Glitzz: Devising a Pricing Strategy|
Marketing Case Report (5)|
1. What factors affect the pricing decisions for a product such as Glitzz? Analyze these factors and comment on the range of prices that can be set.
The right price must generate enough sales dollars to pay for the costs of developing, producing, distributing and marketing the product as well as earn a profit for the company. There are various factors that affect the pricing decision such as objectives, demands and market forces. We will examine these factors in detail below.
1.1 Company Factors
Before embarking on pricing decisions, it is necessary to understand company’s objectives. Lee Jr. and Albert are looking to achieve long-term profit making and sustainability in the market. Higher importance would then be given to obtaining increased market share and sales over immediate profit making. Glitzz needs to focus on gaining foothold in the market, as it would be a new product facing relatively established competing brands and products. As such, Glitzz should not be priced at premiums but instead work to encourage trials, consumer acceptance and return business. If successful, high profits should follow.
1.2 Consumer Factors
Consumer factors such as demand for the particular product class, product or brand, price and availability of similar product, price sensitivity as well as perceptions of value can affect pricing decisions and help Lee Jr. and Albert gauge feasibility and acceptability of prices.
The demand for the product is extremely important for pricing decisions. The greater the demand, the higher can the product be priced. Demand by consumers is affected by four factors. (1) Consumer Tastes (2) Price and Availability of Substitutes (3) Consumer Income and (4) Price of product.
Glitzz can be classified as unsought goods; products that potential consumers do not normally want or know they can buy. These products are not searched for and do not create demand in consumers initially. Consumers of such product only buy when they perceive the necessity for it. As such, creation of awareness and education about product benefits becomes crucial for retailers and creators. This translate to the need for increased budgeting assigned to advertising strategies such as personal selling, relatively aggressive advertising and benefit demonstrations, increasing fixed overhead costs for marketing and distribution.
Glitzz would be a complementary product, with its demand somewhat predicated on the prices and sales of relevant product classes such as jewelry, diamonds and watches. There is negative cross elasticity between Glitzz and the above mentioned product class, i.e. the decrease in prices of jewelry, diamonds and watches would bring an increase in demand for cleaning agents such as Glitzz. In times of recession, luxury goods such as the above may not be highly sought after, affecting Glitzz’s ability to sell due to its nature as a derived product. Pricing strategies should take into consideration market trends and demands of these product classes and be adjusted accordingly.
Consumers’ perception of values and benefits provided by a product will affect the amount of money they are willing to pay in exchange for the product and their price elasticity. Assessing value involves the judgment by a consumer of the worth and desirability of a particular product relative to its substitutes. At the core level of the product, Glitzz is a jewelry cleaner, delivering to consumers the opportunity to renew and bring back the shine in their precious stones, jewelry and watches. The tangible benefits offered come from the product’s non-corrosive, non-abrasive and gentle on skin nature. Premium natural ingredients used in the making of the product are also marketed as a key attribute. The attribution values of Glitzz will translate into a definitive price that consumers deem worthy for the product....