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Pricing Workshop. WorkshopsProposed Date Introduction workshop / The Food & Drink Sector 31 st October PR, Social Media & Events14 th November Pricing.

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Presentation on theme: "Pricing Workshop. WorkshopsProposed Date Introduction workshop / The Food & Drink Sector 31 st October PR, Social Media & Events14 th November Pricing."— Presentation transcript:

1 Pricing Workshop

2 WorkshopsProposed Date Introduction workshop / The Food & Drink Sector 31 st October PR, Social Media & Events14 th November Pricing & Profitability9 th January Best Practice Visit21 st January Product Evaluation / Product & Market Testing 20 th February Managing a small business – HR & people management 6 th March Approaching your customer27 th March Packaging & Labelling24 th April Investment, Grants, Funding & Business Growth 15 th May Creating Development Plans5 th June Workshop Programme

3 Workshop Outline Product Costings Pricing Strategy

4 Price setting Price setting depends on price expectations of customers price category (expected price level) influence of quality influence of image possibility to substitute elasticity

5 Price setting Exercise Put a retail price on the products given out

6 Drivers of product choice 1Price 2Know all ingredients 3Fat content 4Brand name 5Sell-by date 6Sugar content 7Salt content 8Country it's from 9Taste 10Animal welfare standards 11Ethical (e.g. Fairtrade) 12Environmentally friendly 13No artificial colours or flavours 14Looks nice 15Time food takes to reach store 16Availability of usual 17Organic 18GM free 19Trying new foods 20Stories in papers/ news First mention

7 Drivers of product choice

8 What are shoppers prepared to pay a bit extra for? 1High quality ingredients 2Free range 3Locally produced 4Fairtrade 5Well known brand 6Organic 7Retailer’s best own brand 8High animal welfare standards 9Environmentally friendly 10Added health benefits 11Country of origin 12Homemade feel 13Quality assurance standards 14Traditional recipe 15Innovative packaging 16Packaging appearance 17Exclusive 18Restaurant style 19Celebrity endorsed First mention

9 High price-strategy product introduction with relatively high prices quality is sales argument goals: quick coverage of development costs to build a quality image to build the link with luxury or indulgence

10 High price -strategy Premium price strategy : permanent high prices (long term) – no price promotions !!! used for luxury goods, unique-products, products with low price elasticity time £

11 High price - strategy Skimming price strategy high price at product launch, later price reduction Used in the elite / in fashion market - if products are in danger of being old soon (notebooks, phones,); where there is no comparison between price and real value possible; limited production- and sales-capacity risk: competition interested in the product time £

12 Low price-strategy product launch with low prices price is sales argument goals: to avoid market introduction of competition to push back competition capacity usage creation of a price image decrease of costs per piece to tie in customers

13 Low price-strategy Promotion price strategy : permanent low prices (long term) used for mass production products time £

14 Low price-strategy Penetration price strategy low price at product launch, later successive price increases used: to gain fast access mass markets; to avoid competition; if new product has high price elasticity (customers do not want / need the newest product) risk: price increase mostly very difficult to manage time £

15 General options Promotion prices: £9.99 Round prices: £5 £8 Psychological price barriers : £10, £20, £300 Price change by packaging change (change in size, change in design,...) Price change by product change (now with more fresh fruits,...) Price "covering“ through cheap main product + expensive additional products or spare parts (car: additional equipment, spare parts,..) Value analysis: program to decrease costs (while retaining value)

16 The pricing challenge Sample Pricing PlanBasic CostSale PriceMargin £Margin %RSPPOR£POR% A: Retail Normal £ 1.50 £ 2.50 £ 1.0040% £ 4.49 £ 1.9944% B: Retail Normal 2 £ 1.50 £ 3.00 £ 1.5050% £ 4.59 £ 1.5935% C: Retail Matched Promotion £ 1.50 £ 2.00 £ 0.5025% £ 3.49 £ 1.4943% D: Retail Offered Promotion £ 1.50 £ 2.00 £ 0.5025% £ 3.99 £ 1.9950% E: Foodservice Normal £ 1.50 £ 3.00 £ 1.5050% £ 4.20 £ 1.2029% F: Foodservice Discount £ 1.50 £ 2.50 £ 1.0040% £ 3.70 £ 1.2032% G: Direct £ 1.50 £ 2.99 £ 1.4950% £ 2.75 H: Special Promotion £ 1.20 £ 1.75 £ 0.5531% £ 3.49 £ 1.7450%

17 Profit on Return (POR) This should be calculated by taking: The Retail Sale Price (RSP) Minus the cost price For a percentage, divided by the RSP

18 POR As a guideline, the following represents a farm shop’s expected POR (%). Overall, 30% would be a reasonable expectation for a good farm shop with a reasonable product range CommodityPOR (%) Fruit and salads30 Potatoes and field vegetables50 Home bakery25 Regional preserves and honey25-30 Clotted cream30 Biscuits18 Dried flowers/pot-pourri60

19 Pricing Partly an ‘art’ partly a ‘science’. Many potential considerations, including: demand costs other internal factors (objectives, market positioning targets, etc). competitors

20 Thank you See you on the 21 st January

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