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Pricing Strategy of Bajaj Pulsar

Marketing Management

Introduction
Bajaj Auto Launched its Pulsar in the executive Motor cycle Segment on March 6th, Pune. The new
bike offered a top-speed of 120km/hr with a mileage 60km/litres. The launch was aimed at
strengthening in the executive Motorcycle Market after having dominated in the premium bike
segment with Discover and CT 100 in the economy end.

Bajaj Pulsar is a motorcycle brand owned by Bajaj Auto in India. The two-wheeler was developed
by the product engineering division of Bajaj Auto in association with motorcycle designer Glynn Kerr
Tokyo R&D. Currently there are four variants available -with engine capacities of 135 cc, 150 cc,
180 cc and 220 cc. More than a million units of Pulsar were sold by November 2005. With monthly
sales of more than 48,000 units in June 2009, Pulsar is the leader in the 150 cc segment in India with a
market share of 43%.
Pricing Strategy:
The pricing strategy was based on the brand positioning of Bajaj Auto in the automobile industry as
shown in the BCG matrix in Figure 1.

Figure-1
History

Before the introduction of the Pulsar, the Indian motorcycle market trend was towards fuel efficient,
small capacity motorcycles (that formed the 80-125 cc class). Bigger motorcycles with higher
capacity virtually did not exist (except for Enfield Bullet). The launch and success of Hero Honda
CBZ in 1999 showed that there was demand for performance bikes. Bajaj took the cue from there on
and launched the Pulsar twins in India on November 24, 2001. Since the introduction and success of
Bajaj Pulsar, Indian youth began expecting high power and other features from affordable
motorcycles. The project required approximately 3years for completion and cost Bajaj Rs 1 billion.

Target: R.L. Ravichandran, Vice President (Business Development and Marketing) said Bajaj
Auto Limited is supposed to sell around 70,000 motorcycles a month to gain a market share of 23% in
the motorcycle segment.

Consumer Psychology and Pricing:


Reference Price: Prices of CBZ was high, so the reference prices of Pulsar according to customers
were lower.
Price-Quality Inferences: Features of both Hero Honda CBZ and Bajaj Pulsar were almost same, but
Pulsar was relatively cheaper.

Setting the price:


Step I: Selecting the price objective
The objectives were survival, maximum market share and product-quality leadership. For these
purposes the features were set as that of CBZ but the prices were kept a bit lower, which helped
Pulsar to enter the market and gain maximum market share.

Maximum Market Skimming:


Skimming is referred to as selling a product at a high price; basically companies sacrificing
sales to gain high profits. This is employed by companies in order to reimburse their cost of
investment put into the original research of the product. This strategy is often used to target
early users of a product/service because they are relatively less price sensitive than others.
Early users are targeted either because their need for the product is more than others or they
understand the value of the product better than others. In any case, this strategy is employed
only for a limited period of time as a way to recover most of the investment of a product. This
is the reason why the prices of Pulsar were dropped within two years and consumer surplus of
early adopters were captured.

Step II: Determining the demand


Price sensitivity:
Due to the presence of many bikes in the same price range the elasticity of demand was very
high. Hence with the decrease of prices, the amount of sales increased in volume. The amount
of sales in 2009 was 165049 units. Along with other market conditions, with the introduction
of a lower version at a cheaper cost sales increased to 269488 units in 2010. This can be
referred from Figure-2 and Figure-3.

Figure 2
Price
71000
69000
67000
65000
63000 Price
61000
59000
57000
55000
165049 269488

Figure-3

Step III: Estimating Cost


In the short run company’s pricing strategy was to earn more profit and in the long run to
invest that money for the technological advancement such as DTS-i technology.

Step IV: Analyzing competitors cost, prices and offers


From the mistakes of Hero Honda CBZ, Bajaj Pulsar was able to take share away from the
market pioneer of power bikes in India, and command the price premium in the process
because of its performances advantages-smoother driving experience.

Step V: Selecting a pricing method


Bajaj did a mix of pricing methodology of Going Rate Pricing and Value Pricing. It set its
price slightly lower than its competitor following going rate pricing without compromising on
any of the features provided by its competitor to attract value-conscious customers.

