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Cost based – It is when a business works out the total cost of producing a product by adding together all the fixed variables costs. Then it adds an amount for a profit, often called mark up, to give the selling price. The mark up is usually expressed in the form of a percentage.
For example, if the kosher food shop works out that the total cost for producing a kosher chicken is ï¿½10. They decide they want to add a 10% mark up to create profit for them.
This would give the following calculations:
Total cost ï¿½10
Percentage mark up per chicken 10% of the total cost
ï¿½10 x 10 divided 100 = ï¿½1.00
Total price = ï¿½11.00
Market based – It is when a business looks at how much other business are selling a product for and selling the same product for around the same price or maybe a bit lower to gain the advantage amongst its competitors. For example if a kosher chicken at La Boucherie cost ï¿½11.00, my shop will sell it at ï¿½10.
60. This generally happens in an environment where there is a lot of competition and opposition.
Promotional pricing – Pricing to promote a product is a very common application. There are many examples of promotional pricing including offers such as Buy One Get One Free and 2 for the price of 1.
Skimming pricing – Charge a high price because you have a large competitive advantage. The high price attracts new customers; however the price falls as the demands increase. A good example of skimming pricing was a mobile phone. When they first came out, they were really expensive and few people owned them.
As time grew on more were produced and sold at a lower price and many people bought them.
Penetration pricing – The price charged for products and services is set artificially low in order to gain market share. Once this is achieved, the price is increased.
Destroyer pricing – You sell your product at very low price. Consequently people buy your product not your competitor’s product as yours is cheaper, meaning you destroy existing competitors business. An example of this is Primark. Primark sell their clothes at a very low price, meaning many people buy from there and it destroys other competition such as top shop, Base etc,
I think that that my shop should use promotional pricing. This is because the other pricing policies are not suitable at all for my shop. Skimming prices would not suit the shop because the products I am selling are not new or up to date they are just simple general food, Also, people wont buy my goods if I use it, I know this because my results of my survey tell me most people want the shop in Barkingside and if I put my shop there my customers will go to another shop, like Sharon’s to buy the more expensive goods such as chicken. There are other competitors customers can go to if they want cheaper food and I know they want cheaper food because half of the people I survey are more interested in quality than price. This is similar to why I haven’t chosen penetration pricing. It is because once the price has been raised my customers would buy from my competitors as it may be cheaper. Finally although destroyer pricing doesn’t raise the price of my food, I don’t think it would work in the food industry, in particular my shop, because there is only so much the price can be lowered and it wouldn’t be enough for me to eliminate my competitors and still be able to make a profit. In conclusion promotional pricing, would suit mine better because it doesn’t have any disadvantages. Also I think that it is most reliable choice.
There are 2 types of promotion, which are above the line and below the line.
Above the line – Most advertising would be said to be as above-the-line promotion. The main media choices include: television, radio, cinema, national newspaper, posters, magazines, internet, etc.
Below the line – Any promotion not using traditional media is classified as below-the-line. The main types of below the line are: sales promotions, direct mail and door to door, personal selling, sponsorship, etc. An example for below-the-line is Arsenal are sponsored by Fly Emirates, this is a form of below the line promotion. This form is very expensive.
Advantages and Disadvantages of above the line marketing
Advantages of above the line
* Advertising to a wider range of people and the shop could get more customers
* Increases the companies sales which cold boosts the shops profit
Disadvantages of above the line
* Is very expensive
* Can be very time consuming
* Continuous monitoring of product
Advantages and Disadvantages of below the line marketing
Advantages of below the line
* Can be cheaper
* Advertising to a wider variety of people
* Increases number of sales
Disadvantages of below the line
* Can be very expensive
* Easy to lose money. This could happen in the event, for example, Manchester united are doing bad and it’s sales production decreases
The main factors which will affect the products I provide in my shop are:
* Price – If the product that the shop is buying is very expensive, they may not be making much profit out of it and may not want to sell it. On the other hand, if the product they are buying to sell in their shop is cheap, they may be making a lot of money on it, so they would stock more of it to keep making lots of money.
* Quality – If customers come back to the shop and takes a product back for one reason or another, the shop may not want to sell this product. This is important because if a customer isn’t happy with a product they will tell other people and sales will decrease
* Demand – If there is a high demand for a product the shop will stock more of it. On the other hand, if there is a low demand for a product a shop will sell less of it.
* Religious festivals – When a religious festival is near the shop will sell products in association with less. For example if Pesach is coming up, the shop will sell matzoth.
* Reliability – This is to do with suppliers. A shop needs to know a supplier is reliable. For example, meets deadlines for when they are going to arrive with stock.
My survey results told me 12 out of 25 people wanted the shop to be in Barkingside, which was the majority. In addition tot his in Barkingside there is a kosher bakery and a kosher butcher however no kosher food shop.
How will each of the marketing mix help Abraham to achieve his objective?
There are many different pricing schemes e.g. Promotional, Skimming, Penetration and Destroyer. I have shown Abraham what each of these pricing schemes mean and which one I feel is the best to use. So by giving Abraham these different pricing policies it will help him to decide what one he thinks is the best for his shop and which one will help him make the most money.
There are 2 types of promotion schemes; these are above the line and below the line. Above the line promotion which is using media, below the line however doesn’t use the media. The descriptions I have given can easily show which one is suitable to make maximum profit for a small shop in Barkingside. I’m sure Abraham can see that a shop like this doesn’t need media, however offers such as buy one get one free are more than suitable.
When you are opening a business the main feature that you need to think about is where you are going to locate the business. If you are going to put a shop in a sparsely populated area, where there is little of your target market, in this case Jewish people, thou are not going to make much, if any, profit. Whereas, if you place your business in a dense area e.g. Barkingside, where there is much of your target market you are going to make money and a lot of people will come to your shop. From my survey I know that most people live in Barkingside and that Barkingside is the place that most people will want a kosher shop to be located. By telling Abraham the results from my survey about locating in Barkingside, this should help Abraham to achieve his objectives.
The products that you sell in a shop are very important; you need to make sure that the prices are reasonable and in a kosher shop the food must abide by the Jewish laws. If you have stock with products that are unknown, then you will have problems selling them as people will not want to buy products they don’t know. I’m sure my 5 main suggestions will help Abraham make the right decisions in what to stock
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