Brief – Cool Cream Pvt Ltd owned by Somesh Sharma innovated a ginger ice cream and named it Adrak Ice cream. The concept of a ginger ice cream which would protect the throats of those who relish ice cream was well received during the market test. Current Pricing suggestions – GM Finance and R &D chief– The price should be cost plus 100% profit Sales Team – Low price at the time of introduction so that the product is accepted in the market Othe concerns relating to pricing –
Manufacturing manager was not willing to compromise quality to cut cost Purchase manager – cost for buying and storing ginger R & D chief – the product will be copied and cool cream will loose the advantages and investments in developing the idea Recommendation on Pricing Strategy – 1. Value Pricing Approach – Value Pricing Thermometer – Objective value –Perceived Value Product Price Cost of Goods Sold Product Price should be as much or lower than the perceived value of the product. It should also take care of the firms incentive to sell i. generate decent profits over the cost. Ice cream is not a very high end product where a small percentage change in the pricing will have a drastic effect on the the product price. Customer will still buy the product increasing the profitability of the company. In case of ginger ice cream, it’s an innovation and was well accepted in the test market.
Hence the customers will be willing to pay a premium for the same vis a vis the regular ice cream flavours in the market. Keeping up the good quality and the additional cost for the ginger storage, Cool cream should keep prodcut rice higher then the regular ice cream to take care of the increase cost and also the marketing cost to create awareness of the new product It will also have the first mover advantage to earn high profits and gain market share before the innovation is duplicated. A high profit margin will enable them to cover the cost of innovation and R&D at the launch phase only. A low price startegy at the launch phase will result in low profits as the cost of production and marketing will be high. This will not cover the R&D cost as well as the additional storage cost.
Also the marketing expenditure to create awareness of the innovation will also wont get covered. After the product is duplicated even the market share will be diluted. Low pricing will not be a smart move at the launch phase. ntegrating Price with Other Marketing Mix Elements – Since the product is superior and well accepted in test market, cool cream should invest in marketing efforts to communicate the superiority / uniqueness to the potential customers. This will raise the perceived value of the ginger ice cream vis a vis normal ice cream. In turn, the high margins generated by the premium pricing funded that marketign effort.