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Pricing StrategiesResearch studies conducted by IGD, a UK-based market research firm, have shown that consumers in the United Kingdom overwhelmingly prefer two different pricing approaches. The first, called EDLP (Every Day Low Prices) focuses on offering the product at the lowest possible price at all times, with few or no promotions. The second, called High-Low Pricing, focuses on selling products at high prices most of the time but occasionally offering a variety of promotions that involve significant sales. Like most of our UK competitors, including Mr. Kipling, Tesco, and McVitie’s, we decided to adopt a hybrid strategy that utilizes facets of each pricing method. Initially, we intend to enter the market with a price penetration strategy, whereby we intentionally set our prices slightly below our competition in order to encourage consumers to try our products and gain market share. To support this approach, we will pair our low pricing strategy with a strong emphasis on our advantageous product attributes. Emphasis will be put on our exceedingly high quality, which is characterized by the omission of any preservatives and our commitment to delivering fresh baked goods to the stores on a continuous basis. Our intention is that right from our inception into the market, we will be able to satisfy the value and price aspects of the consumer’s buying decision, thus establishing a positive brand image. Once we are satisfied that we have built a strong foundation for our company, we will begin to migrate more towards a High-Low pricing strategy. In doing so, we will gradually raise prices to meet our competition and at the same time offer occasional promotions at significant savings. This approach will allow us to gain more revenues while ensuring that the consumer still sees our products as a great value for the price. The last phase of the pricing implementation will involve a leveling off of both pricing tactics, ultimately arriving at the hybrid strategy we anticipate we’ll use in the long run.
Aside from our preliminary pricing plan, Tasty Baking Company has also taken into consideration how we will price the individual products within our product line. Believing it is important for consumers to maintain a positive value-versus-price judgment of our company, we have decided to utilize a line pricing strategy. In doing so, the range in prices of our products will directly reflect the benefits of each part of the range. The prices will be set based on many factors, including cake form, package count size, and degree of novelty. The line will range in price from 0.31£ to 0.53£ for individually wrapped products and from 1.16£ to 1.76£ for our multi-count boxes. Our competition, on average, sells products that are in the range of 0.35£ to 0.65£ and 1.35£ to 2.29£ respectively. Although we would have liked to bring our prices down as low as possible for our initial entry into the market, the competitiveness of the grocery retail industry simply wouldn’t allow for it. In addition to all of the steps that already existed in the value chain for our product line, we were faced with slotting fees. The slotting fees, charged to manufacturers by grocery retailers in order to cover them from losing money to a failing product, forced us to bring our prices just below our next closest competitor. Nevertheless, we are confident that we will grow our market share in a timely manner and prove to the retailers that we can consistently provide a high quality product that consumers are interested in.
The final consideration in devising our pricing strategy was to come up with an enticing promotional strategy that would allow our retailers to move more product and our consumers to realize a cost savings. Most often, it is the retailer that is solely responsible for driving the creation and implementation of promotions for their respective stores. However, at Tasty Baking Company, we believe in taking the ownership of that function. Our process is to develop pricing promotions based on various events like the introduction of a line extension or product enhancement, novelty items, holidays, etc. Further market research provided by IGD confirms that consumers in the United Kingdom respond most favorably to BOGO (Buy One Get One) and Bonus Pack promotions. The BOGO tactic is just as it sounds; offering two packages for the price of one, while the Bonus Pack tactic involves offering additional product in the existing package size at the same price. Interestingly enough, the BOGO strategy is one that we utilize heavily in the United States, and ultimately the one that consumers here respond best to. Therefore, we have a lot of background knowledge in this area that will enable retailers to trust our judgment with initiating promotional opportunities for their stores. Besides offering BOGO and Bonus Pack promotions on our multi-count boxes, we will also employ basic savings promotions on our individually wrapped cakes. Many of our competitors sell their individual products at small, yet still intriguing, discounts in various outlets aside from the grocery retailers. So we feel that in order to stay abreast of our competition, we too will provide discounts ranging from 10-20% off of the retail price to our non-grocery retailers. In due course, Tasty Baking Company is convinced that the pricing strategies we have formulated will allow for a smooth transition into the European market. Our successes in the United States have prepared us for any challenges that may result, and we are willing and ready to react to unforeseen challenges. We, as the Tasty Baking Company marketing team, understand that we are venturing into a dynamic market. However, the collective capabilities of our team will provide a sound knowledge base from which to reevaluate and reinitiate our objectives if need be.
