Price strategy and implementation frameworks

Pricing strategy needs to take into account a number of different factors. These include the costs of production, the positioning of the product, competitive pricing, and the customer's willingness to pay. Selling Chapman's ice cream to the United Arab Emirates is going to take into account some of these more than others.

With respect to cost of production, there are two factors that need to be taken into consideration. The first is the cost of production and the second is the cost of distribution. Costs of production are high. Factors include the cost of milk, which is protected in Canada and therefore higher than in many competing countries, and the high cost of Canadian labour. Since Chapman's uses premium ingredients, the conclusion is that the factor cost of production is high. The market in the UAE for specialty ice cream is relatively small, so there is no real opportunity to make up for this in volume sales, which negates consideration of a pricing near the marginal cost. The price needs to be much higher than that. The second factor is the cost of shipping to the UAE is high, because of the need for refrigerated shipping. While this is available, it adds to the product cost. Prices need to be high simply to recoup the cost of making this ice cream and getting it to market.

Competitive pricing is important. Our perceptual map shows that Chapman's occupies premium positioning over Nestle and other mainstream ice cream makers, but somewhere below the highest end ice creams on the market. That strategy might need to be revisited in the Middle East, where there are fewer competitors but also where it costs a lot more to bring the ice cream to the market.

The positioning of the product needs to be high end, relative to the other competitors. This is necessary simply because they will have to sell it at a high price. Mainstream ice creams will be made much closer to the market, and will likely have lower factor input costs as well. Thus, it is necessary when marketing Chapman's in the UAE that premium positioning is used. When marketing in a foreign country, it is possible for there to be positioning divergence relative to the domestic market where there is no marketing spillover, a condition that is met here. Therefore, it is possible for Chapman's to occupy a super-premium position that justifies its price, especially if the quality of the ice cream relative to competitors lives up.