Price

M. Caine

FASHION MARKETING FASHION MARKETING

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Price – 4 companies exercise

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Students to study the case studies presented
and recommend a wholesale price for
each camera model to be launched in the
USA
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 Price – 4 companies exercise
Some alternative points.

The companies turnover would not include retail mark up.

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Alternative costs may be considered.

Current profit margins do not have to be matched.

Can they be beaten? Consider trading / credit terms.

Company 1

  Very high quality product.

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·       Seek to sell only 6 or 7 per week for year one.

·       No reason for 10000 RMB to remain top selling price.

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consider outlets to be sold in etc.

Company 2

Not seeking to sell too many.

• Consider changing distribution channels.

• Is this the right market?

 Price – 4 companies exercise
• Company 3

• After selling large volume.

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• No existing market presence / reputation / loyalty.

Need to enlarge total market size considerably. £490 too much.

Increase in volume should further reduce costs in later years.

 
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• Company 4

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• Need for cost reductions eg Sea freight.

• Consider direct sales (no commission) or mail order etc.

 4 companies considerations
highlighted
• 1. The importance of setting and working towards objectives.
 

• 2. Assessment of current market.

 

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• 3. Psychology pricing eg 199, 495.
 

• 4. Consideration of competitors pricing.

 

• 5. profit maximisation.
 
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• 6. Product comparison.
 

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• 7. Long and short term planning.
 

• 8. Costing analysis (flexibility)

Price

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• The value of the product to the user will be judged through
its price

– Re competition, quality, performance etc. 1

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– Price will affect your companies image.

– Higher prices imply better product, a.s.s

Price

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• An adequate return on investment
depends on the revenue generated

– Price x sales volume

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• Price is related sales volume which in turn

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must be related to profit

– High volume sales at low profit

– Low volume sales at high prices

• Price bears no relation to costs.

 Pricing and the Marketing Mix
• Consider the image the company wants to project

• Better selling increases confidence which subsequently means the

price can be raised

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• Who buy and why the purchase is made (company)

• Consider stage in product lifecycle

• Consider where the product will be sold

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– Convenience (local store)

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– Overhead (internet)

– Pricing comparability
Pricing Exercise

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What costs are involved in the pricing of a
garment ?

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 Pricing considerations
• Satisfactory rate of return

• Marginal costing (split costs to variable and non variable)

• Dumping price (export below manufacturing cost)

• Terms of the trade

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• Psychological price

• Price confidence (bargains and status)

• International transfer pricing

• Pricing strategy
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• Differential pricing (airplane)

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– Ok when market is clearly segmentable

– Segments show different reactions

– Is separation between segments

– Segments can not sell to higher priced segments / markets

 Pricing Strategies

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Cost oriented
•
Return on investment
–
Early cash recovery
–

Market oriented (price moves in line with market)

•

–
Market stabilisation 1
Market penetration (low price to gain market share)
–

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Market skimming (price high then reduce)
–

Competition oriented (eg commodities markets – must follow)

•
Improve market position
–
Meet and follow competition
–
Prevent new entry
–
Reflect product differentiation
–
 Sample approach to a Pricing
Initial manufacturing cost
•
Initial research – tariff classification
•
Transportation costs
•
Field costings (3rd parties, advertising)
•
Add desired r.o.i and compare with competition
•

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If final price higher than confidence level then;
•
Is higher price possible
–
Can we reduce the cost price
–
Can we reduce total product costs
–
Can we reduce advertising expenditure (or sell to own brand co.)
–
Compare services offered
–

–
Distribution analysis
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Price volume study
–

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 Price : Cost considerations
• Price of a product has to cover all Business overheads as
well as unit manufacturing costs.

• Consider

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– cash flow

– Reducing stock levels

– Transit times 1

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– Payment terms

– Shipping costs