Pricing Strategies

PRICE

Price is the one element of marketing mix that produces revenue; the other elements produce costs. Prices are perhaps the easiest element of the marketing program to adjust; product features, channels, and even communications take more time. Price also communicates to the market the company's intended value positioning of its product or a brand. A well-designed and marketed product can command a price premium and reap big profits.

In our understanding of the brand (based on secondary study) and also keeping in mind the general pricing of the high street brands, we feel Vero Moda uses the following two pricing strategies namely, Cost based pricing and Competitor based pricing.

MARK UP PRICING:

The Mark-up pricing strategy is to add a standard mark up to the production's cost. The total project's cost is estimated and then a mark up is added to that cost for profit.

Suppose a garment manufacturer has the following costs and sales expectations:

Variable cost per unit = Rs 10

Fixed cost per unit= Rs 300,000

Expectes unit sales = 50,000

The manufacturers' unit cost is given by: Variable cost + fixed cost/unit sales

= Rs 1000 + 300,000/50,000 = Rs 16

Now assume the manufacturer wants to earn a 20% markup on sales. The manufacturer's mark up price is given by:

Mark up Price = unit cost / 1- desired return on sales = Rs 16/1-0.2 = Rs 20

The manufacturer would charge the retailer/seller Rs 20 per garment and make a profit of Rs 4per unit. The retailer will then add his mark up to the cost to ascertain the final cost.

Bestseller A/S uses the Mark up pricing Strategy. It adds a mark up of 1.55 from wholesalers and 2.7 mark up from stores. Bestseller being the parent company uses mark up as one of its strategy, it implies Vero Moda uses the same strategy to price its garments.

The second pricing strategy that the brand follows is the Going Rate Pricing strategy. In going rate strategy the firm bases its prices largely on competitors'' prices, charging the same, more, or less than major competitors. This pricing strategy is mostly used in industries where the competition is high and a large number of producers are offering the same product. Thus, Vero Moda also uses going rate pricing where its prices its product the

Therefore, in comparison to some of their direct and in-direct competitors their prices are low, but the quality of the clothes are the same. In our opinion Bestseller should move forward with the same pricing strategy, because