Price
This is one of the most important elements of the marketing mix. It is the only aspect of the marketing mix that generates directly revenue for the business. The remaining 3 p’s are the variable cost for the business. It costs to produce and design a product, it cost to distribute the product and it cost to promote it. Price must support these elements of the mix. Pricing is difficult and must reflect supply and demand relationship. Pricing a product too high or too low could mean a loss of sales for the business. When considering the price and pricing strategy for the relaunch of the product monster munch I should take into account the following factors
- Fixed and variable prices
- Competition
- Company objectives
- Proposed positioning strategy
- Target group and willingness to pay
There are no fixed prices for products in the savoury snack market in the UK, with prices greatly fluctuating. Despite the huge increase of walker’s sales over the past few years the business hasn’t put the price up massively to see if they could prosper enormously from growth, they have kept the price at a steady level, always giving the customer excellent value for money
There are huge amounts of competition in the savoury snack market, with branded walkers products generally sold around 30p for a single pack, and £1.29 for a 6 pack. Own brand crisps such as tescos and Sainsbury’s usually sell their products slightly cheaper than between 20p-25p per pack and around between 50p -£1 for multipacks of 6. the quality of these goods are not as good as branded ones, as shown in my research, and this is why they usually use market penetration (explained later) to try to gain bier shares in the market. Other products such as space raiders are sold even cheaper at 10p, with the quality and value for money being quite good, but because of their lack of brand name they don’t sell as well as the branded products.
The new price must cover the cost of producing, distributing and selling the product, and be sufficient to generate a profit.
The company objectives would in this case be to for walkers to place monster munch back into the savoury snack market and gain a bigger market share than the 2% it currently has. So the objective would be to maximise profits, so a good course of action would be to estimate potential demand for the product when it is relaunched, and select a price which maximises current profits. A different aim that could also be sought to be achieved would be security, where lowers prices may be set to obtain large market share, but doesn’t maximise profits. This step would usually be taken by smaller businesses entering with new products, whereas I am with a large company relaunching a new product.
The target group and willingness to pay must be taken into account because when you are targeting children like my current and new strategies do then you have to consider how much pocket money they get and will they be able to afford to the product, and will they be willing to pay a higher price, which they probably wouldn’t, unless the product was greatly improved in an area such as quantity given
There are six main approaches that I could undertake as my new pricing strategy under monster munch. They are:
- Cost plus pricing
- Target profit pricing
- Perceived value pricing
- Competitor based pricing
- Market skimming
- Market penetration pricing
Cost plus pricing
This method of setting a price for a product involves adding up the total cost of producing the products and then adding onto this value a standard margin, example 33%. This would be certain to maximise if it works but it wouldn’t be guaranteed to gain a high share in the market as it could set the price of the product too high with customers unwilling to pay. Foods producers don’t use this method because it gives no guarantees and could cause downturns in sales. I will not be employing this pricing strategy as I need to increase market share and profits and this is not the ideal way to do this. This method is more ideally suited to construction companies or book shop owners
Target profit Pricing
This is the method employed where the price that a product is sold at must be set to be at least cover the costs of production, otherwise there is no profit being made, and there would be no point. With this pricing strategy the amount sold is the key, as the business will break even after a certain amount sold, and after a certain amount of sales they will start to make a profit. I will not be undertaking this as my pricing strategy because it all depends of demand and I cannot guarantee demand. This is the method currently used walkers as the pricing strategy for monster munch. Unfortunately the demand has dropped so the profits expectations aren’t being reached
Perceived value pricing
This relates to the non price variables in the marketing mix which affect the price, which helps raise customer’s insight into the product, and in doing so their willingness to pay a higher price for the product. This method of pricing relies on accurate research into how people view a particular product and give value to the non-price variables in the marketing mix. The consumer’s thoughts on the value of a product maybe lower if the business lowers the price of a product. This is because the consumer maybe considers a lower price to be adequate with a lower quality. Walkers could already be called an example of this because although say tescos sell salt & vinegar crisps that are very similar to walker’s salt & vinegar, the very fact that they are made by walkers means that people will buy more of them at a higher price because they believe that they are of higher quality. I will not employ this pricing strategy because there are not too many none price variables that would affect the savoury snack market, and so I couldn’t change the price at many different levels
Competitor based pricing
In this pricing strategy the business is usually a smaller one, and doesn’t have the sufficient capabilities to do research to find out the best method on how to price their product. It is simply setting a price in comparison with competitors. I will not be employing this for my strategy because I have done sufficient research techniques that has allowed me to choose one of the other more business wise pricing strategies
Market Skimming
The organization sets an initial high price and then slowly lowers the price to make the product available to a wider market. The objective is to skim profits of the market layer by layer. A business with a new innovative product that faces little opposition might undertake this strategy. I will not be using this pricing strategy because I don’t want to put the price above the level where the customer wouldn’t buy it, it would be taking too much of a risk. It also wouldn’t work because I am relaunching an old product and not creating a new one which it needs to be for this method to work.
