A Couple of Squares: Pricing for the Future Case Study Solution
1. What factors are involved in Bernadette Erb’s pricing decision?
Answer:The factors which are involved in the pricing decisions of Bernadette Erb consists of mainly demand, input prices of the final product, labor costs, production costs, fluctuations in variable costs, competitors pricing and incentives, retailer’s margin, marketing expenses, transportation cost, bargaining power of consumers and suppliers, availability of its substitutes and complements and custom duty etc. for selling abroad.
As company is importing ribbon from China and Wheat from Canada which has high fluctuations and there is also exchange rate fluctuations which affects pricing. However, Competitors are charging higher prices which gives an indication to the customers that the competitor is offering high quality product as people often perceive quality on the basis of prices. High Price tends to be positioned as high quality whereas, low price tends to be positioned as low quality product for them. Moreover, company has to pay custom duty and custom clearance charges which needs to be part of pricing of the product as well.
Company is often facing losses from the customers of US which needs a customized Logo or label on its products which increases the cost as it is prepared on different machinery and in case of mistake, it has resulted in losses and the demand for its product from US has declined consistently due to the lack of customer trust and confidence to buy from abroad.
2. What operations issues affect the pricing decision?
Answer:Operational issues which may affect the pricing decision consists of the lack of co-ordination between departments which will delay the production of final good and will result in higher cost thus it may affect the pricing of the product. Operations used in making this product includes: Importing the Ribbons from China and getting the inputs from vendors if the material is not received from its suppliers, it will delay the production and thus cost will also become high.
After the production of the product it needs to pass through the decoration and packaging department which consists of the fluctuations in costing hence, it affects the pricing as well. Moreover, after the decoration and packaging, the product needs to be baked and mixed in the form of racks for corporate and retail customers. It is kept for storage and shipping which also consists of the costing and as the company uses high quality product material input such as Butter instead of oil to make it tastier and it also uses Saigon’s Cinnamon which makes the product very costly, thus it will be affecting the price as well.
Company is failing in creating a match between its costing and finance department as its costing is increasing whereas, its pricing is kept constant at $5/cookie which has resulted in the losses for the company regardless of the high quality ingredients.
- What would you do if you were in Erb’s shoes? Would you raise the prices? If so, by how much?
Answer:If I was in Erb’s shoes I would have created the value of my product in the minds of the customer as high quality product through proper marketing and sales promotion so that the increase in price seems reasonable and demand is not declined sharply with a rapid increase in the price of the product.
I will be charging a slightly higher pricing to maintain a certain level of demand at relatively higher price to set off the losses incurred in last 3 years to convert them into profits for the company to meet its growth potential.
Price charge will be increased by almost 60% and price charged will be $8 and it will even the half of the price charged by the competitor. There will be a comparison create between the similar kind of product offered by us and our competitor as well so that the revised price look affordable to our customers by creating value for money as it is providing high quality ingredients and good taste.
- What other actions can Erb and Bradshaw take in response to their circumstances, either instead of, or in addition to, changing the prices?
Answer:In addition to the changes in prices of the product, Erb and Bradshaw can reduce the retailer’s margin which is quite high and it needs to be reduced. Company is currently following the push strategy by giving discounts to the retailers for creating demand of its product even though it is high quality product, they need to create its value for money through promotional campaigns and proper marketing through effective marketing channels which will result in the higher demand for their products with the help of Pull strategy and the brand recognition and brand loyalty will be created just like their employees. They need to work more on their infrastructure to make it quicker and reduce the cost of their product by utilizing the idle machinery which will eventually reduce the labor cost and in the end it will increase the profit margin for the company as well.
A Couple of Squares Pricing for the Future Harvard Case Solution & Analysis
They can expand in those areas which have not been covered by its competitors. They came up with its innovative product gourmet cookies which were differentiated by making it hand iced which created a better positioning and unique of the product in the minds of customers and it had relatively higher demand as compared to normal cookies..................
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