Comment on prices
Only one shop stocked Fry’s Turkish Delight, and it was priced at 43p. From the information I received from Cadbury’s, I have learned that this is the RRP, although I have noticed a shop (not on the survey) that sells them for 40p each. This is definitely the price range that I am aiming at. Another bar in the ‘luxury’ section is Fry’s Peppermint Crème, but I didn’t notice it in any of the shops I went in. Other than that, I can find no other bar but Fry’s that resides in this ‘luxury treat’ section, so I have decided to use a similar price to Fry’s. Instead of using the same price though, I have cut it by 2p (to 41p) in order to be ‘a little less expensive’. The price that Fry’s Turkish Delight is sold at is interesting. I think that they use 43p as it sounds expensive, but they don’t want it to actually be expensive – 43 rounds off to 45, so perhaps psychologically it attracts buyers? I don’t know much about this, but I think there must be some reason why they chose 43 and not 40 or 45. Somehow these round numbers don’t seem as luxurious. Maybe this should be investigated.
What pricing strategy will you use?
There are two main types of Pricing strategy. The first is ‘Cost Plus Pricing’ – This is where you take the price that it costs to make the chocolate bar, and then you add a percentage, the percentage will indicate your Gross Profit per bar. For instance, if it cost 5p to make a Mars Bar, and then you added 500% of that to the final cost, it would retail at 30p. This method is generally used for new bars that belong in new, different markets, or bars that cost a lot of money to make (this is usually due to added Cacao, e.g. Thornton’s). This is a very easy to apply method when it comes to pricing up your bar, but it is very flawed. If your selling price is higher than your competitions, you could lose a lot of sales, so you may have to change the style of your bar, and it’s advertising strategy, because the market you originally intended the bar to fit into may have more efficient chocolate bars, at prices you can’t compete with. This method is best used with others, such as Penetration Pricing.
The other strategy is Competitive pricing, which is where you price your bar at the same price as the bars in your field, e.g. Snickers & Mars are similar prices. This of course, can be a bad move, because often one bar costs more than another to make, but it also helps sell the bar. I shall be using this strategy, because I am making a bar very similar to Fry’s Turkish delight (RRP 43p), and I have decided to make the price very similar too (41p). This of course, may change if the profits aren’t high enough, and I will be researching into how much profit bars like Fry’s tend to make. The sales of a bar that uses a competitive pricing strategy tend to be fairly high, but a lot of Market Research may have to be done on the prices of competitors chocolate bars, and this costs the company time and money.
Along with these two main pricing strategies, there are a few others too, some which my product may use. There is Penetration Pricing. This is setting a lower price than the competition, in order to safely enter a new market. It helps to raise demand for the chocolate bar, because the price is right, but at the same time, the company doesn’t get enough revenue. On the other hand, once you have brand loyalty (the consumers like your bar), you can up the price and they won’t mind. I won’t be using this, Turkish delight is a ‘luxurious’ bar, and although it should perhaps be a little cheaper than the competition, it shouldn’t be too cheap. The opposite of Penetration pricing is Price Skimming – this isn’t really used for chocolate bars, but with items such as DVD players. The price begins high, but eventually drops as the competitors…compete. This is rather stupid for use in a chocolate bars pricing strategy, but it is a good strategy for other products, and therefore deserves a mention.
Finally, there is Promotional Pricing. This is where the product is sold at a very low price for a limited time – I like this idea, and it would certainly attract customers, and help me obtain brand loyalty. This strategy does increase interest in the product, but sales revenue will be a lot lower per bar, and my chocolate bar could actually lose money. I think that I would risk this, and maybe stick a ‘Limited Edition’ stripe down the side of my chocolate bar and sell it for 35p.
Conclusion
I researched the existing market (the chocolate companies) and I hade success. I gained a lot of useful information, and I must give thanks to the kindly chocolate companies (that are, in a way, my competitors) and the shops that allowed me to run price checks on there products and assisted me. This market research should help me to develop my chocolate bar more suitably and efficiently, and allow for maximum sales and accurate prediction of sales figures etc. The results were reliable, if covered up with statistics, but still, to conclude, they were perfectly fine.
Analysing The Existing Market
Show the Market Share of each Chocolate Company in a Pie Chart & Spreadsheet
Information taken from Nestle Information Pack – This is the most recent, but as it is statistical information it may not be 100% correct.
What does this tell you about your competition?
This information gives me a view of which companies own what percentage of the market. I cannot expect my company to automatically grab 20%, that is impossible as I have only created one bar, but hopefully, if the ellison chocolate company were to expand, I could possible own around 5% in say 10 years. It shows me that my major competition, Cadbury (creator of Fry’s Turkish Delight) is the market leader, and this is the company I will compete with, although I only aim to reach the same amount of sales that Fry’s Turkish Delight does. I don’t really think this information is actually all that useful, because I am only making one bar, and that bar is hardly going to take even 1% of the market. These facts are too vague, and don’t really help.
