Marketing mix- Price

Pricing strategy determines how much company charges for a product. For our company
the pricing strategy focus is to introduce our product to customers. Therefore, there are several
pricing strategies that we use. Our aim is to attract buyers by offering lower prices on goods and
services. Lower price helps to lure customers away from our competitors and the idea of low
prices making customers aware of our new product

Firstly, our company use a cost-based pricing strategy to determine the price of our
product. Cost-based pricing involves setting prices based on the costs for producing, distributing
and selling the product. In calculating the costs, we’re very meticulous in examine every aspects
of costs involved.

¿ cost
Unit cost =Variable cost +
Unit sales

RM 6,000
Unit cost =RM 5+
400

Unit cost =RM 20

Unit Cost
Markup Price=
1−Desired return on sales

RM 20
¿
1−30 %

Markup Price=RM 28.60

After calculating all the costs and set the price based on that, our company also make a
comparison between our product’s price and the competitors’. This is important because as a
new product, we don’t want our product’s price to be higher than the competitors. We found out
that the estimated price of our competitors are around RM 30 to RM 35

Our company also decided to use the psychological pricing strategy. The price that has
been finalized by our company is at RM 29.99. The purpose of setting the price at RM 29.99 is
because by reducing the digit farthest to the left by one cent, human’s mind will usually want to
assume there is money to be saved, and so customers will not think much and buy the product
thinking that the product is cheaper.

FINANCIAL INFORMATION

SALES FORECAST (Monthly for the first year)

Month Price (RM) Sales (Unit) Sales (RM)

January 29.99 4 119.96
February 29.99 9 269.91
March 29.99 7 209.93
April 29.99 13 389.87
May 29.99 25 749.75
June 29.99 37 1,109.63
July 29.99 38 1,139.62
August 29.99 38 1,139.62
September 29.99 38 1,139.62
October 29.99 41 1,229.59
November 29.99 57 1,709.43
December 29.99 74 2,219.26
TOTAL 361 units RM 11,426.19

SALES FORECAST (For the first 5 years of business operation)

Year 1 Year 2 Year 3 Year 4 Year 5

Price RM 29.99 RM 29.99 RM 29.99 RM 29.99 RM 29.99

(x) Unit sold 404 units 500 units 675 units 750 units 950 units

TOTAL RM 11,426.19 RM 14,995 RM 20,243.25 RM 22,492.50 RM 28,490.50

Our company expected the slow increase in the first 4 months since we’re focusing more on
introducing our product during that time. Our marketing strategies for the first four months are
more to posting on social media such as Facebook, Instagram, Twitter and Whatsapp. This is
because, for the first four months, we want to not using too many cost for marketing but at the
same time we want to let buyers knows our product. We will also open booth to sell our product
in the area of university. Started from the fifth month, we’ll gear up and increase our marketing
strategies. The result of that can be shown in the increase of our sales whereas there is an
increase of 12 units sold compared to the previous month.

We’re expected that our sales for the month of May until October to have a steady increase of the
number of unit sold. However, for the month of November and December, our company estimate
the sales to increase drastically following the great marketing strategies we will apply at that
time.

Areas of Weakness in The Business Finance

1. Lack of Resources

Without pre-established, solid financial resources to draw from, a business is in a precarious

position. Having no backup financing becomes a major obstacle since when releasing the product
to the market, our company are still unsure on how people will react towards our product. To
avoid losses and dump stocks, our company decide to just open a pre-order in the first two
months of when the product released. Since we are lack of resources we need to make sure that
the first three months we get profit or at least a break even

2. Providing Startup Capital

A bank or other financial institution doesn't usually provide 100 percent of the financing
necessary to start a small business. Our company have to provide a portion of the startup costs
from personal funds or infusions of capital from private investors. It will become a problem if
our company doesn't have private funds to supplement a small-business loan. It will also lead to
inadequate startup capital, which can sink a fledgling company if the business is slow to generate
revenue.
Break-Even Point

Fixed Cost RM 6,000

Variable Cost per unit RM 5

¿ cost
Break−even volume=
Price−Variable cost per unit

RM 6,000
¿
RM 29.99−RM 5

¿ 240

This
means
that
our

company need to sell 240 units at RM 29.99 each to breakeven. And to earn profit our company needs
to sell more than 240 units
Price (RM)

Profit

Break-even point

Losses

Quantity (units)

240