In the marketing strategy decision used by the company, product mix is always the best way to market a product. The name of the product is CALM which is produced by XYZ limited as an energy drink to be marketed and distributed in Australia and give major brands like Mother, Red bull and V(Baines, Fill and Rosengren, n.d.). Market penetration strategy is centered on two fronts which are product mix and pricing mix that are crucial if not fundamental for the success of the CALM brand of energy drinks. The product is to be a top notch energy drink that has limited side effects or harmful effect than its competitors and other drinks in the market. The marketing department objective is to ensure easy penetration of the product and command a sizeable market share in the largely infiltrated Australian soft drink and energy drink market.
In product decision of Calm, XYZ limited has identified three layers of the product. The first layer is the core product, the second layer is the actual product and the third layer is the augmented product layer.
This is the basic need benefit of the product. In core product, it is not tangible, you can’t touch it. This is because the core product it a product of the benefit that makes the product in the limelight the product it is. It is what makes it valuable(Burrow and Bosiljevac, 2012). In this case, Calm, an energy drink has the benefit of being , energizing. It adds back energy to the body. Secondly, it is a thirst quencher, like water, Calm, can be used to quench ones thirst quickly and lastly it is nutritious and adds basic nutrients to the body like vitamins and iodine.
This is the opposite of core product. It is the tangible benefit that the product brings to the body. In this product the energy drink can be bought and be drunk to give a person the energy he needs. It can also be differentiated to other energy drinks and its advantages and benefits can be to the person. It is what the normal person can get under the generic banner of the product(El Husseini, n.d.).
This is the non- physical component of a product. It consists of the value added which may pay the premium or may not pay the premium required. In this product, Calm energy drinks give an extra can for three bought. So when one buys at least three cans of the energy drink, he is sure he will get an extra can as a top up for the product(Gordon, 2013). This is the benefit given the product consumer while the product can also be used to store any other drink if the customer wants.
The determination of product price based on cost. The simplest method of pricing is the determination of surplus cost prices, that is, adding an additional standard margin to the cost of the product.
Another approach to cost-oriented pricing is the determination of price at the point of equilibrium or a variation called target utility price determination(Kono and Lynn, 2007). The determination of the price to reach the point of equilibrium in the costs of manufacturing and selling a product or the determination of prices to obtain the utility that has been set as a goal.
Brand name for the product that fulfills one of the brand dimensions
The brand name of the product is called Calm. It is a nice word with easiness in its pronunciation making it more memorable. The brand name helps to market the product to a very great extent. Its easiness in pronunciation and Sales helps in marketing of the product. Brand loyalty creates various levels of customers(Marburger, n.d.). The very loyal customer to the brand name and the customers brought in by the loyal customers. It is important to note that brand name distinguishes itself from competition, encourages repeat sales, encourages new product sales and has product differentiation.
A product or brand name should have the following characteristics to fulfill the brand dimension;
CALM, the name given to the brand by XYZ limited fits all this characteristics therefore it is highly marketable and sellable(Milligan, 2012). As a marketing tool, XYZ Limited is a brand leader in marketing of products.
In packaging of the brand, the can or bottle that is used to put the soft drink is very unique. Considering the level of competition that is in the energy drink market, any slight mistake to look dull will lead to poor if not disastrous sales and marketability. Australia has a population of around 20 million. This is a very big market for the product(Mohout, 2015). However, soft drinks are associated with the young adults who have the suave and fashionable tendencies unlike the elderly population who aren’t so attracted to energy drinks.
The design of the package should be attractive and unique in nature(Solomon, Marshall and Stuart, 2018). Plastic bottle is not very common although it’s cheaper than the light metallic container used in energy drinks. With the name of the brand being Calm, the packaging should show calmness and a sound aura. It should be bold and colorful to attract the masses. Marketing mix strategy should consider among other things the design of the product that are to be marketed. CALM fits the bill of very marketable products by its design as it is attractive, unique and recognizable.The very loyal customer to the brand name and the customers brought in by the loyal customers.The product is to be a top notch energy drink that has limited side effects or harmful effect than its competitors and other drinks in the market(Thomas, 2007).
Price is a key component of an organizations marketing mix, which is also known as ‘’4Ps’’. The other component is promotion, place and product. Although, market forces of demand and supply determine the price of a product, there are other factors that are considered to determine the pricing of a product. In this case the product is new in the market, thus, many factors come into play(Mohout, 2015).. For a company to choose the pricing objective that it will use, it is guided by the following factors; survival: in order to keep the business running, a company may lower prices of a product in order to increase sales and revenues. Some companies use survival based price objective, and is willing to accept losses that may be short term for the sake of business continuity or long term viability. Profit is the second pricing objective used by companies. Profit is affected by price both directly and indirectly. Direct effect relates to if the price covers the cost of producing the product(Baines, Fill and Rosengren, n.d.).. Profits are affected indirectly by price when it influences how many units are sold of the product. The number of product sold can be affected by economies of scale which consequently affects price. Another pricing objective is boosting sales or market share. A company’s market share measures sales of other companies against the sales of the company. A volume increase is measured against the company’s sales across specific time periods.
