Wednesday, 23 December 2009

pricing in India

Some very random thoughts:

India is NOT a low price market.

Nokia phones, tires, computers and cars sell in India at the same price (almost) as the comparable offer sells in more developed markets of Europe and Asia.

India is not a low price market.

True, the higher the price, the lower the pentration of the product. But companies are under no obligation to sell European products at cheap prices in India.

India is a "value" centric market.

Nokia sells USD 20 phones in India and a 100 million consumers buy these.

But these phones are configurd for the Indian market with lesser features. Features that the Indian consumer values more than an Mp3 player. (a phone that doubles as a torchlight for example)

These phones sell at prices that most surely (and we cannot confirm this) offer NOkia lower margins compared to their most advanced devices. Selling 100s of millions of these phones will drag lower the margins of Nokia.

In the Indian market, companies need to choose very carefully between pricing for the mass market and pricing for large margins. Both are possible. But not simultaneously.

Companies with high legacy costs (pension plans to pay off, large health care benefits to take care off) should think long and hard about which segment of the market to enter. In the long run, it may be posible to innovate and hence design and manufacture products that are cheap but with very strong margins. But from here to there...... is a long time.

Ritu, Venkat

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