Glitzz: Devising a Pricing Strategy

Topics: Marketing, Variable cost, Pricing Pages: 9 (2000 words) Published: February 21, 2013

Marketing Individual Assignment 5

Marketing Individual Assignment 5
Glitzz: Devising a Pricing Strategy

1. What factors influence the pricing decisions for a product such as Glitzz? Analyze these factors and comment on the range of prices that can be set for Glitzz.

Price is the amount of money given in exchange for the ownership or use of a good or service. Firms, like Glitzz need to consider the amount of money that consumers are willing to give up in exchange for their products. In making pricing decisions, firms, like Glitzz must first consider a few factors:

Company Factors
Pricing Objectives
Pricing Objectives involve specifying the role of price in an organization’s marketing and strategic plans. These objectives guide the pricing strategies.

The company is currently in the beginning stage of marketing the Glitzz product. The passage also mentions long-term plans for developing brand awareness and preference.

Hence, Glitzz’s current pricing objectives seem to be
* Increase Product Sales
* Capture Market share.
* Long-term profits

Increasing sales revenue can be an indirect objective to achieve the objective of capturing the market share and thus long-term profits According to the case passage, the industry of the jewelry spray cleaners appears to be oligopolistic, with a few dominant producers, Brilliant Restorer and Connoisseurs. Thus, to enter the market, Glitzz must carry out 2 strategies.

* Product differentiation
Glitzz can be differentiated through packaging, which has been mentioned in the passage. The seller can also consider differentiating its method of application of the solution; i.e. spray.

* Penetration pricing strategy
Secondly, Glitzz should use a penetration pricing strategy by setting a lower initial price, which can appeal to the mass market. Glitzz might earn a smaller profit margin but it is able to capture the volume of the mass consumers. This strategy may not maximize current profits but focus on long run profits and market share instead.

Pricing Constraints
* Demand
The main demand of Glitzz jewelry cleaner would be derived from mainly jewelry retailers and departmental stores However, there exist similar products in this industry, and already sold to such business entities, limiting the price of Glitzz to within the price range of the existing products.

* Newness of Product
While Glitzz is a new brand in the industry of jewelry cleaners, there are other existing similar products. Hence, Glitzz needs to focus on differentiating themselves from the existing products. Glitzz should be priced near the price range of the substituting products in the market.

* Cost of Producing and Marketing
The cost of producing and marketing the product needs to be accounted for in pricing Glitzz. The price of Glitzz should at least cover the total costs of producing and marketing the products. According to the passage, the cost of producing and packaging the product costs $ 5.00 per unit. However, the firm will have to take into account the fixed costs on top of the $5.00 variable cost per unit. Hence, assuming the total cost (fixed and variable) of producing one unit of Glitzz is $ 9.00. The lowest price that Glitzz can be priced at should be $9.00.

The firm needs to take into account the expected quantity demanded of the product by the market. However, the price can affect the quantity demanded of the product. Thus, this concept may complicate the process of pricing Glitzz.

* Type of Competitive Market
Types of market affect the behaviour of both consumers and competitors in response to your product. The industry is an oligopoly market with few sellers such as Brilliant Restorer and Connoisseurs. Glitzz may be priced below the lowest price of the existing substitute products but this strategy is not sustainable as it can ignite a price war. Instead, the firm should differentiate...
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