Question 1
Cost-Based Pricing
Cost-Based Pricing is an easy method of pricing products, which involves the summation of production costs and other additional costs to estimated profit in order to determine the selling price of a product (Pride et al., 2008). This method will allow easy estimation of the selling price of Cowgirl Chocolate products. In addition, Cowgirl Chocolate may use this method to conduct a breakeven analysis, which aids in determining the anticipated profit and price of the products. Moreover, the method grants Cowgirl Chocolate a chance to classify its costs effectively; as fixed, variable, or total costs. Finally, this method grants Cowgirl Chocolate a chance to formulate effective volume sales goals, which have the ability to attain the anticipated profit margin.
Demand-Based Pricing
This method focuses on using demand as the sole determiner of the price of products. Therefore, Cowgirl Chocolate has a chance of attaining higher prices for the products when demand of the same products is high. In addition, this method gives Cowgirl Chocolates a chance of using more than one price for its products by adopting price differentiation. This is possible in cases where the business focuses on changing the attitude of consumers by using promotion or advertising means. As such, the business will have an opportunity of attaining higher profit levels in comparison to the use of Cost-Based Pricing strategy.
Competition-Based Pricing
Competition-Based Pricing involves a consideration of revenues and costs as secondary factors to competitor’s prices (Duke, 2009). As such, Cowgirl Chocolate may use this strategy to increase its market share and sales volume. This involves setting of prices below, at the same level, or above the prices of competitors. However, the business has an opportunity of using different cost approaches in order to increase its profit margins.
Options for Consideration
Cowgirl Chocolate should consider the adoption of periodic discounting, special event pricing, promotion pricing, and secondary-market pricing. This is based on my recommendation that the business should run from the owners personal savings, but from the profits earned and other returns. As such, Cowgirl Chocolates should adopt these pricing methods, which will aid it in increasing profits level. Moreover, the business needs to consider adopting marketing strategies such as product promotion, which will aid in increasing sales volume and market share.
References
Duke. (2009). Methods to Price Your Products. Retrieved from:
http://www1.agric.gov.ab.ca/$department/deptdocs.nsf/all/agdex1133
Pride, W, Hughes, R, & Kapoor, R. (2008). Business (11th Ed). United States: Cengage
Learning.
