Pricing Strategy

Topics: Costs, Cost, Variable cost Pages: 4 (529 words) Published: April 18, 2013
DETERMINING DEMAND According to Kotler and Keller (Marketing Strategy, 2012 P. 390); ‘each price will lead to a different level of demand and have a different impact on a company’s marketing objectives’. Generally, when the price increases, the demand tends to decrease, ceteris paribus. Customers are sensitive to price of services or items except they are low-cost, or has few substitute, or the price is small part of their total cost (Kotler and Keller, 2012). The website is created to provide free services to its users. Although, we plan to add some premium services in the future that users would need to pay before they can enjoy it. These premium services would be optional to users so that we do not lose them; because more than 95% of revenue is generated through advertisings. Meanwhile, the higher the users, the more revenue the website generates. There is probability of losing more than 50% of the free website’s users if fees are introduced except if such fee is optional without affecting the services offered. Users are sensitive to this type of services because it has lot of competitors that offer free service. In view of this, no fees would be charged The service provide to business students is elastic. A small change in the price will have greater change in demand. The website has many substitutes. So, if the price is relatively higher, there is high probability of losing users to competitors, and vice versa. Even though, a little change in its contents’ quality can have impact on the traffic. ESTIMATE COSTS Initial Costs: Adobe Creative Suite: $1,500 Microsoft SharePoint: $150 Web Designer: TOTAL INITIAL COST Annual Fixed Cost: Domain name: Dedicated Servers: Maintenance Costs Microsoft SkyDrive: TOTAL ANNUAL FIXED COST Variable Fixed Cost: $12 $3960 $1200 $50 $5222 $400 $2,050

Internet ghostwriters: $0.02/word Advertising – PPC: $0.50 per 1000 Impressions


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