCT:

In basic product marketer turn core benefit into actual basic product. In this
case we can say a marketer of Maggi is turning “stress buster or “relief” into
product called Maggi which include specific flavors, variety etc.

3) EXPECTED PRODUCT:

Then marketer of Maggi prepares a set of attributes of customers into normally

what they actually expecting from the product. Here, we can say an educated
customer while having Maggi expects various flavors and new and new varieties
from it.

4) AUGMENTED PRODUCT:

Actually when customer get his/her expected product their expectations will
increases so according to their expectations marketer will try and build some
more benefits in his product and try to satisfy customer’s need in a better way.
For this marketer of Nestle had developed a specific brand of his product like
Maggiwhich will occupy some specific space in the customer’s mind. For instance;
by providing specifically prepared masala along with Maggithe marketer had
developed different image of Maggi in the mind of customer.

5) POTENTIAL PRODUCT:

Potential product includes all the possible augmentations and transformations

the product or offering might undergo in the future. In a simple way we can
conclude that the company Nestle (Maggi) will find some more change which can
enhance customer satisfaction level. For instance; company may think in the way
of producing such ready to cook food which will be more convenient than Maggi
also.

SETTING THE PRICE OF NESTLE MAGGI

A firm must set a price when it develops a new product, when it introduces its
regular product into a new distribution channel or geographical area, and when it
enters bids on new contract work. Generally marketers have three to five price

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different price points. In my product MAGGI there are also so many verities with
almost sameprices. There are so many factors which are considers for seating
pricing policy. Like (1) Selecting the ricing objective (2) Determining demand (3)
Estimating costs (4)Analyzing competitor costs, prices and offers (5) Selecting a
pricing methods (6) Selecting the final price.

(1) Selecting the pricing objective

First of all company have to select objectives the easier it is to set price.

Survival: It is major objective if NESTLE are plagued with intense competition.

Prices covers variable costs and some fixed costs, the company stays in business.

Maximum Market Share: NESTLE wants maximum market share. They believe
that a higher sales volume will lead to lower unit’s costs and higher long run
profit.

Product quality: Maggi brands strive to be affordable luxuries products by high

levels of perceived quality, tests and status with a price.

(2) Determining demand

Each different price has different level of demand, which have different impact
on company’s marketing objectives. Generally price and demand have inverse
relationship.

Price senility: The first step in estimating demand is to understand what affects
price sensitivity sometime customer are les price sensitive to low cost items or
items they buy frequently. Same cases happen with MAGGI people generally
buyMaggi frequently and price is also low. So people are not so much price
sensitive.

Estimating demand curves: For estimating demand NESTLE Companyhas to make

some attempt to measure their demand curves using several different methods.

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 Surveys: Company have to explore how man units consumers would

buy at different proposed prices, although there is always the chance
they might understate their purchase intention.
 Statistical analysis: For making statistical analysis company have to
check past prices, and its demand also, quantities sold, and other
factors can reveal their relationships. Advance in database
management have improved companies abilities to optimize pricing.

(3) Estimating cost:

Generallycompany wants to charge a price that covers its cost of producing

distributing, and selling the product.

Types of costs and levels of production: Total cost divide in two parts fixed cost
and variable cost. Fixed cost is cost which is not varying with changing production
units. Variable cost is cost which changing with production units.

For producing Maggi company bears some fixed cost like administration
cost labor cost electricity charges while for the variable cost like raw material,
packaging cost etc.

For estimate the real profitability of selling to different types of retailers or

customers, the manufacturer needs to use activity based cost accounting instead
of standard cost accounting. ABC accounting tries to identify to identify the real
costs associated with serving each customer.

Target costing: Target costing means costs changes with production scale and
experience. NESTLE company find which are the target cost for the Maggi and try
to reduce it like costs are designers, engineers, and purchasing agents cost.

(4) Analyzing competitor costs, prices and offers:

NESTLE Company must take competitors cost, price, and possible price
reactions into account. The firm should first consider the nearest competitor’s
price like ITC, GSK and TOP RAMEN competitors offer contains some features
not offered by the firm the firm should subtract their value from its own price.

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The introduction of any price of the chance of any existing price can provoke a
response from customers, competitions, distributors, suppliers and even
government. Competitors most likely to react when the number of firms is few
the products are homogeneous and buyers are highly informed.

(5)Selecting a pricing methods

After getting the customer’s demand schedule, the cost function, anD
competitors prices any company is now able to select price. Generally company
can setthe price through the three aspects like costs set a floor to the price;
competitor’s prices and the price of substitutes provide an orienting point. There
are different six price setting methods which are as follows. Mark up pricing,
Target return pricing, Perceived value pricing, Value pricing,going rate pricing, and
Auction- type pricing. As we see there are six different prices setting methods but
NESTLE Company follows value pricing method

The firm set the lower prices for high quality offerings. Value pricing is thus not a
matter of simply setting lower prices, it is a reengineering the company’s
operations to became a low-cost producer without sacrificing quality, to attract a
large number of value conscious customers.

(6)Selecting the final price.

Selecting final price, NESTLE Company must consider additional factors including
the impact of other marketing activities, company pricing policies, gain-and-risk
sharing pricing and the impact of price on other parties.

Impact of other marketing activities:NESTLE Company considered the brands

quality and advertising relative to the competition for selecting final price. They
have to do classical study like examine the relationships among relative price,
relative quality and relative advertising. The positive relationship between high
prices and high advertising held most strongly in the later stages of the product
life cycle for market leaders.

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Impact of price on other parties: They also considered the reactions of other
parties to the contemplated price how sill competitors react. Will suppliers raise
their prices when they see the company’s price? Seller must not collude with each
other while fixing the price.All the price which is describes by company have some
specific reason and descriptions without it are illegal.

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