1. What factors affect the pricing determinations for a merchandise such as Glitzz? Analyze these factors and remark on the scope of monetary values that can be set.
The right monetary value must bring forth adequate gross revenues dollars to pay for the costs of developing. bring forthing. distributing and marketing the merchandise every bit good as earn a net income for the company. There are assorted factors that affect the pricing determination such as aims. demands and market forces. We will analyze these factors in item below.
1. 1 Company Factors
Before shiping on pricing determinations. it is necessary to understand company’s aims. Lee Jr. and Albert are looking to accomplish long-run net income devising and sustainability in the market. Higher importance would so be given to obtaining increased market portion and gross revenues over immediate net income devising. Glitzz needs to concentrate on deriving bridgehead in the market. as it would be a new merchandise facing comparatively established viing trade names and merchandises. As such. Glitzz should non be priced at premiums but alternatively work to promote tests. consumer credence and return concern. If successful. high net incomes should follow.
1. 2 Consumer Factors
Consumer factors such as demand for the peculiar merchandise category. merchandise or trade name. monetary value and handiness of similar merchandise. monetary value sensitiveness every bit good as perceptual experiences of value can impact pricing determinations and aid Lee Jr. and Albert gauge feasibleness and acceptableness of monetary values.
The demand for the merchandise is highly of import for pricing determinations. The greater the demand. the higher can the merchandise be priced. Demand by consumers is affected by four factors. ( 1 ) Consumer Tastes ( 2 ) Monetary value and Availability of Substitutes ( 3 ) Consumer Income and ( 4 ) Monetary value of merchandise.
Glitzz can be classified as undesired goods ; merchandises that possible consumers do non usually want or know they can purchase. These merchandises are non searched for and make non make demand in consumers ab initio. Consumers of such merchandise merely purchase when they perceive the necessity for it. As such. creative activity of consciousness and instruction about merchandise benefits becomes important for retail merchants and Godheads. This translate to the demand for increased budgeting assigned to publicizing schemes such as personal merchandising. comparatively aggressive advertisement and benefit presentations. increasing fixed operating expense costs for selling and distribution.
Glitzz would be a complementary merchandise. with its demand slightly predicated on the monetary values and gross revenues of relevant merchandise categories such as jewellery. diamonds and tickers. There is negative cross snap between Glitzz and the above mentioned merchandise category. i. e. the lessening in monetary values of jewellery. diamonds and tickers would convey an addition in demand for cleaning agents such as Glitzz. In times of recession. luxury goods such as the above may non be extremely sought after. impacting Glitzz’s ability to sell due to its nature as a derived merchandise. Pricing schemes should take into consideration market tendencies and demands of these merchandise categories and be adjusted consequently.
Consumers’ perceptual experience of values and benefits provided by a merchandise will impact the sum of money they are willing to pay in exchange for the merchandise and their monetary value snap. Measuring value involves the judgement by a consumer of the worth and desirableness of a peculiar merchandise relation to its replacements. At the nucleus degree of the merchandise. Glitzz is a jewellery cleansing agent. presenting to consumers the chance to regenerate and convey back the radiance in their cherished rocks. jewellery and tickers.
The touchable benefits offered come from the product’s non-corrosive. non-abrasive and soft on skin nature. Premium natural ingredients used in the devising of the merchandise are besides marketed as a cardinal property. The ascription values of Glitzz will interpret into a unequivocal monetary value that consumers deem worthy for the merchandise. Lee Jr. and Albert have already taken stairss to study consumer market and trial merchandise responses. The NUS pupil research workers found that few consumers are willing to pay more than SGD20 for the merchandise.
Monetary value and handiness of similar merchandises are besides strong casting forces on pricing for new entry merchandises such as Glitzz. Technological progresss and progressively spoting consumers meant heightened consciousness about replacement merchandises and monetary values. The ability to compare similar merchandises and weigh out the benefits against cost. affects consumers’ decision-making and willingness to pay for a merchandise. The manner to extenuate such comparings is to possess strong separating features from its rivals. Glitzz. nevertheless. seem to be substitutable by many options in the market. An in-depth rival analysis is as follow.
Brilliant Restorer and Glitzz
Brilliant Restorer and Glitzz appear to be offering correspondent merchandise benefits and have similar dispensing system and packaging. It is besides under a mostly established distributer trade name. Gordon Max. It is distributed through channels that Glitzz is believing of utilizing. taking up counters at big departmental shops such as Nips. It appears to be Glitzz’s chief rival. aiming similar markets. offering similar benefits and selling in similar channels.
