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Shampoo Price Elasticity

Keywords: shampoo market competition

Price

The price of a commodity represents the value the consumer's put on it and the earnings the producers want from it.

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Demand Curve

The demand curve shows the partnership between price and quantity demanded and it is one of the most basic and important tools for analyzing consumer's side of the marketplace.

Price Competition

In price competition, the firm's try to capture the marketplace by lowering the purchase price since cheap increase demand. Hence firms try to beat each other in prices. Consumers usually alter to the lowest priced brand hence price opponents will most likely have prices very close to each other.

Non - Price Competition

In Non -Price Competition businesses make an effort to increase sales and market share by fighting with rivals in areas like branding and advertising.

The firm builds loyalty towards the brand by emphasizing product features, service, quality etc. The company ensure that the buyer must be able to identify brand through unique product features and understand the variations in brands and view them as desired. Another form of non-price competition is patents by which the firm makes it difficult for rivals to emulate the dissimilarities between companies and there product. The firm tries to get rid of its price difference using its opponents through non-price competition, whereby it off-sets the price difference by the identified benefits associated with its product.

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Demand Curve for two different brands of the same product

The above picture shows the demand curve of two contending organizations where one firm's demand curve is shifted out to the right by stressing distinctive traits, hence consumers understand and desire particular features thereby having a greater demand for just one companies product at the same prices.

Example which differentiate Price and Non- Price Competition

For case, two restruants providing the same kind of food and located right next to the other person will have very similar or may be exactly same prices on their Menu Cards. Hence, these restraunts are participating in price competition. Since they are selling a similar cuisine and are located right next to each other, if one price to ask for the higher than the other it will lose all its customers. That is a form of price competition.

Now consider two restaurants selling totally different kind of cuisines. Is a Chinese restaurants and the other is a Greek Restaurants, then we can get that even challenging both are situated right next to the other person they could be charging totally different charges for their food but still getting customers. That is an instance of non-price competition because each restaurants has its own differenciated product so it can afford to market at a different price but still get customers.

Product Development

It basically targets setting up a good brand image. Non-price competition typically includes promotional expenditures, (such as advertising, retailing staff, the locations convenience, sales promotions, coupons, special orders, or freebies), marketing research, new product development, and brand management costs.

Competition

In economic examination, the most important indicator of the degree of competition is the power of firms to regulate the price and use it as a competitive tool.

Perfect Competition

In perfect competition there are numerous vendors offering the same product hence an individual firm has almost no control over the price tag on its product. That's all are price takers.

Perfect competition is a theoretical market composition. It is primarily used as a standard against which other market set ups are likened. The industry that best shows perfect competition in real life is the agricultural industry.

Monopoly

In Monopoly a firm has all the market power since it the only seller in this kind of market. It gets the power to build the purchase price at whatever level it needs, subject to possible constraints such as government regulation. It is the consummate price machine.

In perfect competition and monopoly, you can find neither price competition nor non- price competition.

Monopolistic Competition

Monopolistic Competition

Monopolistic competition is a form of imperfect competition as producers competing one another and offering products that are differentiated from one another (means products are not exactly similar, they will be the substitutes). In monopolistic competition companies can react like monopolies with respect to their own product and use the marketplace power to make profit. Eventually in Monopolistically competitive marketplaces other firms go into the market and the advantages of differentiation decrease with competition; the market becomes similar to perfect competition where businesses cannot gain economic profit. Models of monopolistic competition can be used to model establishments. Textbook types of market sectors with market buildings much like monopolistic competition include restaurants, cereal, clothing, shoes, and service sectors in large cities.

In Monopolistic Competition the market situation could be both Price and Non- Price Competition. A good example Nokia provides its Music Exhibit phones in just a bit higher price than the other music telephones of others because of its differentiated features.

Oligolopoly

Oligopoly is a market situation where there are just a few vendors (of products that can be differentiated but not to any great level); each owner has a higher percentage of the marketplace and cannot afford to ignore the actions of the others.

In some situations, the businesses may make use of restrictive trade methods (collusion, market sharing etc. ) to improve prices and restrict production in quite similar way as a monopoly. There may be price and non-price competition in oligopoly. For example: Inside the Indian market petrol pumps is an exemplory case of oligopoly.

