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Pricing Strategies

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pik ki chan

on 30 March 2014

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Transcript of Pricing Strategies

How pricing strategy achieve objectives
Pricing Strategies
Customer value-based pricing
Cost-based pricing
Competition-based pricing
Pricing Strategies
Introduction
Tipple knows that beer and ice are not a good combination (Skynet Chronicles, 2013).

generally need to put the drink into the fridge until it becomes cold

To avoid these inconveniences:
Corkcicle introduces the Chillsner
the best way to get drinks cold
Overview
How the business should set their price
Definition of Price
It is the sum of all values that customers give up in order to gain the benefits of having a product.


Tip of pricing strategy:
The more overpriced a product, the slower it will be sold (Hui & Wong 2012).



Skynet Chronicles 2013, Icicle-like Chillsner keeps your beer cold from the inside out, Skynet Chronicles, viewed 30 August 2013, <http://www.skynetchronicles.com/2013/05/13/icicle-like-chillsner-keeps-your-beer-cold-from-the-inside-out>.
Question:
How much are you willing to pay for the Chillsner?
a) $5 - $10
b) $11- $20
c) $21 - $30
d) $31 - $40
1. Introduction
2. Pricing Theories
3. Target market
4. Marketing objectives
5. Conclusion
Hui, E.C.M. & Wong, J.T.Y. 2012, "Marketing time and pricing strategy", The journal of real estate research, vol. 34, no. 3, pp. 375-398.
There are three major pricing strategies
1. Customer value-based pricing
2. Cost-based pricing
3. Competition-based pricing
This strategy uses buyer's perception of value.

Involves: understanding on how much value consumers place on the benefits they receive from product and set a price that captures this value (Kotler, Armstrong, Adam & Denize 2012).

Examine two types of value-based pricing:
- Good-value pricing
- Value-added pricing


It sets prices based on competitors' strategies, costs, prices and market offerings (Kotler et al. 2012).

Customers will base on their judgment of a product's value on the prices that competitors charge for similar product.

If a company follows high price, it may attract competition
If it sets at a lower price, it may stop competitors or drive them out of the market.

Kotler, P., Armstrong, G., Adam, S., & Denize, S. 2012, Principle of Marketing, 5th ed, Sydney: Pearson Australia.
This strategy setting prices based on the costs for producing, distributing and selling the product, plus a fair rate of return for its effort and risk (Kotler et al. 2012).

Companies with lower cost can set lower selling prices that result in smaller margins but higher sales and profit.
E.g. Woolworths

Disadvantage: fails to consider customer value and relationship between price and demand.

Kotler, P., Armstrong, G., Adam, S., & Denize, S. 2012, Principle of Marketing, 5th ed, Sydney: Pearson Australia.
Kotler, P., Armstrong, G., Adam, S., & Denize, S. 2012, Principle of Marketing, 5th ed, Sydney: Pearson Australia.
The target market we focus on:

- University student- Moreover, 38% of the young generation would like to share their daily life on social media platforms so as to keep up to date (Bridgestock 2013).

- Office workers- enjoy the shorten time to freeze the beer

Mainly University students
Both male and female
Middle class, average income receivers
People who enjoy socializing and a party lifestyle
People who are interested in new, exciting and innovative products
Target Market
To attract Target Market
Stay fairly competitive with other business
Not offering prices that are too low as customers will create impression of low quality
Enrich knowledge of customer and competitor
Set optimum prices
Offers unique product
Keep inventory in stock


New Promotion
Advertisement on Google and Facebook
For better image of our product
Popular forms of media therefore increase popularity
- Customers who are thinking about buying Chillsner can enjoy low price.
- Production cost of Chillsner is low, the company can set lower price that gain greater sales and profits.

Market-penetration pricing:
- Company can set a low initial price (production cost) in order
- To enter the market quickly and deeply, attract a large number of buyers and win a large market share.
- Keeps out of the competition.
- Sales: increase 15% within a year
generate $1000 per day with $354,070 in a year
- Brand Awareness: increase by 15% half year, 35% for a year
be mention in magazine or some social media platform
get more than 1000 likes on Facebook page in half year
Strategy we suggest to Corkcicle is cost-based pricing.
How this strategy related to product & services level
How pricing strategy achieve objective
Marketing Objective:

Cost-based pricing strategy:
set price base on cost of producing, distributing and selling the product, plus a fair rate of return for its effort and risk (Kotler et al. 2012).
Kotler, P., Armstrong, G., Adam, S., & Denize, S. 2012, Principle of Marketing, 5th ed, Sydney: Pearson Australia.
Low price: attract more customer, increase brand awareness and sales
Which one would you prefer?
Waring Pro Chiller
$80
Chillsner
$40/2
Which of the following statements is not related to major pricing strategies?

a) Set prices based on production cost.
b) Set prices based on buyers' perception of value.
c) Set prices based on economy.
d) Set prices based on competitors' strategies, cost and price
Becky Chan, Chloe Chau,
Hyelim Chu
T15
How this strategy related to positioning
How this strategy related to location
How this strategy related to customer expectation
customer is willing to pay for something they expect to have a greater value
Convenient, trendy
High price, high quality
Low price, low qualiry
Inconvenient, unstylish
Corkcicle
Chillsner is only available online
Rental fee will not transfer to customer
Suggestion for future expansion:
introduce the product with low price

attract more customers to buy it
place Chillsner in bottle shop for sell
"Arranging for a market offering to occupy a clear, distinctive and desirable place relative to competing products in the minds of target consumers" (Kotler et al. 2012)
Kotler, P., Armstrong, G., Adam, S., & Denize, S. 2012, Principle of Marketing, 5th ed, Sydney: Pearson Australia.
What is Chillsner?
provides customers the coldness taste of the beverage to the last sip by just freeze the Chillsner for 45 minutes
made by stainless steel, BPA-free plastic and non-toxic thermal gel (Corkcicle 2012)
Chillsner is not only design for beer but also fits for a 9-inch or longer bottle (TrendsUpdates 2013)
Trends Updates 2013, Chillsner keeps your beer chilled from inside out, Trends
Updates, viewed 29 August 2013, <http://trendsupdates.com/chillsner-beer-chilledinside-out>.
Corkcicle 2012, Cool to the last sip, Hewy Wine Chillers LLC, viewed 4 September 2013, <http://corkcicle.com/chillsner>.
Maintain in low price with high quality
Service level is used to measure the performance of inventory.
Deliver an optimal level of services
Conclusion
Suggest cost-based pricing strategy to Corkcicle

Corkcicle places itself at a high quality and low cost position

To attract target market, Corkcicle should set optimum prices and offering unique product.
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