Connoisseur and Glitzz
Connoisseur patterns merchandise distinction. offering a scope of specialised cleansing agents for different sorts of metals. It may lose out on the convenience associated with the general-purpose Glitzz. but can market it’s specialised utilizations as a plus point. The company has strong advertisement roots. marketing its merchandises in mainstream newspapers and online. Glitzz may confront menaces stemming from Connoisseurs strong advertisement attempts.
Powervescent and Glitzz
Powervescent is a tablet-form cleansing merchandise. offering similar benefits at really low monetary value. It may be less convenient to utilize when compared to Glitzz’s pump bottle design. Powervescent does non administer in Singapore and is in procedure of puting up its e-store. While Powervescent may turn out to be a rival among monetary value sensitive consumers in the hereafter. its low monetary values may besides be viewed as a contemplation of its quality. As such. it may non be every bit large a competition to Glitzz as others.
Cleaning Machines and Glitzz
The 2nd tiered rivals offer jewelry-cleaning machines with high engineering public presentations such as the Connoisseur Jewelry Bath ( $ 49 ) . Savco Jewelry Cleaner ( $ 95 ) and OSIM uSonic ( $ 108 ) . It is priced much higher than cleaning solutions such as Glitzz but seem to assure better and more targeted consequences. The merchandises may be marketed at flush consumers or retail merchants largely. It is non as near a replacement as portable. self-administered cleansing merchandises such as Brilliant Restorer.
Other solutions for dirty or tarnished jewellery include common soap and toothpaste every bit good as free cleansing services provided by retail merchants as a value-add for purchases.
The big figure of replacements makes demand for such merchandises really elastic ; i. e. consumers are price-sensitive and lessening in monetary values will take to increase in demand for the merchandise. Glitzz would hold to pay excess attending to Brilliant Restorer and Connoisseurs as they are close replacements and their monetary values will be critical in the pricing determination. Glitzz is a normal good and is comparatively monetary value elastic as compared to necessity goods or luxury goods. As such. take downing monetary values and maintaining cheque with competitors’ monetary values becomes the key to increasing consumer demand.
1. 3 Competitive Factors
Pricing for Glitzz is constrained by the type of market in which it competes. Jewelry cleansing merchandises compete in a monopolistic competition market construction. There are a figure of rivals viing on both monetary value and non-price factors. For illustration. Lockhart competes with its low monetary values in the sector while OSIM offers high engineering solution as the alone merchandising point. Understanding the environment in which they compete will let a deeper penetration into the scope of acceptable monetary values. extent of market distinction and importance of advertisement. In such an environment. Glitzz should apportion more budgets to publicizing to separate itself from its rivals. This means a rise in costs and later. a necessary rise in pricing. Besides. its monetary values should endeavor to non divert excessively much from the viing products’ monetary values.
To be effectual. pricing must work to cover the costs and do net incomes. It is hence necessary to take into considerations the assorted costs involved in bring forthing. packaging. selling and administering the merchandise. The cost of production for Glitzz in this instance includes the SGD5000 re-packaging audience fee and the direct production cost of Glitzz cleaning solution and fees associated with packaging it into 30ml pump bottles to accomplish gross revenues province. Overhead costs may besides include distribution fees such as retailer’s cut in exchange for gross revenues services and media fees to publicize the merchandise.
Keen research and delicate mediation of all the above company. consumer and competitory factors will let decision of a executable monetary value that is most symbolic of the value Glitzz clasp.
I propose a monetary value scope of SGD13 to SGD17. The ultimate upper bound as surveyed by NUS pupils is SGD20. The ultimate lower bound is established with the unit variable costs and other production costs in head. which will be SGD5 at the initial phase. The recommended monetary value runing between SGD13 to SGD17 takes into consideration competitors’ monetary values. company’s aims and consumers’ purchasing responses. The suggested monetary value should work to undersell competitors’ monetary values and stimulate tests while non diverting excessively much from the market rate. This manner. Glitzz can stay profitable. competitory and accomplish a breakeven within a short period of clip.
2. What monetary value would you urge for Glitzz? Why?
I would urge Glitzz be sold at SGD14. In the monopolistic competition market construction. Glitzz can non merely set up its monetary value as an independent company. It has to be subjected to the market demand and supply forces. doing monetary values to be comparatively similar to its close rivals.
To utilize a demand-oriented pricing attack. Glitzz should prosecute in incursion pricing. By puting a comparatively lower monetary value to its rivals. Glitzz can guarantee involvement and high degrees of entreaty during the launch phase in the market. Whether or non penetration market works is predicated on several factors. First. consumer base should be comparatively monetary value sensitive. This facet is fulfilled in the instance of Glitzz. With the being of many replacement merchandises in the market. there is high demand snap.
