JXL boots are a famous brand in the hardwearing outdoor pursuits footwear market. Recently the brand has become popular as a fashion item as well as a functional product. The new range comes in a variety of finishes and styles but the JXL boot design is very distinctive. Cost price to the retailer is £60 per pair and the retailers’ mark up is usually around 50%. The run up to Christmas is an important time for the new range and already it is noticeable that customers are becoming more ‘value for money’ conscious. Other clothing and footwear manufacturers are preparing to cut prices to maintain sales volumes for the Autumn/Winter season.
Approximate costs, margins and prices for JXL
Unit cost £50 - £50
Standard profit margin 20% £10 - 5% £5
Cost price to retailer £60 - £55
Retailer mark up 50% on cost price - £82.50 (£27.50 + £55=£82.50)
In the light of this the organisation that owns the JXL brand has agreed a revised profit margin of 10% for the JXL range. Typical retail prices for outdoor shoes for men appear to be in the £30 - £75 range, although a number of up-market brands are achieving prices above this.
Advise the JXL brand managers on its pricing policy and tactics for the Christmas season 2005.
Your answer should specify the factors that should be taken into account when setting a pricing strategy,
a recommended pricing strategy for the JXL boots and include a suggested price. [continues]
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