Question

1. What are some of the key factors you would consider as a manager to decide on multi-product pricing?

2. In a monopolistically competitive market, advertizing plays a major role in keeping consumers informed of potential product differentiation features. Please share your personal thoughts about what massive advertising campaigns, do you think massive advertising budgets are complementing new product innovations or it is taking away from some funds that could have been used in new product innovations. Please feel free to use anecdotes if necessary in support of your thoughts.

Answer 1

1. Pricing your products for the online market can be a tough job, especially because as an online retailer, you have to face competition from hundreds of other retailers who might be selling the same/similar products. A few months ago we published an article that talked about some unusual pricing strategies that make use of certain psychological factors to decide on the most lucrative price for a seller. The strategies discussed in that article, like the rule of 9 (Why is it 99 cents, and not a dollar?), are great to use, but first you need to have an idea of the actual pricing of the product. There are other questions that we will endeavour to discuss in this article, like when to raise prices and when to slash them.

First and foremost, it is time for some introspection. To price your product, you have to know your product, know your market and know your customers. Here is a list of questions that will help you do so. Take your time with them, and try to answer them as honestly as possible.

1. Is your product/service unique? , i.e., are you entering a niche, undiscovered market?
2. What is your customer base? Are they predominantly urban or rural? How much do you think your customers make per year? How much would your average customer be willing to pay for the service/product you offer?
3. What are the costs that you are bearing to make an individual sale? If you are manufacturing the product yourself, what is the cost price? How much does your shipping partner charge you per product? What are your administrative and logistical costs and can you break them down to a per product basis?
4. Who are your competitors? How much do they charge for the products they sell? Can you discern a pattern in their pricing strategies? Do you think your competitors undercharge/overcharge for their products?

fter you are done answering the above questions (we are sure that will take some time, provided you are being thorough), it is time to calculate your expected profit margins. There are three profit margins that we would consider – direct cost margin, break-even pricing and profit pricing.

• Direct Cost Margin: Direct costs margin is the margin that you can accumulate after paying for all the costs directly related to the product you are selling. This includes fabrication, transport, sales costs, shipping, administration, logistics, etc. Here is how you calculate it:

Direct costs margin = Sales price – Total direct costs

Profit Pricing: The break even pricing will give you a null profit, null loss situation. It is not a bad situation to be in, compared to a few others.

The following points highlight the eight important pricing strategies adopted by firms. The strategies are: 1. Pricing a New Product 2. Multiple Products 3. Product-Line Pricing 4. Pricing over the Life Cycle of a Product 5. Cyclical Pricing 6. Transfer Pricing 7. Differential Pricing 8. Cost-Plus or Full-Cost Pricing.

2. Activia: It Starts Inside

The Campaign

In February 2017, Activia launched its ‘It Starts Inside’ rebranding campaign. The work was designed to spark conversations and encourage women to achieve their full potential, inspiring them to rise above their ‘inner critic’.

The Insight

A study conducted by Activia and research partner GlobalWebIndex revealed that 80% of women in the U.S. aged between 25 and 55 agree that they are their own worst critic.

Why it Worked

The campaign features candid interviews with real women talking about their experiences with self-doubt as well as their strength and determination to achieve their goals. The “Don’t Tell Me I Can’t” video is an ideal example of audience-centric marketing at work, where people are at the core of the brand’s message.

The successful exploitation of new ideas is crucial to a business being able to improve its processes, bring new and improved products and services to market, increase its efficiency and, most importantly, improve its profitability.

Marketplaces - whether local, regional, national or global - are becoming highly competitive. Competition has increased as a result of wider access to new technologies and the increased trading and knowledge-sharing opportunities offered by the Internet.

It is important to be clear about the difference between invention and innovation. Invention is a new idea. Innovation is the commercial application and successful exploitation of the idea.

Fundamentally, innovation means introducing something new into your business. This could be:

• improving or replacing business processes to increase efficiency and productivity, or to enable the business to extend the range or quality of existing products and/or services
• developing entirely new and improved products and services - often to meet rapidly changing customer or consumer demands or needs
• adding value to existing products, services or markets to differentiate the business from its competitors and increase the perceived value to the customers and markets

Innovation can mean a single major breakthrough – e.g. a totally new product or service. However, it can also be a series of small, incremental changes.

Whatever form it takes, innovation is a creative process. The ideas may come from:

• inside the business, e.g. from employees, managers or in-house research and development work
• outside the business, e.g. suppliers, customers, media reports, market research published by another organisation, or universities and other sources of new technologies

Success comes from filtering those ideas, identifying those that the business will focus on and applying resources to exploit them.

Appealing to viewers’ emotions in an effort to build radical empathy and shift perceptions of Activia as more than a mere product, but as “a product and platform to help women feel good inside and out”, it proves the power of insights that inspire.