MKT501 Assignment No. 2 Fall 2011

SEMESTER FALL 2011
Marketing Management (MKT501)
Assignment No. 02
Due Date: Dec 27, 2011
Marks: 30



Topics Covered:
Read the given topics in detail to attempt the assignment.
1. Pricing
2. Pricing objectives
3. Pricing strategies

The Case:
Neven Corporation is an international coffee and coffeehouse chain. Neven is the largest premium coffeehouse company in the world, with 18,887 stores in 55 countries. Neven sells drip brewed coffee, hot and cold drinks, coffee beans, espresso-based hot drinks, salads, hot and cold sandwiches and pastries, snacks, and items such as mugs and tumblers.
Recently Neven observed customers are cutting back and switching to cheaper coffee shops. When recession pushes customers to choose cheaper alternatives and switchingfrom your products, cutting your prices to keep the customers is best conventional strategy. This practice is usually followed and accepted, it is not based on any analysis.
In such a disastrous situation when Neven was loosing its customers, Neven decided to raise its prices by as much as 10%.

Requirements:
1. In the given case of Neven, how did they decide at price increase? (15)
2. Do you think there will be a fall in sales? How long should the sales fall to nullify the benefits of price increase? (15)

Instructions:
Please read the following instructions carefully before preparing the assignment solution:
• Solve this assignment in your own words.
• You can take idea/concept from Video lectures, recommended books, reference books, internet etc
• Copy from internet, VU-Student’s websites/blogs will be graded as zero.

Note:
Only in the case of Assignment, 24 hours extra / grace period after the due date is usually available to overcome uploading difficulties which may be faced by the students on last date. This extra time should only be used to meet the emergencies and above mentioned due dates should always be treated as final to avoid any inconvenience.

Other Important Instructions:

Deadline:

• Make sure to upload the solution file before the due date on VULMS.
• Any submission made via email after the due date will not be accepted.
Formatting guidelines:
• Use the font style “Times New Roman” or “Arial” and font size “12”.
• It is advised to compose your document in MS-Word format.
• You may also compose your assignment in Open Office format.
• Use black and blue font colors only.
Solution guidelines:
• Use APA style for referencing and citation. For guidance search “APA reference style” in Google and read various website containing information for better understanding or visit APA REFERENCE STYLE: Table of Contents
• Every student will work individually and has to write in the form of an analytical assignment.
• Give the answer according to question, there will be negative marking for irrelevant material.
• For acquiring the relevant knowledge do notrely only on handouts but watch the video lectures and use other reference books also.
Rules for Marking
Please note that your assignment will not be graded or graded as Zero (0), if:
• It is submitted after the due date.
• The file you uploaded does not open or is corrupt.
• It is in any format other than MS-Word or Open Office; e.g. Excel, PowerPoint, PDF etc.
• It is cheated or copied from other students, internet, books, journals etc.

Solution:
Neven is actually now starting price skimming. (Charge a high pnice because you have a substatial competitive advantage. However, the advantage is not sustainable. )


"Skim the cream" pricing involves selling at a high price to those who are willing to pay before aiming at more price-sensitive consumers. This expression comes from the farming practice of milking cows - the cream rises to the top and you skim it off. The advantage of using a Skimming price policy is that you can theoretically get the maximum profit from each level of customer


Skimming Pricing


"A Skimming policy is more attractive if demand is inelastic says the Shapiro text - remember inelastic means there are no dose substitutes


- products that people will pay a high price for because there is nothing else they can buy the is close to the item


~ ~ Prof. Allen says


"A skimming pricing policy involves setting prices of products relatively high compared to those of similar products and then gradually lowering prices. The skimming price is the highest price possible that buyers who most desire the product will pay (skim the cream off the top -- skim the innovators). This market segment is more interested in quality, status, uniqueness, etc. This policy is effective in situations where a firm has a substantial lead over competition with a new products


2. Do you think there will be a fall in sales? How long should the sales fall b nullify the benefits of price increase? (15) Solution:
The high price tends to attract new competitors into the market, and the price inevitably




falls due to increased supply. Once other manufacturers were tempted into the market and the watches were produced at a lower unit cost, other marketing strategies and pricing approaches are implemented.

Please Don't Copy Paste Just take an idea and Make it by your self Thanks ...