Sunday, September 24, 2006

Special offer

Recently I ran into a pack of Quaker Oats with a special offer. The packet says, MRP which is the Maximum retail price in India of 58 rupees and then says, Special price, 48 rupees. The accompanying blurb on the front pack says that this is the price inclusive of all taxes.

So, is it a price with no margin? Or is it the price that is the lowest possible? No. There is a low margin store nearby that gives customers more than a rupee off of the special offer price. Which means that there is a margin even at a rupee lesser than the special price. This means that the MRP which is rupees 58 has a fat margin built into it. The prices of comparable products are same as the special price and not the MRP.

Which brings me to the question, what is the MRP and how is it decided?

1 comment:

rishi said...

The MRP is decided by the company. It is the maximum price that any retailer anywhere in the country can charge for the product. It generally includes 25-35% margins for wholesalers, retailers etc.

The MRP is decided after taking into account all the margins of all possible retailers, so that even in small villages the price of the product is at (or less) than MRP. (This is not actually the case and you will generally find products in villages sold at above MRP, this is illegal and a matter for another discussion).

The reason that you get discounts on MRP is that the costs in cities are lower due to more volume, better competition etc.