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Pricing Strategy
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PRICING
OVERALL COSTS
The initial set up and marketing costs in starting the business will be treated as capital costs and thus, they will not be considered in the determination of the product and service price. The cost to be considered in setting price will be:
Tire Purchase cost
Cost of tire shipment
Buildings lease hold cost entailing the office and store rents,
Sales and administration personnel costs,
Future costs of marketing, advertisement and promotional activities
Cost of market evaluation exercises
Legal fees and Licenses
Materials used in service provision
Factory running costs including Electricity, heating and lighting costs
Price Setting
To incorporate these costs a 25% markup price will be charged on the tires' shipment and purchase cost. This percentage will suffice to cater for the business operations and overhead costs. The mark up price setting will serve for normal demand trends in ordinary market...
The price promotion will be considered to boost sales revenue and increase the businesses grasp in the market.
In case of potential competitors, temporary promotion price will be considered to retain demand for the products and services. Competitive pricing strategy will however, ensure that commodities contribute to business expenses and profits. Competitive price will also target low cost tires since they have a price elastic demand.
Additional promotional pricing strategy will be used where new tire products are introduced in the product range or the company is venturing in a new market. This strategy will enable the business to attract demand for tires and increase its market share.
Promotional price on seasons such as holidays will be used to serve as a means to communicate the company's existence, excite current customers and entice potential customers. This strategy will serve to increase the company' revenue…
References
Kotler, P. (1997). Marketing Management: Analysis Planning and Control, 9th Edition. Englewood Cliffs, NJ: Prentice-Hall.
Marn, Michael, & Rosiello, R. (2004). Managing price, gaining profit. Harvard Business Review, 8(2), 378-390.
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