Consumers with no immediate penchants or anterior experiences may do purchase determinations based on monetary values. By puting the monetary value at SGD14. Glitzz can subtly undersell its rivals and set up its value. Second. as a new merchandise in its introductory phase. Glitzz has to work on get the better ofing its failing in footings of its new entry and unknown trade name individuality. Glitzz’s chief aims should so be to excite tests and easy accumulate market portion. Penetration pricing helps to promote first purchases and can work hand-in-hand with quality control and good trade name direction to construct market portion. Increased volume of gross revenues will assist maximise net incomes for Glitzz as unit production and selling costs falls.
That being said. Glitzz merchandises must non be priced excessively low and divert excessively much from similar rivals. Assuming Glitzz finally decides to market and administer its merchandise through big departmental shops like Robinsons. its breakeven monetary value for the initial batch of 20. 000 where entire cost = net income border will be at SGD10. 50. We have to monetary value higher than SGD10. 50 to interrupt even and lower than SGD14 to SGD17 to undersell the competition. It is non executable for Glitzz to monetary value its merchandise closer to the terminal of SGD10. 50. First. it may promote a monetary value war where rivals engage in consecutive price-cutting to increase or keep market portion. This can merely be damaging to the full industry in the long tally. Second. Glitzz as a new company needs to hold buffer in net incomes to put in farther selling or advertisement attempts. header with exigency operational issues or salvage up for trade name enlargement.
Besides. the planing pricing method would non work for Glitzz as its merchandise is excessively homogeneous and non differentiated plenty to warrant premium pricing.
In add-on. the pricing of Glitzz cleaning solution at the higher terminal of the SGD10. 50 to SGD14 scope ensures Glitzz have future chances and infinite to carry on promotional enterprises such as price reductions and still be profitable. Consumers may non take kindly to merchandises progressively their monetary values after a successful intitial publicity period where low monetary values were offered. This may impact their sensed image of the trade name and be damaging to future gross revenues.
In kernel. Glitzz merchandise pricing must be low plenty to undersell rivals to bring forth involvement in consumers and high plenty to let net income maximization. While the incursion pricing scheme can assist to construct volume. directors must maintain close path of the costs and supervise its effects on the market.
3. What scheme would you suggest for Glitzz? What costs and disbursals would be involved? Calculate the break-even point.
Glitzz at its point of entryway would be at the debut phase of its merchandise life rhythm. Here. the selling aim should be to derive consciousness. This aim is farther amplified by the nature of Glitzz as an undesired good. There is high degree of demand for promotional and advertisement attempts to inform and educate the populace about the presence and benefits of Glitzz. Harmonizing to past path records. Glitzz did good in advancing with in-store counters and consumer exhibitions.
This has roots in the personal merchandising and benefits-demonstration agencies of publicity. I would urge Glitzz to go on with such channels of selling and to administer and advance their merchandises with departmental shops such as Robert robinsons. As a new merchandise. this would let consumers to see the benefits of Glitzz first-hand at well-established shopping topographic points. triping first purchases and tests.
To give a concrete illustration. on top of in-store distribution. Glitzz could keep presentation booths at shopping promenade forums to present its merchandises. Free samples could be given out to bring forth trade name consciousness and tests.
Costss involved and Premises made
* Production cost of one bottle of Glitzz at SGD5 ( Unit Variable Cost ) * Branding Consultation Fee at SGD5000 ( Fixed Cost )
* Promotional Event at about SGD25000 ( Fixed Cost ) Amount from presuming a 3 yearss ( 6 hrs/day ) promotional event at a shopping promenade bing about SGD9000 in leases. with an estimated 3000 samples to be given out and an employment of 3 gross revenues helpers at SGD100 per twenty-four hours. The event will number up to about SGD $ 24900 * Distribution Margin for Retailers at its upper limit of 50 % Net income Margin * One bottle of Glitzz is priced at SGD14
Hence given the list monetary value of SGD14. the freshly incurred selling cost coupled with the sunk cost of audience fee will ensue in the breakeven point being at 15 000 bottles of Glitzz. a extremely executable end. I believe that publicities and presentations should be used at the initial phase of the merchandise launch to make consciousness and inform consumers of its being. Subsequently. advertisement in other signifiers should follow to separate Glitzz from its rivals and accomplish trade name acknowledgment and penchant. Glitzz would hold to reassess costs and monetary values to find following selling move so.