Marketing strategy and direct marketing pricing activities

Marketing Strategy

Doggie Day Care

Launching a new doggy day care business in an upper-income area of the community requires a careful analysis of costs, pricing strategies, a clear strategy for pricing promotions and a well-defined series of profitability goals. The intent of this introduction is to evaluate the costs and pricing strategies of the proposed business.

Overall Cost Analysis

The most significant fixed costs for the doggie day care clinic include the following:

Lease for the facility

$2,000/month (for a facility with a dog run)

Utilities

$100/month (anticipate heavy water usage)

Staff

$3,500/month (burdened cost w/insurance for two staff members with veterinary training)

Supplies

$1,000/month (dog food, materials for care)

Monthly Insurance

$200/month (incudes liability)

Total

$6,800/month

With the assumption that 50 dogs being in day care initially this puts the breakeven point at $136 per dog, per month. With the goal of 100 dogs boarded per month being achieved, the cost will go to $68 per dog, per month. These figures do not take into account gross margin forecasts.

Price Definition Strategies

With $136 being the breakeven point for the initial forecast of 50 dogs per month, the minimum gross margin will need to be 30%, or a per dog monthly revenue of $176 to even achieve a small profit. The pricing strategy t5herefore needs to be more oriented to value-based (Chao, Wilson, 1987). The pricing strategy also needs to take into account the majority of services have inelastic demand curves, which means pricing can readily be increased over time to differentiate relative to competitors (Matanovich, 2003). Plummeting prices and getting into price wars with any other potential competitors is going to eventually end up with all businesses in this segment going out of business.

Temporary and Seasonal Price Promotions

Temporary and seasonal price variations need to be concentrated on the types and level of service, which can yield the greatest potential long-term customer gains for the lowest cost (Chao, Wilson, 1987). For temporary and seasonal price promotions to be effective, they must enable greater levels of customer loyalty and attract new customers over time. A frequent boarder discount and refer-a-friend programs would be useful for enabling greater customer loyalty over time and increasing lifetime customer value. Dropping prices or putting them into free-fall will end in the day care center going out of business.

Impact of Price Discrimination

Price discrimination is not necessarily a bad if used to differentiate premium service and charge higher rates for larger, more special-needs and high maintenance dogs. This approach to premium pricing and price discrimination is warranted when the service is exceptional and highly differentiated from competitors (Matanovich, 2003).

For VIP Treatment including weekly grooming, special dietary analysis and cardiovascular check-ups the doggy day care clinic could feasibly charge $250 per month, which would be 83% gross margin when 50 dogs are being cared for. The margin goes up significantly the more dogs are enrolled in this VIP Program for example.

Profitability