TastyKake has built its U.S. market on the quality, freshness and convenience of its products. In order to be successful in the U.K. market, TastyKake has decided to keep the same brand image. Quality is the most important aspect of the brand name. We want our customers to purchase our product knowing that they can be guaranteed a fresh and quality cake every time. We pride ourselves on knowing that every cake that we make meets or exceeds our customer’s expectation. Freshness of the products is another important feature of the brand. Even though the products are pre-packaged, we bake everything close to the distribution area so customers can enjoy a great fresh taste. Convenience is also important to the building of the TastyKake brand of products. These conveniences not only include the location of our product but also the convenience of including them in a lunch or eating them while on the go. With the busy schedules of parents today, making things easier can help them focus on something more important. In order to effectively build brand awareness and communicate the brand message in the U.K., TastyKake has decided on using print advertising and sales promotion to introduce the products into the market. For the print campaign TastyKake has decided to use Red Cell Agency, to help develop campaigns, because of their strong efforts in introducing products in to the U.K. market and because TastyKake currently uses them for their U.S. promotions. As well as advertising, the sales promotions will include value-added purchases, off-shelf displays and character merchandising. Advertising:To build brand awareness the advertising campaign will focus strictly on print for the market entry. Even though there are specific customers that purchase our product, essentially any consumer that has a taste for cakes, can be targeted. Because of that, one campaign will focus on a mass marketing strategy, while two other campaigns will focus on segmented markets: Parents with Children and Older consumers. The mass marketing campaign that was developed by TastyKake and Red Cell will be “Something Fresh. Something New.” Since this will be the first time most of the consumers have heard of the TastyKake brand, we need to build some excitement and curiosity around our products. Given that this is a mass marketing message, we are planned to place the ad on 2 billboard locations. These billboards are seen by 10,000 people a day and we have purchased the space for one month with the option to extend. It will also be placed in the major newspaper in London, The London Times, and we will be experimenting with the use of taxi advertisements. Since our products are convenient and great for children’s lunches, our one segmented campaign focuses on Parents with Children. The cake consumption is greatest (72.8%) in households with children 5-9. This segment is the target market for most competitors in the snack industry. In order to effectively standout compared to our competitors, we came up with the campaign, “Something for everyone.” This campaign will feature our cakes, pies and healthier products not only for children but for the parents as well. There has been a growing concern over the past couple years on childhood obesity in London, so this campaign will not only focus on gaining market share but also let consumers know that we offer great tasting snacks that are healthy. The location of these ads will be focused in the newspaper, specifically in the main news and leisure sections. Also through our research we found that a growing number of consumers aged 65+ should provide a boost, as this age group includes the highest concentration of avid cake eaters. In order to capitalize of this growing market, our second advertising campaign will target older consumers. We want older consumers to feel young when they eat our cakes so we have developed the campaign “The Taste You Grew Up On.” The location for these ads will be found in the main news section of the newspaper and also The Sunday Times Magazine. Sales Promotion:To promote impulse purchases, TastyKake will be using the Buy-One-Get-One Free strategy in grocery and convenient stores. Not only will this cause impulse purchases but it will also give customers an incentive to purchase. The buy-one-get-one strategy will not only allow customers to get more for their money but also encourages them to share with other people. This will help get the brand and products into the hands of consumers that normally wouldn’t try new products. As well as the buy-one-get-one free purchase strategy, we found that the use of characters can also enable new entrants to gain instant recognition. So, TastyKake has purchased the license to Shrek© to enter into the U.K. market. Shrek© is adored by children, and was one of the highest grossing movies in the U.K. Character merchandising focuses on building the “parents with children” segment. The last sales promotion we will use is off-shelf displays. Consumers may not always walk up and down every aisle at a grocery store, especially when they know exactly what they want. So to successfully get TastyKake products purchased, we have paid a premium to get a display at the end of most aisles in major grocery stores. This strategy will also help in getting impulse purchases. We will feature our most popular products that we currently have in the U.S. If we find that other products are selling better in the U.K. we will switch the products that are put at the end of the aisles. Promotional Timetable:
The tentative launch date for our product is 9/5/2005, which will coincide with the beginning of the school year in London. We feel that since our major market is children, this would be an ideal time to enter the market. The mass marketing campaign will run for a month before we launch our product in hopes that we start to get the buzz around the TastyKake brand of products. Since we have an option to renew, this campaign may stretch for a following month, depending on how the market reacts to TastyKake. As we get closer to the launch of the product, we will begin the Parents with Children campaign. This will give them a couple of weeks before children start school to gain some knowledge of our products. Since the timing of the Older Consumer campaign doesn’t matter, we chose to begin that campaign a week after the parents with children, and run it an extra week past the end of the Parents campaign. With the launch our product, both our Buy-One-Get-One free and Off-shelf displays will be used for sales promotion. Consumers need an incentive to make their first purchase, so giving them a cake for free will give some of the consumers on the fence an extra nudge to make the purchase. Again, since this will be the first introduction of TastyKake in the U.K., off-shelf displays at the end of the isles will allow consumers to see our product, even if they don’t go down the snack isle. Also at the launch of our products, some of our individual cakes will feature the Shrek© for our character merchandising promotion. This will create a high demand for children to have these snacks in their lunches, and also for parents to make the purchase to satisfy their children’s wants.
Works Cited ”BBC News-Country Profiles: United Kingdom” Updated: March 23, 2005; Viewed: April 15, 2005 <http://news.bbc.co.uk/1/hi/world/europe/country_profiles/1038758.stm> “CIA-World Fact book: United Kingdom” Updated: February 10, 2005; Viewed: April 15, 2005 <http://www.cia.gov/cia/publications/factbook/geos/uk.html> ”Country Watch: United Kingdom” May 2, 2005 <http://www.countrywatch.com> “Food Manufacture”. Nov97, Vol. 72 Issue 13, p5, 1p ”Foreign and Commonwealth Office” April 15, 2005 <http://www.fco.gov.uk/servlet/Front?pagename=OpenMarket/Xcelerate/ShowPage&c=Page&cid=1007029390554> IGD Consumer Research. 2005. 29 April 2005 ”ITAP International” The cultural differences between the European Union and North America and their impact on transatlantic business: by Lionel Laroche, PhD, P.Eng; May 15,2005
“Manor Bakeries” 14 May 2005. “McVitie’s” 13 May 2005. Mintel International Group Limited. June 2004. 10 April 2005 ”National Statistics” April 18, 2005 <http://www.statistics.gov.uk/> ”Onada.com: The currency site” May 15, 2005 <http://www.oanda.com/convert/classic> Perner, Ph.D., Lars. “Food Marketing: Consumers, Development, Manufacturing, and Distribution.” Food Marketing: Consumers, Food Innovation, Retailing, and the World-
“UK Food & Grocery Retail Logistics Overview.” 2005. IGD. 15 May 2005. “Wincanton.” 15 May 2005. ”Yahoo Finance: TBC” April 15, 2005 <http://finance.yahoo.com/q/is?s=TBC> Download 174 Kb. Share with your friends:
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