Monday, January 16, 2012

Tol Mol ke Bol

Disclaimer : Its damn boring man. Read at own risk !

For the last couple of days, I have been going through my Marketing books. I have been checking out the chapters on how to price a product and ruing at my gross inattentiveness during the classes in which these theories were taught. This sudden interest in this topic owes to this very interesting newspiece where a Chennai couple have sought out a sperm donor from an IIT. The news immediately sparked some dormant entrepreneurial instincts in me. If an IITian can command a sum of twenty thousand rupees for his sperms, how much should the same product be priced for a person with an REC+IIM background ?
So I opened Kotler, the Bible of Marketing to go through the basics again. With a production rate of 1000 per second (Source : The endocrinologist sister) at almost zero input cost, this is a product that challenges the very foundations of all pricing principles. We cannot follow any of the cost-oriented pricing strategies and thus concepts like break-even analysis, markup pricing etc are of little help to me.
However like every other product, it must be priced and priced rationally for it to succeed in the market. I analyse a few theoretical concepts to throw some light on this subject.

Value-Based or Cost-based pricing - This is the first choice that a seller has to make and the choice is fairly obvious given the nature of the product. With insignificant costs of production, the pricing strategy needs to be Value-based. But therein lies the catch. Value-based pricing method needs the seller to set a target price that would match the customer's perceived value of the product which becomes a tricky proposition. A good idea would be to follow a value-added pricing plan. Thus instead of a price war with competitors, one should attach value-added features and services to differentiate the offers. Maybe something like a contribution from a batchmate can go a long way in establishing market credentials of the product. I am currently in touch with a few who are interested to contribute.

Pricing as per Market : To understand this we take a little help from the concepts of economics. Now there are primarily four types of markets.
a) Pure competition - Many buyers and sellers trading in a uniform commodity and individual sellers cannot cause changes to market price.
b) Monopolistic competition - Many buyers and sellers trading over a range of prices owing to differentiated offers for different customer segments.
c) Oligopolistic competition -Few sellers who are highly sensitive to each other's pricing. Entry barriers exist for new sellers.
d) Pure monopoly - Single seller.
Of the above, though we may fantasize of an Ideal world where a pure monopoly exists with us being the single provider, in reality I think the market for our product would fall in between monopolistic and oligopolistic competition leaning slightly towards oligopolistic at this stage but with the government opening up a plethora of IITs and IIMs , the market is expected to move more towards monopolistic competition and thus as sellers, we must quickly start devising plans to differentiate our offerings.

The Price-Demand relationship - An increase in price is usually followed with a decrease in demand but to what extent is the question. That must be analysed with proper market research data and I suggest opening up a Facebook community for say IIM Sperm donors to keep record of sales. Also every donor should immediately update his Twitter account on a successful transaction to maintain a real time check on market prices. However such updates should strictly happen only when the transaction has had some commercial value attached to it.

New Product Pricing Strategy :
Kotler says that pricing strategies should change as the product passes through its life cycle. Now the life cycle of a sperm while inside the production warehouse is hardly of any interest to anybody and thus we will directly jump to the stage when he has successfully managed to come out to see the world outside the factory gates. The stimulus to see the outside world may vary greatly depending on the mood and circumstances of the factory owner. The life cycle of this product depends largely on that. If the gates were opened under the pressure of some adult content related stimuli or some fanciful thoughts interspersed by special appearances of beautiful unobtainable women, then the product is doomed from the very beginning. Inhospitable external environment, most often tissue papers, lead to immediate destruction of any commercial value of the product.
If however, the exit circumstances are enabled by the physical presence of another person of the opposite gender, then it may have a completely different cycle to follow, which this time would invariably depend on the mood of this other person. Most often than not disaster would strike again in the form of a thin plastic sheath that prevents any further transportation of the product. The product gets an unceremonious fruit-flavoured farewell.
(Note : If the product finds itself getting a vigorous rinse and then looking down a basin hole, then the circumstance leading to its predicament regretfully cannot be covered in this blog owing to its 12A rating)
Coming to the case, when the product manages to transfer itself successfully to a hospitable foreign destination. The word hospitable here is only used relatively as the acidic recipient environment allows the survival of only a couple of hundred of sperm from an enormous pool of about 300-500 million that arrive with each incoming batch. These few hundred who survive are left to shoulder the responsibility of the product. Depending on ten thousand other factors, details of which are beyond the realms of our understanding, one robust swimmer, out of those many millions that started the journey with him, may successfully swim across the complex matrix from the vagina to the cervix to the uterus and reach at the gates of the fallopian tubes where it would do what it does best. Wait ! The wait may or may nor bear fruit and the life cycle of the product again becomes dependent on factors beyond its control. The heroic journey may be cut short simply because of the timing of his visit. The sign on the gates 'No Ovulation - Come back later' brings his world crashing down and he too dies a tragic and unsung death like so many of his compatriots. The task would be left for another brave soldier from another batch who, after braving all these above mentioned obstacles, may finally meet a coy little egg at the gates and complete its Karmic cycle by fertilising it !!!
Urination on a strip thereafter may lead to congratulatory messages being exchanged or a broken nose for the factory owner. Thus discretion is supremely advised in any transaction related to the product.