Produce a Spreadsheet for each Company showing which bars they sell, the Price and the money received from sales & Use this Spreadsheet to produce Bar Charts
I searched the internet and my chocolate bar information, but I couldn’t find out the volume of chocolate bars sold, so instead I opted to use the sales money as a guideline. For this task I will take 3 bars from each major company (Mars, Cadbury & Nestle), 1 bar from Terry’s, and 1 ‘other’ bar. I will also do an extra Cadbury bar, Fry’s Turkish Delight, as this is a similar product to mine. I could not possibly do every bar, as I don’t have the time, and that really wouldn’t help me to reach a greater understanding of the Chocolate business. Also, the information I have is not very precise, it tells me how many bars were sold in the year 2000, but only shows a figure that the bars sold over, e.g. Milky Bar sold over £60million (therefore between 60 & 70 million) bars. In order to work out the retail price, I simply took an average from my shop survey and rounded it up. I understand this is not necessarily the retail price, but as I don’t have the retail prices, I will just have to make do.
Chosen Bars:
Cadbury – Dairy Milk, Milky Way, Crunchie, Fry’s Turkish Delight
Nestle – Kit Kat, Aero, Milky Bar
Mars – Mars Bar, Twix, Snickers
Terry’s Suchard – Toblerone
Other – Wonka Xploder
These bars were chosen because I already had the prices and Millions sold (In terms of cash), with the exception of Fry’s Turkish Delight – I chose this because my bar is very similar. Most of the information about these chocolate bars came from the leaflets and assorted information that the Chocolate companies sent me when I wrote them the letters – In particular, Nestle’s information proved very valuable to this part of the coursework. The rest came from reliable sources on the internet, such as the official websites of the chocolate bar companies.
Cadbury
Nestle
Mars
I have decided to combine the Terry’s & the Other Bar Chart, because there is only one bar in each category:
Terry’s Suchard & Other
Why is it useful to put this information into a bar chart?
Putting information into bar chart form makes it easier to study. Instead of searching through many results you can simply glance at a bar chart and learn the answer to a question, obtain the result or notice patterns emerging (e.g. Old, Men tend to like this kind of bar..).
In this case, I can see if more costly bars fare worse or better than cheaper bars when it comes to sales.
What do the bar charts tell you about Chocolate bar prices?
The bar charts tell me that chocolate bar prices are usually in the mid 30s, probably due to competitive pricing, with this price simply becoming common. There are some bars that aren’t in this section of the market – For instance, Milky Way is cheaper because it is only a small, ‘children’s’ chocolate bar, and Fry’s Turkish Delight is a ‘luxury’ bar.
What do the bar charts tell you about Chocolate bar sales?
The bar charts tell me that they vary a lot. They also show that sales don’t depend on price at all, they depend a lot more on the packaging and the actual chocolate inside. A good chocolate bar will have customers returning to buy more, and a good wrapper attracts the buyer in the first place. A couple of pence doesn’t really make a difference, and customers only expect to pay 15p for a Milky Way. Chocolate bar sales can be high or low, it all depends on the chocolate. Which is actually stupendously simple and shouldn’t require market research to figure out.
Look at the range of prices and work out what percentage of bars sell at each price – this will help you find the most common price
For this task, I shall be using the average prices for all the chocolate bars in the survey. I checked, and double checked the percentages and the number of chocolate bars, and this table is correct.
The most common price for a bar is 32p – This is 20% of the market that I surveyed – and it will not be changing my mind, my chocolate bar will remain at 41p. I have also included a scatter graph to illustrate these facts better.
Do the results of your shop survey (roughly) agree or disagree with the Chocolate bar Companies Information?
The chocolate bar information did not tell me the Recommended Retail Price of the bars, so I cannot really field this question. All I can say, is that chocolate bar prices vary from shop to shop, sometimes cheaper, sometimes more expensive, sometimes exactly the retail price.
Conclusion: How has the collected data shown the extent of the competition? Why do you think IT has been a useful tool for this process?
The collected data has certainly helped me understand the pricing of chocolate bars. The common chocolate bar is priced at around 30-35p, and is usually more popular than the type of bar I’m making. The bar that sells in my section of the market is usually around 40-45p, and although it does not sell triple figures, it normally pushes around £20Million in sales, and has a lot more profit in terms of single bars, meaning it costs around the same to make, but is more expensive to purchase. This ties in with another important fact. Price is not really related to sales. People don’t care about the odd penny, and when a chocolate bars price is extremely low or high, it is usually because the bar is bigger. People buy chocolate because they like it, or because the wrapper attracts – sometimes they buy it because it’s cheap (e.g. Limited Edition), but usually they’re willing to pay the extra 5 or 6 pence.
IT has helped me a lot in terms of looking at the results and deciding what they indicate. It has helped me easily generate bar charts, pie charts, and scatter graphs, which show quite clearly the facts of the matter. It is also extremely useful in the fact that I can print work out, and if it is not of satisfactory quality, instead of re-writing it again, like I would have to do using hand, I can simply edit it, and print off another copy. IT has helped a lot.
After Research, What price do you think you should charge for your bar? How many are you likely to sell per year? Will shops stock it?
