Steps in Setting a Pricing Policy
Step 1 :- Selecting the pricing objective
For Cadbury Dairy Milk Silk their major pricing objective has been PRODUCT-QUALITY LEADERSHIP.
With Cadbury Dairy Milk already a market leader, Silk aimed to target the luxury market segment. Hence it strives to be affordable luxury as it is known by its:
Perceived Quality - Rich, creamy and smooth
Taste - Gives a melt in the mouth experience
Status - It has achieved this status by pricing it just high enough not to be out of consumers reach.
Step 2 :- Determining Demand
The higher the price, the lower the demand.
Price Sensitivity: Customers are less price sensitive to items they buy infrequently.
Hence the demand curve for Silk will be
Step 3 :- Estimating Costs
Variable cost of Silk varies as per the price of Cocoa, milk and butter. It varies directly with the level of production.
Step 4 :- Analyzing Competitors Costs, Prices and Offers
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As there are only foreign brands which compete with Cadbury Silk, So the competitor cost hardly affects the price of Silk.
They recently came up with an offer in order to sell both Cadbury Silk and Bournville.
Step 5 :- Selecting a Pricing Method
Cadbury Silk adopts a PERCEIVED-VALUE PRICING.
They base their price on customers perceived value of the product.
Step 6 :- Selecting the Final Price
Estimating the production cost clubbed with high image benefit that it portrays in the consumers mind, is the way how Cadbury Silk decides its price.
Link Price with Consumer Decision making process elements
Customer value component
Competition/identity factor
As Cadbury Silk does not have any major competitor in India as far as its pricing is concerned, so the price of any other chocolate does not directly affect Cadbury Silk.
Industry Life Cycle Stages
The chocolate industry life cycle is in the maturity stage. But the introduction of Silk has started a new trend of premium chocolates in India. Due to this, Cadbury Silk is still in the growth stage. Pricing thus has a huge effect on the chocolate industry.
Product Features
Silk is creamier, smoother, and tastier and gives a melt in the mouth experience to the customer. It is chunkier, with a soft center and so is priced heavily as compared to other chocolates. It is high on the image benefit. The image that Silk portrays is that it targets only the high-end consumer. Hence it is deemed as a premium product.
Step 1 :- Selecting the pricing objective
For Cadbury Dairy Milk Silk their major pricing objective has been PRODUCT-QUALITY LEADERSHIP.
With Cadbury Dairy Milk already a market leader, Silk aimed to target the luxury market segment. Hence it strives to be affordable luxury as it is known by its:
Perceived Quality - Rich, creamy and smooth
Taste - Gives a melt in the mouth experience
Status - It has achieved this status by pricing it just high enough not to be out of consumers reach.
Step 2 :- Determining Demand
The higher the price, the lower the demand.
Price Sensitivity: Customers are less price sensitive to items they buy infrequently.
Hence the demand curve for Silk will be
Step 3 :- Estimating Costs
Variable cost of Silk varies as per the price of Cocoa, milk and butter. It varies directly with the level of production.
Step 4 :- Analyzing Competitors Costs, Prices and Offers
As there are only foreign brands which compete with Cadbury Silk, So the competitor cost hardly affects the price of Silk.
They recently came up with an offer in order to sell both Cadbury Silk and Bournville.
Step 5 :- Selecting a Pricing Method
Cadbury Silk adopts a PERCEIVED-VALUE PRICING.
They base their price on customers perceived value of the product.
Step 6 :- Selecting the Final Price
Estimating the production cost clubbed with high image benefit that it portrays in the consumers mind, is the way how Cadbury Silk decides its price.
Link Price with Consumer Decision making process elements
Customer value component
Competition/identity factor
As Cadbury Silk does not have any major competitor in India as far as its pricing is concerned, so the price of any other chocolate does not directly affect Cadbury Silk.
Industry Life Cycle Stages
The chocolate industry life cycle is in the maturity stage. But the introduction of Silk has started a new trend of premium chocolates in India. Due to this, Cadbury Silk is still in the growth stage. Pricing thus has a huge effect on the chocolate industry.
Product Features
Silk is creamier, smoother, and tastier and gives a melt in the mouth experience to the customer. It is chunkier, with a soft center and so is priced heavily as compared to other chocolates. It is high on the image benefit. The image that Silk portrays is that it targets only the high-end consumer. Hence it is deemed as a premium product.
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