In the marketing field, marketing mix plays an important role. One of the four components of the marketing mix or 4Ps is the ‘price’ of the product. A change in price component may lead to a change in the other three components like product, place, and promotion. While developing a pricing strategy for a product, a few steps to be followed are to develop a marketing strategy, determine the marketing mix decisions other than price, calculate the cost including the fixed and variable cost of the product, determine the external environmental analysis, set the pricing objectives and finally determine the price of the product. The marketing strategy is formulated before the product is launched. This mainly includes target market selection and product positioning. The quality of the product and the price of the product are two associated factors. The marketing mix decisions may vary with a change in any of the 4Ps. When a company decides to launch a product, there is always a situation to understand at least the basic costs involved. While calculating the costs, both the fixed cost and variable cost should be included. Then, the company should be aware of the market condition, existing competitors, etc in the external environment. The company should frame the price only after referring to the pricing of their competitors; otherwise, there will be a price war situation. Also, there may be price controls for pricing a product too high or low. Then comes the most important aspect of pricing objectives like current revenue maximization, current profit maximization, quantity maximization, quality leadership through pricing, survival of the company in adverse situations in the market, etc. There are many pricing policies in the market available currently. Some of them are skimming the price, where the target market is not highly price-sensitive and the demand is relatively inelastic, and penetration pricing where the target market seems to be highly price-sensitive and the demand is highly elastic. These two pricing policies are most widely used by various companies.
Marketing strategy of CADBURY’S
“The global confectionery market is the world’s fourth-largest packaged food market.” (Our marketplace, 2009, para.1). This company is mainly oriented towards the younger customers of the market. It attracts children by making the product available at affordable prices and satisfying them. Cadbury’s always makes research on what types of products can make the children satisfied and hence has entered into a variety of product launches right from simple chocolates to ice-creams and even cakes. Cadbury’s has always concentrated on the aspect of making its customers satisfied with their demands.
The target market for Cadbury products is people in the age group of 5-60. The company offers differentiated products for each age group like from ‘5-10, 11-21 and 21-60’. A product of milk chocolate coated with nuts could be provided for children with an attractive colored wrapper. Brown chocolate covered with nuts with low caloric value may suit chocolate lovers and finally, for matured aged people, white chocolate coated with nuts can be provided as they will be more diet conscious. This differentiated product is an important marketing strategy adopted by Cadbury’s. The aim of Cadbury’s is to accomplish the goal of becoming the best and the biggest confectionery company in the whole world. Cadbury’s confectionery revenue breakdown is about 46% from the chocolate sector, 33 % from the gum sector, and 21% from the candy sector in the market. Chocolate is the largest category under confectionery whereas gum is the fastest-growing category. Now, Cadbury is going to introduce a new product which suits both youth and aged people. The product is named ‘Tantalizers’
Pricing strategy & price tactics – Tantalizers
The mission of this new product is to ‘tempt and attract the youth and ripened ones of the society with its taste’. The pricing objectives of this product are to increase the revenue growth, increase the net profit margins by10-5%, and increase the dividend per share by 6% and have stable earning rates during adverse market conditions. As Cadbury’s is well known for its quality, the positioning may not be a serious issue as everyone encourages and waits for a quality product like this. This product should successfully deliver the selected position to the market in return. Before pricing or positioning the product, the competitive advantage of the product also should be analyzed. Hence, after going through all these aspects successfully, Cadbury’s put the pricing strategy for Tantalizers in a very economical rate as ‘for 24CT pack – $39.99, for 48CT pack – $49.99, for 140 pieces in a pack – $15, etc’ These prices are comparatively very economical and affordable to the target market.
The pricing tactic mainly used in this context is odd value pricing, which is an essential aspect of buying decisions. Some customers may prefer this type of pricing as it seems to be more attractive.
Competitive pressures
One major competitor for Cadbury’s is Nestle. Nestlé’s business aim is to create a sustained value for its products over the long term. Nestle always believes in recruiting the right persons for the apt places to improve their efficiency. Nestle always prefers long-term benefits. Nestle aims to retain its valuable customers for the long term as they are the key to success. Nestle has a wide variety of products range from chocolates and confectionery, nutritive drinks, cereals, cookies, baby food, bottled water, coffee, and ice creams. (Brands: Nutrition & health, n.d.).
Nestle uses an international competitive strategy as it is a global company. Its main competitive strategies are associated with foreign direct investment in dairy and other food industries. It also uses another strategy of making strategic partnerships with other large companies. Nestle, whenever expands its business to a new area, tries to acquire the local companies to form a group of regional managers who know very well about the culture of that area. And Nestle always looks for new markets and expands their business, which also seems to be a good competitive strategy. When such a variety of products like Tantalizers comes to the market, obviously there will be a response from Nestle and all other competitors as well.
The competitive advantage of Cadbury’s Tantalizers
The major advantage of Cadbury’s over the competitors is its brand name and quality which are recognized in the whole world. Then, the innovative features of the products that the company is producing are another unique feature. The wide availability and affordability of the price structure also are unique. The wide promotion of the products through good advertisements also leads to competitive status. The company also takes care in delivering the products safely and fastly in the market. This brand is preferred by customers worldwide more than any other product.
Since Tantalizers is very economical and affordable, the customers will surely go for it. As the quality of the product is one of its uniqueness, the customer will love to have a quality product at such an affordable price. The odd value pricing tactics also would be welcomed by the customers. The nutritive value of the product also adds up to its uniqueness and due to all these reasons, customers will love to buy this product.
The pricing strategy launched by Cadbury’s for its new product Tantalizers is attractive, and hence the target market would love to have it. Together with the pricing strategy and pricing tactics, positioning of the product and overall marketing strategy has been done with so much care that would surely have an efficient outcome in the market.
Reference List
- Brands: Nutrition & health. (n.d.). Nestle: Good Food, Good Life.
- Our marketplace. (2009). Cadbury.