Market penetration pricing
Here the business will try to establish themselves in the market when they enter by setting the price slightly lower price than it is worth in order to gain a good share in the market. This firm is used by businesses introducing new products or re-establishing old ones. The business hopes to raise the price at a later date. I have decided to use this pricing strategy because it allows me to put the price slightly lower than its competitors, and this will almost guarantee walkers good sales, and then when sales start to increase we put the price up and start to make a profit on the relaunched product.
There is also a number of other ways in which the business could use the price as a tool:
Bundle Pricing: The organization bundles a group of products at a reduced price. I will use this when I sell the product in multipacks, with an overall saving on the price
Psychological pricing: The seller here will consider the psychology of price and the positioning of price within the market place. The seller will therefore charge 99p instead £1 or £199 instead of £200. I wont use this because the prices I am selling at are not big enough
Premium pricing: The price set is high to reflect the exclusiveness of the product. An example of products using this strategy would be Harrods, first class airline services, Porsche etc. will not use this method because my products are not exclusive enough, although the quality I am selling is among the top in the market
Optional pricing: The organization sells optional extras along with the product to maximize its turnover. This strategy is used commonly within the car industry. I wouldn’t use major extras in my strategy, although I could guarantee a toy for children
Place
This is where the company of producer has to deliver the product to the consumer as and when it is required. There a re a number of factors which contribute to how far this is achieved
These include:
Location- this should take in account the convenience for the customers. The development and increases in the number of supermarkets and shopping precincts allow numbers of products to be bought from one place. Customers are happier if they can buy all their products from one shop or in one go. Supermarkets are located in the town centres and on the outskirts of every city in the UK, at the customer’s convenience
Currently monster munch is sold throughout the UK in over 400,000 outlets, the major supermarkets selling the most, and also in thousand of newsagents, sweet shops and garage forecourts. They are also sold in the leisure industry in places such as sports centers and cinemas
Under my new strategy monster munch will continue to be sold in all the locations used in the current strategy, with a main emphasis on supermarkets, but there will be more packets sold in schools as my research has shown that schoolchildren are the target market, and at school is a place where lots of savory snacks are already eaten. As Scotland has been proven to having the heaviest crisp eaters from my research, we will try to sell as many products within this region. However, we will not neglect other areas such as the south west which haven’t got as many heavy crisp eaters, because there is still huge market opportunity.
Product availability- this is where the organization makes the decisions which matter and will affect the availability of the product. The factors which affect this are the production, storage and distribution of the product which all need to be kept up to standards to meet high quality levels for the customers
Currently there is massive availability at all times for the product monster munch. The nearest shop to where any customer lives will in most cases sell the product and this is what the customer’s want, as this makes it again more convenient for the customer. The product is located in over 9000 outlets in the UK. They are produced in six factories located throughout the UK, and there are seven distribution centres crucially located in key population areas
Under my new strategy there would be no need to change as the product availability under the current strategy is very good, matching up to any customer’s expectations as to how far they would have to travel and at the convenience of the customer.
Distribution systems- this is the different methods which allow the products reaches the market. They will try to achieve the most efficient system so that the product is available at the right time and place. A successful system depends on efficient and rapid transportation, good quality of packaging, and efficiency of stock control and storage system, and how sophisticated the ordering system is at the moment
The current distribution centres for walkers and monster munch are very good. There are seven distribution centres in the UK located in key population areas. The products are transported 24 hours a day. Walkers use 200 vehicles, most holding the equivalent of 4,032 packets, to transport the product throughout the country. The packaging quality reminds at a high level using quality control checks. Walkers also have a team of 400 workers which work with supermarkets to make best use of space available and stock control.