Status quo is a pricing objective that encourages competition on other factors other than price. Its main focus is maintaining market share, an example is the company matching competitors price rather than beating it. Status quo pricing strategy has a stabilizing effect on demand for a company’s product.
The best pricing objective that company XYZ should use is sales pricing objective. The reason for using this is because the company wants to improve its market share and also increase the number of units that the product pushes since it’s a new product in the market. They will be determined to sell as many units as possible of calm energy drink to improve the brands visibility in the market.
XYZ Company should use penetration pricing strategies for the new energy drink product. The pricing point of the product should be set lower than that of the competitors. By placing the price of the product lower than that of the competitors the company is able to attract new customers to try out the energy drink(Milligan, 2012). . The advantage created by penetration pricing strategy is that XYZ Company increase its market share at a fast rate and move the product at a faster rate. The lower price are deliberately set to get a high turnover for Calm energy drink. Placing competitive price is a safe alternative as the market is already used to the existing products price.
Fixing the price of a product should not be a simple decision, but one that we meditate and analyze well, because as we mentioned above, determines to a great extent our demand and our profits and, therefore, our profitability. New products have a distinctiveness that is doomed to progress from competitive inroads(Gordon, 2013).. After a period of market resistance of the product at the beginning, the product manages to catch up with its competitors in terms of sales. This price is usually lower than the competitor’s price, hence Calm selling price should be a few dollars lower than the other brands. Direct effect relates to if the price covers the cost of producing the product(Milligan, 2012). . Profits are affected indirectly by price when it influences how many units are sold of the product. Some companies use survival based price objective, and is willing to accept losses that may be short term for the sake of business continuity or long term viability.
To push the sales of the company’s products, the following pricing tactics should be considered by the company. The company should introduce penetration pricing by introducing special offers for its product. The aim of this tactic is to increase the products market share. The market is dominated by other brands which have been in the market for a long time, they have already established their brands in the market hence an offer price is an ideal strategy by XYZ Company to lure customers into trying the new product(Solomon, Marshall and Stuart, 2018).. This price is usually lower than the competitor’s price, hence Calm selling price should be a few dollars lower than the other brands. In the shart term , the company may experience low profits at the expense of increasing sales volumes and market share in the long run.
The second tactic that can be used by XYZ Company is psychological pricing. This is setting the price at unusual levels for example,$12.99 for a unit of the product. Customers tend to think that $12.99 is cheaper than $13 , thus, will go for the cheaper brand. The company should set the price of the product one pence lower than the other brands , making the customer believe that other brands in the market are more expensive than Calm(Milligan, 2012). For customers looking for value , psychological selling is the method to use.
XYZ company may also chose to apply competitor based pricing. Due to strong competition in the market, the company may chose to adopt a price taker strategy(Mohout, 2015).. The price will certainly not give XYZ Company a competitive advantage, and will not also have a competitive disadvantage(Solomon, Marshall and Stuart, 2018).. Faced by a variety of substitute products in the energy drink market, customers are mindful of what is reasonable price for the product which is also known as normal price. But for a company trying to increase its market share and sales volume this may not be a very wise strategy however, it may work only if the product has unique properties such as an attractive brand(Gordon, 2013).
Baines, P., Fill, C. and Rosengren, S. (n.d.). Marketing.
Burrow, J. and Bosiljevac, J. (2012). Marketing. Mason, Ohio: South-Western Cengage Learning.
El Husseini, S. (n.d.). EDLP versus hi-lo pricing strategies in retailing.
Gordon, I. (2013). Managing the new customer relationship. 1st ed. Hoboken, N.J.: Wiley.
Kono, T. and Lynn, L. (2007).Strategic new product development for the global economy. Basingstoke [England]: Palgrave Macmillan.
Marburger, D. (n.d.).Innovative pricing strategies to increase profits.
Milligan, S. (2012).Marketing strategies. Delhi: Research World.
Mohout, O. (2015). Lean pricing. 1st ed. Brugge: Die Keure Professional Publishing.
Raulerson, P., Malraison, J. and Leboyer, A. (2009).Building routes to customers. New York: Springer.
Schindler, R. (2012). Pricing strategies. Los Angeles: SAGE.
Solomon, M., Marshall, G. and Stuart, E. (2018).Marketing. Hoboken, NJ: Pearson.
Thomas, A. (2007). Direct marketing in action. Westport, Conn.: Praeger Publishers.
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