Pricing Strategy ChurroZ

Cost includes the cost of goods manufactured, which includes raw materials, processing, labor, etc. and the cost of goods sold that includes the operating expenses. The operating expenses and initial investment would be covered under the assigned budget. Mostly, businesses that are entering into a market try to set a price that covers their cost while helping them earn a reasonable amount of profit. Hence, the pricing methodology is pretty simple, they add a markup to the total cost of the product. There are several pricing options available based on which we can decide the price of an item of ChurroZ Pricing Strategies A product can be priced according to several strategies. A business should decide on a pricing strategy based on its marketing strategy, as well as the market it is moving into. We are discussing the following two pricing strategies here: Price Skimming – Using this strategy, a business charges a relatively high price for a short period of time exploiting newness of the product. The main target of the strategy is to ‘skim off’ customers who are willing to pay a high price for getting the product sooner. The prices are reduced as the demand goes down. This strategy is effective for extremely innovative products or for products being introduced to a market so that they can take advantage of customer involvement and attraction towards the product. ChurroZ are Spanish donuts and they are being introduced in New Zealand on a cart for customers on the go. As the product is being introduced in the market, the business could think about utilizing Price Skimming as a strategy because it is a relatively new product for the New Zealand market and customers would be interested in trying it. Later, they bring the prices down if the demand falls or the competition increases. Penetration Pricing – In this pricing strategy, a business sets a relatively low price to enter a market to attract maximum customers and induce trials. The objective of the strategy is to make the customers switch from their existing brands due to the lower pricing. The target is to increase market share, sales volume. This strategy is not suitable for ChurroZ as it is a new product and there is very little or no competition currently in the market. Various Price Allocation Techniques Cost plus pricing – this technique is the most commonly used and popular with manufacturers. It involved adding up all the costs associated with the manufacturing of a single item and then adding up a desired profit to find the price. This is a fairly simple and transparent technique and it involved minimum complexity. It is most suitable for business startups or if entering a new market. Competitive Pricing – Another strategy of pricing is to price your product based on the prices of the competitors. However, this strategy is a risky one as it can back fire if it induces a price competition among businesses. Hence, business should only compete with others of their own size and strength. This strategy is not suitable for startups as they would looking to stabilize themselves and understand the market and their customers and blend in accordingly. Demand Based Pricing – Demand based pricing is the method in which an analysis of consumer response to a range of prices reveals the highest acceptable price. This is a relatively new method that relies on research and time. A company before deciding on a price and launch the