The Most Appropriate Pricing Technique for Cadbury Essay -- Business M

The Most Appropriate Pricing Technique for Cadbury There are 7 different pricing techniques that are available to Cadbury. 1. First pricing technique is skimming pricing. With skimming pricing, these prices are set very high to take advantage of some peoples desire for a new product or design at any price. Skimming is most effective if demand is inelastic. For e.g. Cadbury put their prices at the same as most of their competitors and at the price their customers are able to pay. 2. Cost plus pricing Pricing methods which are based on the cost structure of Cadbury that are favoured by accountants because they are supposedly more accurate and reliable. Cadbury is trying to maximise it profits. This method works successfully because all costs need to be accurately accounted. In many firms this is a very difficult process which is why the simpler mark-up procedure is used. Cost plus pricing tends to ignore the demand for the product and the competition. 3. Positioning pricing Cadbury uses this method to position prices that are set which reflect the consumers view of the chocolate bean. 4. Demand based pricing Cadbury set their prices based on what they think the consumer is prepared to pay. If they don’t then they wont sell as good as they thought. If they do sell at the customer’s price they will have a good reputation and an output of more customers. 5. Competitive pricing In this situation Cadbury set a price roughly in line with their competitors. This will depend on the type of competition that exists for the chocolate bean. It is particularly the number of seller and the number of buyers. This process works reasonably well if the cost structures of the companies are roughly similar. 6. Discount pricing Cadbury is a competitive market which buyers should be able to obtain goods for less than the advertised price. Many firms can be forced into price-cutting if they are short of cash or need to increase sales quickly. 7. Different pricing Cadbury may change different prices sometimes for the same product at different times. Its prices will be based on the elasticity of demand for the chocolate bean. Which is the most appropriate for this market type? The most appropriate strategy for Cadbury is Cost Plus pricing and Demand based pricing. Cost plus pricing is appropriate because the information is more accurate and reliable which is good... ...ghtly difficult but they have managed due to good marketing strategies. It has distributed its products in many ways even if they have failed in some but they always try to find the right way to distribute their product so their customers stay satisfied. PRODUCER WHOLESALER RETAILER COMSUMER When there are a large number of retailers, Cadbury (the manufactures) will usually deal with a wholesaler who buys in bulk, stores the products and sells them on to the retailer in smaller quantities. A small grocer will usually go to the wholesaler. This is mainly done regularly to avoid the small space. Advantages of long channels - Retailer gains convenience and minimises storage costs - Consumers are able to buy in small quantities from retailers - Goods are available close to where they are needed - Wholesalers provide valuable retailer support services - Transport costs are lower because the producer does not have to make as many deliveries. Disadvantages of long channels - Prices tend to be higher when goods change hands many times; compare prices in the corner shop with those in supermarkets - Producers have less control over the way in which goods are stored and sold