Wednesday, April 11, 2007

Pricing of Low Fat Milk


I have been thinking how should one price a product like low fat milk.To start with one needs to know who would be consuming it? Probably consumers who are health and weight conscious. Basically a very small but growing segment of the effluent class of the Indian consumer. The consumer would be willing to pay a premium for the product, right?

But how does pricing of milk work at the dairy level, high fat milk is priced higher as the dairy is not able to extract by-products out of it so the price is higher. As the fat percentage gets lower the prices reduce. So the 99.9% fat free Amul should be priced low, because the dairy has extracted value out of the milk.

From a marketer's point-of-view if once should price a product keeping the target consumer in mind and not the production considerations...... though the slim milk is priced at 2 rupees higer than their "taaza" but is the pricing right?

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