Mkt501 Marketing Management VU current Assignment No. 2 Fall 22 December 2011

[Vuhelper]

SEMESTER FALL 2011

Marketing Management (MKT501)

Assignment No. 02

Due Date: Dec 27, 2011

Marks: 30

Topics Covered:

Read the given topics in detail to attempt the assignment.

1. Pricing

2. Pricing objectives

3. Pricing strategies

The Case:

Neven Corporation is an international coffee and coffeehouse chain. Neven is the largest premium coffeehouse company in the world, with 18,887 stores in 55 countries. Neven sells drip brewed coffee, hot and cold drinks, coffee beans, espresso-based hot drinks, salads, hot and cold sandwiches and pastries, snacks, and items such as mugs and tumblers.

Recently Neven observed customers are cutting back and switching to cheaper coffee shops. When recession pushes customers to choose cheaper alternatives and switching from your products, cutting your prices to keep the customers is best conventional strategy. This practice is usually followed and accepted, it is not based on any analysis.

In such a disastrous situation when Neven was loosing its customers, Neven decided to raise its prices by as much as 10%.

Requirements:

1. In the given case of Neven, how did they decide at price increase? (15)

2. Do you think there will be a fall in sales? How long should the sales fall to nullify the benefits of price increase? (15)

Instructions:

Please read the following instructions carefully before preparing the assignment solution:

• Solve this assignment in your own words.

• You can take idea/concept from Video lectures, recommended books, reference books, internet etc

• Copy from internet, VU-Student’s websites/blogs will be graded as zero.

Note:

Only in the case of Assignment, 24 hours extra / grace period after the due date is usually available to overcome uploading difficulties which may be faced by the students on last date. This extra time should only be used to meet the emergencies and above mentioned due dates should always be treated as final to avoid any inconvenience.

Other Important Instructions:

Deadline:

• Make sure to upload the solution file before the due date on VULMS.

• Any submission made via email after the due date will not be accepted.

[jani faisal]

solutin khah hai

[Vuhelper]

Solution:
Neven is actually now starting price skimming. (Charge a high pnice because you have a substatial competitive advantage. However, the advantage is not sustainable. )


"Skim the cream" pricing involves selling at a high price to those who are willing to pay before aiming at more price-sensitive consumers. This expression comes from the farming practice of milking cows - the cream rises to the top and you skim it off. The advantage of using a Skimming price policy is that you can theoretically get the maximum profit from each level of customer


Skimming Pricing


"A Skimming policy is more attractive if demand is inelastic says the Shapiro text - remember inelastic means there are no dose substitutes


- products that people will pay a high price for because there is nothing else they can buy the is close to the item


~ ~ Prof. Allen says


"A skimming pricing policy involves setting prices of products relatively high compared to those of similar products and then gradually lowering prices. The skimming price is the highest price possible that buyers who most desire the product will pay (skim the cream off the top -- skim the innovators). This market segment is more interested in quality, status, uniqueness, etc. This policy is effective in situations where a firm has a substantial lead over competition with a new products


2. Do you think there will be a fall in sales? How long should the sales fall b nullify the benefits of price increase? (15) Solution:
The high price tends to attract new competitors into the market, and the price inevitably




falls due to increased supply. Once other manufacturers were tempted into the market and the watches were produced at a lower unit cost, other marketing strategies and pricing approaches are implemented.