Apologies for digressing from the primary intention of this blog but the above information was necessary to understand whether the price of the product should vary as per its life cycle. As per my conclusions, the pricing should remain constant due to the complex nature of the product's life cycle.

Some other very pertinent points which I think are worth considering when setting the price of the product:
  • Market-skimming pricing - where we charge a high price initially should be justified here as the competitive advantage is soon to be affected with the arrival of new competitors. Though some of the earlier batches who passed out in the 60's and 70's may not be much of a competition now but they cannot be completely discounted either. Also I am pretty sure that very soon, fake products would flood the market that would bring deflationary impacts on my product price.
  • Time pricing -where a firm may vary its price by the season, the month , the day or even the hour also is relevant here. Research shows that the demand for the product fluctuates largely based on the global economic climate. Recessionary trends that may lead to lesser than expected salaries during the placement season significantly brings down the perceived value of the product. Thus the pricing too should be need to be adjusted accordingly.
  • Competitor's Strategies and Prices - Kotler says , "Consumers will base their judgement's of a products value on the prices that the competitors charge for similar products ". Thus I guess an all IIT-IIM meet should be organised where the directors of all these institutes should agree upon some basic principles of pricing that would be applicable to all alumni and current students. This would ensure a level playing field for all. The products should be graded as soon as the placement season is over. The following table can be used as a guiding principle :

    Recruiting Company
    Product Grade
    I-Banks, Management Consulting firms
    AAA
    PE firms
    AA
    FMCG firms
    BB
    Indian IT firms
    Suspicious Quality of product

I am a little groggy after all this study. No one single theory seems to be giving me a definitive direction to my pricing strategy. Thus after considering all relevant and irrelevant literature , I have come to the conclusion that Psychological Pricing which prices a product based more on the psychology of the consumers rather than economy would be the most ideal way of pricing this product. A higher priced product comes with the natural perception of having a higher quality. So in order to shine out in the competition pool, I have decided to put up my product for auction.
The shortlisted sites are Khuljasimsim.com Bazee.com, Nilaami.in, Mastibids.com .

So all couples who are looking out for this great product, please don't miss this opportunity to buy this guaranteed product. Register yourself today and start bidding. Let you, my dear consumers, decide what the price of my product should be ! Looking forward to doing great business with you all.

Jai Hind !

5 comments:

Archita Kashyap said...

Very funny read, in a deadpan sort of way. Although I did have to work through the marketing theory a bit, which actually made their application funnier.
I wonder though, about the coeval/concomitant cynicism with being an REC or IIM graduate that spills through your writing.Am I accurate, or am I reading too much into the recent blogs?

Wanderlust said...

@Comment deleted - Thank you. Very profound !

@Archita - Cheers. Glad you liked. But what the hell do these words coeval/concomitant mean? Are you by any chance raising aspersions on the greatness of these brands ? No products for you !!

Archita Kashyap said...

Coeval: One of the same period or era- contemporary

Concomitant: One that occurs or exists concurrently with another.

With reference to the cynicism I referred to, contextualise both these words, and you will see what I meant.

I am sure your products will find a lot of takers, and a single customer won't matter:)

My larger point is, that cynicism can be tapped to create creative writing of a different level. A not so subtle suggestion to write a blog on the perceived root of the cynicism.Just let the blogs keep coming, is all.

Wanderlust said...

@Archita - This one is more complicated that your previous comment. So I guess I will just let the blogs keep coming as you say :) !

Anita Jeyan Sandeep said...

The post was so funny that I wanted to leave a comment and when I came here the comment threads are funnier ..!!!!! i cant help LOLing here :D :D