About Simbrand
What is price & concept of pricing
Price is the amount provide to a seller from a buyer for the purchase of a good or a service.
Prices are set where the marginal revenues are equal to the marginal cost. Following the marginality rule is helpful since it allows the organization maximize its profits. Pricing decisions are useful to an organization it helps the organization in the generation of revenue. In addition, pricing contributes to the success or failure of the company’s marketing strategy depending on the type of product or service being offered. Price has an inverse relationship with demand, particularly for normal goods, this means that increase in price leads to a reduction in the quantity demanded. Overall price helps a company accomplish three main objectives. It helps the organization maximize its profit, achieve a target return, increase sales volumes or maintain a market share. However, it is important that the company is able to determine a consumer’s paying capacity for the product in its determination of price.
The importance of pricing in the perspective of seller of SIMbrand
In the perspective of the seller SIMbrand pricing is important since it allows the company to get a return for its product production. The company adds on a margin to the cost of production in order to ascertain a price which it will charge to the market. Pricing is also a way through which SIMbrand can enter the market. In case there is presence of other competitors, SIMbrand is able to charge a price which makes it more attractive in the market.
The importance of pricing in the perspective of buyer of SIMbrand
Pricing in the perspective of the buyer of SIMbrand is important since it allows the buyer to estimate the value of the product. Price is able to enable the buyer compare among alternatives and gauge the value of the product compared to the amount of compensation that they are required to pay.
3rd paragraph, describe the 6 steps of price planning ( to set the price of your phone) (one sub para for each steps of price planning)
Step 1: Develop pricing objectives for your phone
In this case, the price objective of the SIMbrand is to achieve a target return. The aim is to achieve a set margin for the product from its production costs. This will be done by adding an extra cost to the product in order to achieve a desired level of profit.
Step 2: Estimate demand for your phone
In order to estimate the level of demand, it would be useful to have a demand cure which will tell us the type of good the product is and the effect of price on the demand of the product. This can be done through the use pf product surveys, price experiments or statistical analysis with historical data.
Step 3: Determine cost for your phone
The company will determine the cost of the phone using both variable and fixed costs. This includes the costs of the raw material, labor and overheads. In addition, it is useful for the company to take account of differential costs in the differential markets for instance it may became costlier to sell the product in Europe than in Asia.
The Importance of Pricing in SIMbrand
Step 4: Evaluate the pricing environment (market—-) & Explain its impact on pricing strategy for your phone
It is useful to analyse the pricing of the competitors in order to ascertain the firms strategy on pricing. The information used for this analysis will include price levels, changes in price and any price differentiation mechanisms used in the market.
Since the phone is similar to the competitors’ products, it may be useful to charge an almost similar price. This means that if the margins set are higher than those that can be achieved with the competitors’ price, there is need to reduce the costs. On the other hand, in case the product being offered by SIMbrand is premium, there might be need to charge higher prices to communicate the value of the product.
Step 5: list any 2-3(at least) pricing strategies
Mark up pricing – this is where you add a markup to the cost of the product which means that the mark-up added to the cost of the product is the profit to the business
Value pricing – this is where the product is priced based on the value it provides to the customer, that is more for less. The product can have many features for a bargain price.
Going rate pricing – this is the price where a product is sold at a price that is common in the market in order to allow a penetrative approach to market share.
Conclusion: of the 3 strategies & tactics, choose 1 each as your preferred & explain why.
The value pricing will be best suited to SIMbrand. This is because as a new market entrant we have to create a need where the customers will be willing to try the product. Value pricing will allow for a penetrative price in the market as well as ensure that the customer is attracted due to the perception thy will be getting value for money.
Essay Qns 2: STP (2-3 pages answers)
Discuss a key strategic decision which your team had to make during the SIMbrand game-for example, positioning the brand, segmenting the market, which you might have to make it you were in charge of the marketing operations of a similar organisation.
What is STP?
STP is a process which shows the links in a market and determines how a company decides to compete in the market. The process involves segmentation being done first, then targeting and lastly positioning of the product. Market segmentation involve dividing a market into smaller groups using similar product needs or market characteristics in order to select relevant target markets. Targeting is the process of an active selection of a market segment by a company with the intention of heavy focus of marketing efforts. Product positioning involves providing the target market with a perception of the product’s benefits and key features compared to alternatives.
What are the 4 bases of segmentation of the 4 bases, which one are relevant to you in the SIMbrand universe?
In this market we have a geographic segmentation of customers in Asia and Europe. The customers in Asia are more focused on value for money while the customers in Europe are geared more toward high value products.
In terms of demographic segmentation, we have high end and low-end customers. High end customers are those who have higher levels of incomes compared to the ow end customers. High end customers are les price elastic compared to high end customers.
The other segmentation is based on the customer behaviour, for instance is it a household or a business. Households are likely to want a phone to communicate to loved one s and have other feature that support social activities while business more focused on efficient use of communication and ability of using communication data to make business decisions.
Segmentation by geography and demography makes most sense for SIMBrand. This is because these customers have unique characteristics which may enable the brand to succeed in those markets.
What are the 3 Approaches?
Undifferentiated
An undifferentiated approach is where all market segments are provided with similar products at the same price level. This approach can be used when there are no strong differences in the identified markets.
A differentiated approach occurs when the market segments are provided with either different products or different prices or a mix of both. This approach is useful when the market segments differ significantly and the go to market strategy for each market should be different.
Concentrated/ Niche
This involve identifying a small but specific segment in the market. In this market one can be a market leader and charge higher prices since it is a niche market.
The differentiated approach makes most sense for SIMbrand since the markets identified are different and have differentiating characteristics which the company would be best placed to satisfy in order to penetrate the markets.
High end and low end customers
The effectiveness of the chosen segment can be validated through the different customer behaviours of the segments. For instance high en customers are likely to purchase products that communicate prestige while low end customers need products which provide them with value for money.
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