Under my new strategy there is no need to change the distribution system of walkers as it is proven to be successful. The only possible action to be taken would be tot build more distribution centres, however this would be only a decision taken by the higher management in walkers and would be subject to money requirements.
Direct marketing- this allows for the direct approach to customers by the company using a number of methods. These are
- Direct mail- this is where the business provides a highly targeted approach by selecting individuals identified by various socioeconomic and other criteria. The most effective of these methods tends to be promotional mail of letters to customers.
Under the current strategy walkers doesn’t use direct mail to as a way of getting across to its customers because customers have become aware of the product in other ways used in promotion, and the product sold is too small to bring a great interest from a customer, as the product is only lasting a number of days
Under my proposed new strategy there will be no direct mail to communicate to potential customers because I believe the promotional methods used get across to the potential customers far more affectively
- Telemarketing- this involves the business communicating with potential customers directly via phone. Interested customers may then be visited by a sales representative with a view to completing a sale. This method is used for selling double glazing, insurance, driveways etc…. The development of call centres have increased the use of telemarketing using the use of a target database of names and numbered
Under the current strategy there is no telemarketing as the product isn’t big enough and doesn’t cost enough to try to sell down the phone. Walkers also like to get across to all their customers at once rather than contacting them individually
For my new strategy there will be no telemarketing as it would cost the business to much, it would be a waste of the workers and the customer’s times as they would already know about the product and my promotional strategy will hopefully get across to the customers effectively
- The internet- offers new way for advertising and direst selling. Can allow for customers to digitally shop on the net. Allows the business to target new customers and receive feedback through the use of email
Under the current strategy walkers have a website at that gives product information, promotional information, contact team, and various information for retail outlets wishing to be supplied with walkers products. Walkers aren’t sol on their website but they are sold on supermarkets websites when purchased with other products
Under the new strategy the website would have much more information available about each product individually, such as a history of the product. I would also set up an online shop that allows for purchasing of crisps and delivery on a minimum order of £9.99. This might encourage customers to buy crisps in bundles. I would continue the section for retail outlets and allow them to purchase online as well by setting up a system that allows them to join a member’s area.
- Leafleting- this is door to door distribution of leaflets, and can provide an effective way of targeting a particular area.
There is no leafleting under the current strategy and there will be none under the new strategy because it is too time consuming and with monster munch we want to target areas and no areas in particular. It would also be cost effective
Promotion
Promotion Strategies
A successful product or service means nothing unless the benefit of such a service can be communicated clearly to the target market. An organisations promotional strategy can consist of:
Advertising: Is any non personal paid form of communication using any form of mass media?
Public relations: Involves developing positive relationships with the organization media public. The art of good public relations is not only to obtain favourable publicity within the media, but it is also involves being able to handle successfully negative attention.
Sales promotion: Commonly used to obtain an increase in sales short term. Could involve using money off coupons or special offers.
Personal selling: Selling a product service one to one.
Direct Mail: Is the sending of publicity material to a named person within an organization. There has been a massive growth in direct mail campaigns over the last 5 years. Spending on direct mail now amounts to £18 bn a year representing 11.8% of advertising expenditure (Source: Royal Mail 2000). Organisations can pay thousands of pounds for databases, which contain names and addresses of potential customers.
Direct mail allows an organization to use their resources more effectively by allowing them to send publicity material to a named person within their target segment. By personalizing advertising, response rates increase thus increasing the chance of improving sales. Listed below are links to organization whose business involves direct mail.
Message & Media Strategy
An effective communication campaign should comprise of a well thought out message strategy. What message are you trying to put across to your target audience? How will you deliver that message? Will it be through the appropriate use of branding? Logos or slogan design? The message should reinforce the benefit of the product and should also help the company in developing the positioning strategy of the product. Companies with effective message strategies include:
Nike: Just do it.
Toyota: The car in front is a Toyota.