Step VI: Selecting the Final Price


While selecting the final price, Bajaj did set its price lower than its competitor to share the
risk of launching a new product in the market.

Adopting the Price:

Promotional Pricing:
 Special event prices were offered during festival seasons.
 Zero interest financing was offered for some speculated period to attract customer.
 Longer payment terms were provided to the customer so that the EMI would be less.
 Three free service contracts were offered at the time of purchase.

Differentiated Pricing:

Market Research was done to differentiate among different income groups and their demand for
Pulsars of different versions. This can be viewed in Figure 4.
Income vs %age Share
50
45
40
35
30
25
20
15 %age Share
10
5
0
Less than 5000 5000 - 350000 35000 - 60000 and
600000 above
Income Group

Figure-4

From the above data, Bajaj has introduced different versions of Pulsar to meet different customer
verticals and provide customer-segment pricing. This can be viewed in Table-1.

Pulsar Pulsar Pulsar Pulsar Pulsar 220 Pulsar Pulsar


135 150 DTS-i 180 DTS-i 200 DTS-i DTS-Fi 220 220S DTS-i
FDTS-i
Power 13.5 15.10 17 18.2 20 21.04 21.04
(bhp)
Torque 11.4 12.45 14.22 17.98 18.7 19.12 19.16
(N·m)
Wheelbase 1325 1320 1345 1345 1350 1350 1350
(mm)
Weight 122 143 147 147 150 152 148
(kg)
Top 115 116 124 139 140 144.5 145
Speed
(km/h)

Current 59,000 68,000 70,000 80,000 97,000 80,000 70,000


Price
(Mumbai)

Table-1
Launch of DTS-i engine:

The second generation Pulsars featured Bajaj Auto's newly developed DTS-i technology, which
increased the power rating of both versions by 1 bhp (0.75 kW) each and also increased fuel economy.
This was done to get a competitive advantage over the newly launched Hero Honda Karizma which
posed a threat to the 220cc Bajaj Pulsar.

Launch of Hero Honda Karizma:

The Hero Honda Karizma is the flagship motorcycle of Hero Honda. It was launched in May
2003 and was replaced by a cosmetic upgrade Karizma ZMR.

Hero Honda Karizma and Pulsar in same fray

Bajaj has launched the Pulsar 200cc and Hero Honda has come up with face lifted Karizma.
In the Bollywood movie, Dhoom 3 both the bikes will be used under the same category.
Karizma scores over the Pulsar when it comes to torque; the bigger engine provides healthy
Pulsar 200cc clocks a top speed of 121kph against the 125kph offered by Karizma 223cc. The
new Karizma will also continue to be priced at almost the same level as the previous version,
with on-road prices for the regular variant working out to Rs 79,000-80,000. Bajaj has
launched 52 Probiking outlets – which housed only high performance bikes. Pulsar 200cc is
available at such Probiking showrooms at selected locations across the country for an
attractive price of Rs.65,497 (ex showroom, New Delhi).

Price war between Karizma and Pulsar:

Initially Hero Honda Karizma launched its bike at the same price as the Bajaj Pulsar variant
in 220 cc which was around 1 lakhs. But since both had the same features and were
positioned in the same segment led to a price war. This was concluded by both of them
decreasing the price significantly. With proven engine and completely new unheard features
Bajaj Pulsar 200cc outsmarts the new Karizma. Also, the better pricing makes the Bajaj
pulsar 200cc a perfect bike for the highway.

Conclusion
The challenge for Bajaj Pulsar was to keep coming up with proprietary products that fuel its
business model, which is based on innovation and R&D. Pulsar’s pricing strategies include
setting the price high at the start of launching a new product. After gaining some profits from
its early customers who are often fascinated with every new technology such as DTS-i, Pulsar
seems to reduce its prices by introducing different versions in order to make it affordable and
popular among other competitive products. Basically, the company adapts prices according to
the customers’ ability to pay. It came up with different variants to cater to the needs of cost to
value customers.