Marketing Glitz

Individual Assignment – Glitzz Case Study 1. What factors influence the pricing decisions for a product such as Glitzz? Analyze the factors and comment on the range of prices that can be set for Glitzz. The factors that influence the pricing decisions for Glitzz are the pricing objectives, costs, and demand. The pricing objectives will be needed to direct the role of the price in the market. Higher prices will need to be set if the objective is to have higher profit margin instead of higher market share. However, if the objective is to survive in the industry, the prices need to be low to get more sales to meet its operating cost.

For the case of Glitzz, the pricing objective is between having higher market share and to survive in the industry. Costs play an important role in the pricing decision as it set the minimum price for the product in order for the company to operate and cover their cost to prevent losses. There are five cost concepts, namely the fixed cost, variable cost, unit variable cost and marginal cost and total cost. Fixed cost is the sum of expense of the firm that is stable and do not change with the quantity of a product that is produced and sold. The fixed cost for Glitzz would be the machineries, rent of factory building, and insurance.

The variable cost is the sum of expenses of that firm that vary directly with the quantity of the product that is produced and sold. The variable cost for Glitzz would be direct labour and raw material used to produce the bottle of jewelry cleaner. Total cost is the total expense incurred by the firm in the process of producing and marketing the product. Unit variable cost is the variable cost expressed on per unit basis and the marginal cost is the change in the total cost that results from producing and marketing one additional unit of product.

Demand is also one of the important factors for pricing decision as it helps to relate the quantity sold with the price. Demand is dependent on the key factors, consumer taste, consumer income and the price and availability of similar products. They look into the consumers willingness and their ability to pay for the product. As stated in the case study, very few consumers are willing to pay a price which is higher than $20. Hence, the consumers willingness to pay and affordability for the product needs to be lesser than $20. In the case of Glitzz, the type of competitive market is monopolistic competition.

There are similar products in the market but Glitzz will be competing with the non price factor which is their special formula for the cleaner with natural ingredient that is gentle on skin. This is to stand out from their competitors like the Brilliant Restorer and Connoisseurs by charging at a slightly different price as compared to its competitors. Therefore, the price has to be set at an affordable range around $12 to $20 in order to manage long run profit and develop a quality product to penetrate the competitive market.

This price should not be lower than the cost and its competitors due to its unique non price factor that their competitors did not offer. 2. What price would you recommend for Glitzz? Why? I would recommend Glizz to set their price at $17. 90. Most of its competitors like the Brilliant Restorer and Connoisseurs are setting their prices ranging from $6. 97 to $16. 90. As Glitzz is a newly packaged product that is entering the monopolistic competitive market, it has to be competition oriented.

With the pricing objective to gain market share, they are not able to gain market share by having price war. Hence, the price has to be set in a way that it does not deviate much from its competitors. Furthermore, the price is also priced odd-even as theory shown that the demand increases when the price drop. Thus, pricing at $17. 90, it seems to indicate that the price has dropped from $18. This can help as way to increase their demand by having customers to kick start their first purchase of Glitzz product in order for Glitzz to pave its place in the market.

However, the price is set slightly above the competitors as a form of prestige pricing to attract quality customers as Glitzz is offering a product of quality with the natural ingredient used for its jewelry cleaning solution that is gentle on skin, non-corrosive and nonabrasive. A product that brings positive benefits to the customers should not set its price at a very low rate as it will devalue the product and lost credibility for the benefits that the product has promised. In addition, the price should not be over $ 20 as research has been conducted to show that very few customers are willing to pay above $20 for the product. . What Strategy would you propose for Glitzz? What costs and expenses would be involved? Given your recommended price in (2), what would be the breakeven point? I would recommend Glitzz to use Flexible-price policy together with demand and competition oriented approaches like prestige, odd-even and above-market pricing. Both the demand and competition oriented approaches focus on consumer demand, revenue implication and the markets performance and this helps Glitzz to stay competitive and in operation.

Moreover, with flexible pricing policy, Glitzz is able to use price discrimination by setting different prices for different type of customers. The price can be set at a discount for business to business customers like Lee Hwa. Glitzzs product will be frequently used by jelwelry shops like Lee Hwa as Lee Hwas products are the jewelries. The jewelries have to be kept clean and shiny to attract consumers attention and desire to purchase their jewelries. Hence, Gltizzs product will come in handy to facilitate the jewelry shops sales as it aids in the cleaning and polishing of the jewelries.

Hence, being the main stream of customers for Glitzz with their high usage and quantity purchased, Glitzz can lower their price and gives discounts to these jewelry shops. On the other hand, the price will be higher for the mass market as compared to the jewelry shops due to the lower usage and quantity purchased. The consumers in the mass market will purchased the jewelry cleaning product less frequently as they do not have the need to maintain their jewelry at its best condition everyday and the product is commonly used especially during special occasion like New year or parties.

Hence, Glizz is able to set at higher price for the mass market at departmental stores like Robinsons. In addition, setting a higher price could also allow Glitzz to earn a smaller amount of profit when there are seasonal discounts for their product in the departmental stores. The cost and expense involved were the consultation cost ($5000), cost of the content and packaging (20000 x $5= $ 100 000) and budget for advertising ($ 1-2 million).

The budget for advertising will somewhat made up the majority of the cost as these activities are important for the long-term future of the products by developing brand awareness and preference. The activities will include advertising cost on mass media, promotions and marketing cost that are incurred. Assuming that budget for advertising is $1million, Fixed Cost= $5000+$1000000=$1005000 Unit Variable cost = $5 Recommended Unit Price in Question 2 = $17. 90 Break-even point (BEP) = Fixed Cost/ (Unit Price- Unit variable cost) = 77906. 9767 = 77907 Quantity (round up to nearest whole number)

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