Media strategy refers to how the organisation is going to deliver their message. What aspects of the promotional mix will the company use to deliver their message strategy. Where will they promote? Clearly the company must take into account the readership and general behaviour of their target audience before they select their media strategy. What newspapers do their target markets read? What TV programmes do they watch? Effective targeting of their media campaign could save the company on valuable financial resources.
Internet promotion.
The development of the World Wide Web has changed the business environment forever. Dot com fever has taken the industry and stock markets by storm. The e-commerce revolution promises to deliver a more efficient way of conducting business. Shoppers can now purchase from the comfort of their home 24 hours a day 7 days a week. However, particularly in the UK the e-commerce revolution is hindered by two factors. Firstly the cost of logging on to the net. Consumers are still weary of the time-spent surfing; the high cost is slowing down the take-up. The number of homes that are linked to the web in the UK is only 25% of all house owners. If e-commerce businesses are to succeed the home penetration rate of internet access must also increase. Secondly, most homes are linked to modems of 56K. As the growth of people signing on-line grows the access speed slows down. In America most consumers only spend 10 seconds browsing on a web page, before they change sites, within the UK it is 2 minutes. The future seems to be with ADSL networks which will speed up access to the Internet dramatically running at 512K per second. However, again whether this format is adapted depends much on the cost.
Owning a website is a now a crucial ingredient to the marketing mix strategy of an organization. Consumers can now obtain instant information on products or services to aid them in their crucial purchase decision. Sony Japan took pre-orders of their popular Playstaion 2 console over the net, which topped a 1 million after a few days, European football stars are now issuing press releases over the web with the sites registered under their own names. Hit rates are phenomenal.
The current promotional strategies employed by walkers towards monster munch are to advertise the product on the internet, which is on its website, and some posters and large banners in city centres. There was until a few years ago advertising on the television specifically to the product, but the downturn in sales have caused walkers have turned to advertising its mainstream products. When walkers is being advertised on the TV using the current promotional campaign of Gary lineker and Pokemen, monster munch is indirectly being advertised because monster munch is a feature of walkers, and so when walkers is advertised all its products are advertised. The new beans flavoured walkers that have recently been released are sold under monster munch, and they have been advertised on the television along with other brands that the baked bean flavoured crisps are available for. There has been the sales promotion of a free item that comes with many of the new packets of baked bean flavoured crisps, and there has also been multipacks of baked bean flavoured crisp which mixes all walkers different products into one bag of 6 or 12, for a price which works out much cheaper than buying them individually. The has been in the past promotions in newspapers and magazines for collecting vouchers in return for free bags of monster munch, but none currently. There are many advertisements for walkers in magazines. On the Television there has also been the Doritos sponsorship of ITV movie premieres, with Doritos also being a brand of walkers. There is an advertisements for walkers on the radio using Gary lineker and the “no more my nice guy” slogan. There advertisements that re used on the TV are also used on the shown before films on cinema screens. The PR team at walkers release press releases about products and negotiate sponsorship between products such as Pokemon. Finally in many of packs of walkers there is the £20 note promotion where there is a chance of winning a free £20 note in some packs of walkers. However this promotion is not available for monster munch packs
For my new promotional strategy there will be plenty of changes to the current one. Firstly I would say that threw would be a bigger advertising campaign specifically for the monster munch product. They will advertise to reach the biggest audience, so that everyone in the UK will see the new promotions. This will be the main objective of the new campaign. All potential customers must learn about the changes made to the packaging, the new flavours available and the new image of the product. There will be chosen advertisements in the newspapers, with some local newspaper carrying special offer coupons that allow for a free bag of the new range of monster munch. This again will be repeated in some magazines.
On the television there will be a new adverting campaign with at least three new adverts in the next year on the screens, featuring a famous figure who endorses the product, and who tells the viewers of the new features and image of the product. There will be similar adverts on the radio with a new slogan for crisps. All this would be within walker’s budget as they have a substantial budget available to them. The special sales promotions that will be available will small toys available with every pack, possibly based on the person who is endorsing the new product. There will also be a continuation of the free books for schools campaign and the chance to win a £20 note in some packs of monster munch. I will also advertise the new price for the product to be below all other branded products
