CASE STUDY TOPIC - PRICING OF AN INNOVATIVE PRODUCT

By- Anju murmu Arnav Kumar Divya Agarwal Gurudas Kunal kr Rajak Mayank kr Choudhary Prashant Kumar Shafique Alam

 Soomesh

was the owner of Cool Cream Pvt. Ltd. Who did his MBA in marketing from the USA Ginger has antibiotic property Ginger cures throat infection Innovation of a new flavor of ice-cream invented by Soomeshs sister Stocks of ginger are difficult to maintain

 Finance

department: cost+100% profit R&D department: cost+100% profit Sales department: low price Manufacturing department: not willing to compromise on the quality to cut the price/cost

 Should

not have ice-cream when your throat is infected Ginger in ice-cream would prevent throat infection R&D chief assumed that the product(ginger flavored ice-cream) will soon be copied after its launch in the market by the competitors.

R&D chief also assumed that Cool Cream Pvt. Ltd. Would loose all the advantages and investments for developing the idea of ginger flavored ice-cream soon after the competitors launch their version of ginger flavored icecream. There is always a conflict between different departments while taking a pricing decision of a new product.

 Market

skimming pricing:Cost+100% profit Market penetration pricing:low price

o o

compromise on quality to reduce cost/price. no compromise on quality and companys fair name.

I) MARKET SKIMMING PRICING:

Market skimming pricing can be defined as charging relatively high price for a short time where a new, innovative or much improved product is launched into the market.

2) MARKET PENETRATION PRICING: Market

penetration pricing is a pricing strategy that sets a low initial price for a product. The goal is to quickly attract new customers based on the low cost. The strategy is most effective for increasing market share and sales volume while discouraging competition.

Advantages of Market Skimming Pricing

High

short-term profits Supplier benefits from the monopoly profit Return on set-up cost High quality image from the product Strategy successful for attracting prestige conscious customers

Disadvantages of Market Skimming Pricing

High

price attracts competitors High price may fail to attract customers May backfire, if competitors soon introduce similar product at lower prices Low adoption by price-sensitive customers

Advantages of Market Penetration Pricing

Sales

volumes are high, so distribution may be easier to obtain Long- term profits Attracts large number of customers Encourages trial of the product Easy adoption by price sensitive customers due to low price Competitors are kept at bay

Disadvantages of Market Penetration Pricing:

Company

initially faces huge losses. Payback period is longer Customers expect prices to remain low It is believed that penetration pricing cannot create strong customer relationship and only attracts customers on the lookout for a profitable deal

 Based

on the analysis/evaluation of the alternatives pricing solutions and after weighing their pros and cons we can come to a conclusion that Market Skimming Pricing strategy would be most appropriate for this new and innovative product i.e. the ginger flavor ice-cream launched by Cool Cream Pvt. Ltd.

Reasons of selecting Market Skimming Pricing strategy:To make maximum profit for the company before the market gets affected by the competitors To recover the investment costs as soon as possible To make full use of the competitive advantage over the potential competitors