Elasticity

In economics, elasticity is the proportion of the percent change in one variable to the percent change in another adjustable. It is an instrument for calculating the responsiveness of the function to changes in parameters in a unit-less way. In addition to the price and non-price competition, the demand for product is determined by elasticity of demand. A couple of three types of Elasticity's which could have an impact on market demand from the consumer's area. They are:

- Own Price Elasticity,

- Income Price Elasticity,

- Mix Price Elasticity.

Own Price Elasticity

Price elasticity of demand steps the ratio change in number demanded the effect of a percent change in price. So, it steps the degree of movement along the demand curve. This elasticity is almost always negative and it is usually expressed in terms of absolute value (i. e. as positive figures) since the negative can be assumed. In these conditions, then, if the elasticity is higher than 1 demand is said to be elastic; between zero and one demand is inelastic if it equals one, demand is unit-elastic.

Income elasticity of demand

The income elasticity is determined as the percentage change in the number demanded of the nice divided by the percentage change in income. Income elasticity can be used to classify goods as normal or second-rate. With a standard good demand differs in the same path as income. With a substandard good demand and income move in opposite path.

If the income elasticity for a good is positive we call them normal goods. It could be between 0 and 1, and we call it income inelastic demand for goods such as food, clothing, papers. If it is above 1, we call it income stretchy demand. Examples are the red wine, cruises, jewelry, art, etc.

If the income elasticity is negative, this means that as income increases, the quantity demanded for those goods actually decreases, we call those goods substandard goods. Examples are "Ramen noodles", cheap burgandy or merlot wine, potatoes, grain etc.

Cross price elasticity of demand

The mix price elasticity is determined as the ratio change in the quantity demanded of good x divided by the ratio change in the price tag on good y. Goods can be matches, substitutes or unrelated. A change in the price of a related good causes the demand curve to move reflecting a big change popular for the original good. Mix price elasticity is a dimension of what lengths, and where direction, the curve shifts horizontally over the x-axis.

If the mix price elasticity is negative, then we call such goods Matches (example: pizza and soft drinks -- they are simply consumed together). When the combination price elasticity is positive, then we call such goods Substitutes (example: pizza and burgers -- you usually take in either / or).

According to the full total costs method;

Ep<1

Price of X rises then the expenditure on X rises. Thus the expenditure and demand on Y decreases. Cross price elasticity of X and Y i s negative, therefore they are really compliments.

Now Taking Ep>1. . . we can find out the relation of substitutes.

Therefore own price and combination price elasticity is not totally 3rd party of one another.

Ans 2

In shop name "All Needs" which is tiny Vishal mega mart, i went through the shampoo section of that shop, where i observe the agreement of Shampoos is done. The first thing one notice when they get into the hair shampoo section will be the mostly used shampoos like Fructis, Sunsilk, Medical center Plus, Clinic All Clear, Pantene, Baby Johnsons & Johnsons Hair shampoo, Head & Shoulders. L'Oreal has its own independent section. The high price shampoos like Vela, L'Oreal are put at the uppermost section. There is a separate portion of Anti-Dandruff Shampoos of merged brands. The conditioner and other least used shampoos like Sesa, Ayur, Vatika, Medicare, Halo were shown at the lower section. Hair shampoo Sachets and small containers were displayed at the cheapest section.

Retailers' has give attention to the needs of the buyer and accordingly displayed shampoos. They figured out that men demand fragrance, kids demand scent and bubbles, middle income section requirements normal brands like Sunsilk, All Clear, Brain & Shoulders which are easily affordable and last long. Low income people generally demand Sachets of shampoos or Natural hair shampoo like Himalaya, Chik, Ayur. High income people demand shampoos like L'Oreal, Wella.

Accordingly Dealer of 'All Needs' have organized the shampoos in the following manner:

" Upper segment is targeted on upper course people and joint family, where 1st they have arranged L'Oreal and then Wella, then 700ml and 400ml containers of Dove, Brain & Shoulder blades, Sunsilk, Elvie.

Middle Segment is focused on middle class people where they have mostly displayed 200ml, 300ml containers of Clinic Plus, Sunsilk, Fructis, Himalaya.