After research, I have decided to sell my bar at around 35p for 1 month, but add a ‘Sample Price’ sticker to the wrapper so customers know they are getting ‘a bargain’ and that the bar is luxurious, not cheap. Also, if I can get them to try it, I can get them to like it…maybe. Later, I will be pricing the bar up to 43p – I decided against 41p. If I price the bar at 43p, and the wrapper and content is similar to Fry’s, then customers may recognise it as being in the same section of the market Fry’s Turkish Delight, which is the best selling Turkish Delight bar, and customers know this bar is of a good quality, therefore attracting them to my, similar bar. I think I may sell around £20Million worth of bars per year, around 500,000 bars. This aim is set high, and although I may not reach it, it is always best to set your aims high, because then you push more and you don’t give up after you’ve reached the (possibly lower) target. If I aimed to sell 10,000, I could do that easily, and then seeing as their aims were reached, the staff could grow lazy – marketing becomes worse, production slows etc. Anyway, those are roughly my figures.
As for if the shop will sell my bar or not – I only found 1/3 bars that actually stock Fry’s Turkish Delight, but I’m sure the others have stocked it in the past, and if I get these stores to sell my product, I will have a lot more chance of reaching my target – the shop would be inclined to sell it for the first month due to the trial price, and if sales were high, the shop would of course buy more.
Break Even Chart
A Break even point is where a firm’s revenue is equal to its costs and its net profit will be zero – anything above this point is profit, and anything below it is loss.
In order to work out my Break even point, I must use the price of making my chocolate bar, the price I will sell it at, the fixed costs, the amount (quantity) that I can produce, and then I must use accounting techniques to gather the results and learn how many bars I must shift.
I have predicted that my sales will be £20Million. My chocolate bar will cost 20p (Which pays for Making, Marketing & Manufacturing) to produce, and the profit is invested back into the company for other things, such as expansion.
Market Research Of Consumers
Explain What Market Research is and why it is vital
Market research is finding out what people want in the way of new or existing products and services. A firm can find some of the answers to questions such as “How do you know the products will sell?”, “Who will buy your product?”, “Have you got the right design?”, “Is the price right?” and “Why are you losing sales to your competitors?”. Large firms will often spend large amounts of money on market research, but small firms may also find it useful. Some small firms fail because they haven’t carried out enough basic market research, and that is why market research is vital.
One way of doing some Market Research includes the use of things like Questionnaires, which take a small sample of the public. This might be a random sample, where every 3rd person you see is approached (for example). In general, the smaller the sample, the less reliable the research. This is why it is useful to target the market research at the people most likely to buy your product, interviewing, say, women between the ages of 18-34. There’s no point in asking old people about teen magazines, for example.
Much market research, particularly that that is conducted by small businesses, is informal. This means people know already what people want, and about the area around them, and can decide in a group discussion what to do. Even the most sophisticated market research doesn’t always provide the correct answers – one example is the Sony Walkman, extensive research showed that it wouldn’t sell, but now it is a huge success.
Discuss Different Ways of Carrying Out Market Research
One of the most useful methods of conducting market research is listed above, and is a questionnaire. This way you can get sufficient information from people, useful information, and you ask the questions. This, however has its downsides. People don’t really want to do a questionnaire unless maybe there’s an added incentive, and when you are approached whilst shopping by someone holding a clipboard and wishing to “ask you a few questions” you don’t always feel like participating. The best way to counteract these is to offer to enter all filled in questionnaires into a prize draw, or include questions in an order form that don’t need to be answered. I have also noticed online questionnaires, after ordering a product from amazon.com.
‘Normal’ people could be recruited for market research – they can be paid to sit at a table, and share their comments on ideas that the company has. These could actually be company members, but they aren’t really going to badmouth there own creation so it may be wiser to recruit common people.
Market Research usually involves taking a sample, which means a small amount of people (well, small in comparison to the population or target market). This sample should fairly accurately represent the population of the possible consumers of your product (the target market), for instance you could ask equal amounts of males and females from different age categories to find out whether or not they are interested in your product, and your advertising campaign could therefore be designed to attract that kind of person.
Which part of the survey is the most important?
As 90% of all chocolate bars are bought on impulse, and simply for ease of use, I gave only two answers to the question “If you saw a Caramel Turkish delight bar in a shop, would you try it?” These answers were of course, Yes or No, and this question made it extremely to gather results, tabulate them and create graphs etc. This is the key question as it tells me exactly whether or not this bar will sell, and this is why I have focused more on creating graphs and tables of this particular question. Should I have not used this question, or even made it clearer how eager you would be to try the bar (More than two choices – which I did do in another question), the results would be a lot harder to manipulate.
Find out who will try your bar
I conducted another survey to discover who would buy my chocolate bar, what age period, what sex, etc. In order to conduct an accurate survey, I must take a sample that will more or less accurately reflect the population of the U.K. I asked 50 people the question: “If you saw a Caramel Turkish delight bar in a shop, would you try it?” I asked 5 people from each range, an equal amount of males and females and an equal amount for each age section, e.g. I asked 5 Females between the age of 21-30, and 5 males too. Here are my results:
This table shows the ages and sexes of those that would try my Chocolate Bar
