The Most Appropriate Pricing Technique for Cadbury
There are 7 different pricing techniques that are available to
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
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
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 because Cadbury won’t waste time
this way. If for example information is not accurate then Cadbury will
have a problem. This will reflect the attitudes of all their customers
because wrong information is being given. Customers will feel that
Cadburys can’t be trusted.
In this case Cadbury always try to give their customers the right
description. If they don’t then they will have to suffer the
consequences. It could be that an image of a bad reputation is
portrayed and prices and demand would decrease.
Demand based pricing is also appropriate because Cadbury is prepared
to sell their...