There is 1 individual portion of Anti-dandruff shampoos of most brands like Mind & Shoulders, Medical clinic All Clear, Dove Anti-Dandruff. This may be positioned either at upper portion or at middle segment.

Mixed Segment concentrate on lower school section where mainly cheap and easily affordable shampoos are shown which is easily affordable to all tough does not bring good quality. These shampoos are like all shampoo sachets and easily affordable shampoo like Vatika, Clinic Plus, Chik, Natural and organic Shampoos like Aloe-Vera, Ayur, Dabur health shampoo.

After analyzing the nature of the marketplace, I have observed that folks of high income course mostly prefer to acquire L'Oreal, Joint family purchase 400ml-700ml of Dove, Mind & Shoulders, Sunsilk, And Center Plus. Middle income Class people largely purchase 200ml-300ml bottles of Pantene, Dove, Sunsilk, Medical clinic All Clear, Fructis. Low income school people typically purchase sachets of shampoos and 100ml -200ml bottle of Chik, Ayur.

Pricing strategy

There is intense price and non-price competition in the shampoo market. If we look at the two major rival companies particularly HUL and P&G we notice the trend these two companies have been engaging in powerful price competition. The following is an excerpt from a newspapers article:

""WITH the purchase price conflict in the FMCG industry intensifying further, Procter and Gamble (P&G) India on Thursday night announced that it includes slashed the costs of its popular Pantene selection of shampoos by 16 per cent.

Here we see a good example of price competition between firms in the shampoo market. So businesses with similar products engage in price competition to fully capture a larger show of the marketplace. In addition you can find non-price competition also. Companies spend a huge amount of money on adverts as well as product development. Thus we've advertisements where celebrities like celebrities claim that utilizing a certain shampoo has benefitted their scalp immensely. For example - Furthermore firms also continue adding new types of shampoos. Example: Bollywood Television actresses Shilpa Shetty and Neha Dupiya using New advanced' Pantene Expert V'; Asin Thottumka and Bipasha Basu for 'Medical clinic Al Clear - Anti - Dranduff Shampoo'. P&G recently introduced Pantene HAIR LOSS Control hair shampoo, which is "designed to reduce hair fall scheduled to breakage by up to 50 per cent within 8 weeks". Pantene presently has a market share of 7. 5 % in the Rs. 900-crore domestic shampoo market and is wanting to increase it by introducing services as well as competing in prices with other hair shampoo sellers.

Current Market Position

The current shampoo market in India is worth Rs. 930crore. The hair shampoo penetration is 40% for urban and 10% for rural market segments. There is a great deal of competition possibility in this market because of the huge untapped market.

The Top Companies of Shampoos in India are Hindustan Uniliver Ltd. , ITC (Indian Cigarette Company, Dabar India, Paras, P&G, Himalaya, L'Oreal Paris. THE MOST NOTABLE Hair shampoo brands are:

'Normal Shampoos - Medical clinic Plus, Chik, Dove, Fiama D'wills'.

'Herbal Shampoos - Ayush, Dabar Vatika, Nyle, Ayur, Himalaya'.

'Anti-Dandruff Shampoos - Medical center All Clear, Mind & Shoulders, Dabar Vatika ADVANCE'

'Premium Shampoos - Revlon Flex, L'Oreal, Wella'

Conclusion

According to my evaluation, I conclude that hair shampoo market is a Monopolistic Competition where many competing makers sell products that are differentiated in one another (that is, the products are substitutes, but, with variations such as branding, aren't exactly equally). Monopolistic Competition is fighting both in conditions of price and brands. If there are more replacement of shampoos it is more stretchy. In this all products are differentiated in some ways, thus the firm will only be able to sell extra outcome by lowering the price. In physical distinctions of shampoos it might are different in color, scent, thickness, container design and lathering ability.

Hence each organization has its own customers (by creating some consumer commitment), modest change in the productivity price of any solo firm does not have any perceptible affect on the sales of some other company, i. e. one firm can boost price without burning off all customers. Therefore, in addition to price competition there may be non-price competition. Hair shampoo manufacturers have every motivation to seek out and offer only the features that consumers are really willing to pay for. By advertising it appeals to people towards their product.

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