Price related promotions
Different kind of sales promotions help to boost the
sales. Such promotions can vary depending on the type of the product, marketing
objectives of a company, competition, total costs. Two examples of such
promotions of Kinder Surprise are on-pack promotion and price discount.
Multi-pack promotion is a psychological pricing that involves two or more
identical products packaged together. Another type, price discount takes place
when a purchase of a product being made involves large quantity, and based on
that, discounts are given to the buyer.
These sales promotions generate short-term sales,
unless a manufacturer or a retailer always uses multi-packaging for a specific
product. In the case of Kinder Surprise, the following promotions are used: two-for-one
pack, chocolate eggs with reduction in price, buy 3 – get each egg with 20%
discount, buy one get one free. In some cases, there are stands in supermarkets
or hypermarkets, to which a person promoting those goods is assigned.
Sometimes, companies also do such promotions, that when you buy a certain
quantity of a product, there will be a guaranteed gift given to you. With
Kinder these kind of promotions take place a lot, because it encourages the
Kinder consumers. This can be the case with “best picture competition” or “Buy
5 Kinder Surprise eggs and 2 packs of Kinder Chocolate and get a pair of home
slippers”.
30%
discount on 6 chocolate eggs
-50% discount if you buy two Kinder Surprise Maxi
The first ever on-pack promotion of Kinder Surprise
was launched on September 4th in 2012 which offered its consumers
the chance to win a trip to the home of Kinder Surprise.
Use of price tactics
Selection
of a pricing strategy is the seventh stage in the process of establishing
prices. The are many pricing strategies that can be used when establish the
price of a product.
Differential pricing – charging different prices to different buyers for
the same quality and quantity of product.
This group of strategy includes four
others, which are related to price negotiations, early-bird marketing, periodic
discounting. Such do not apply for Kinder Surprise. However, there is one more
strategy that suits the product well – random discounting. In the pictures
above, there are examples of discounts which were made randomly, not on a specific
occasion. Usually, retailers (such as Jumbo, Plus etc) set product discounts on
different occasions in order to attract customers. They believe if they have
some products with low prices, those customers will be attracted not only to
those but also to other products, higher in price.
Product-line pricing – establishing and adjusting prices of multiple
product within a product line.
If you relatively compare the costs of
Kinder product line (Kinder Chocolate, Kinder Pingui, Kinder Bueno etc.), you
will notice that the price fluctuations are minor. Kinder uses price lining pricing – having limited
number of prices for selected products in a product line. This is done in order
to sell the products within a line steadily. If Kinder Surprise was much cheaper
than Kinder Delice, than the sales of Kinder Delice would drop a lot in
comparison to current sales.
Psychological pricing – designed to encourage purchases based on
emotional rather than rational responses.
Adjusting prices psychologically becomes a
dangerous and a powerful tool. Among them, we see multiple unit pricing
practices, prestige pricing and odd/even pricing. Multiple unit pricing
practices were explained above in the beginning. Prestige pricing involves
setting high prices for quality product. Even though Kinder Surprise chocolate
egg is expensive comparing to its cheaper analogues, buyers usually “close
their eyes” on this fact, assuring themselves that they pay such a high price
for the quality. As for odd/even pricing, the visual example above includes a
price of €3.78. A customer is rather to pay €3.78 than (suppose) €4.12. The difference,
which is not that high, affects the buyer because it is a psychological price.
Influence of other marketing mix elements
The are many factors to be
considered before setting a price of a product. A few of them are related to marketing
mix variables: product, promotion and place. I will discuss them in depth.
Product: a
price should be set taking into account product quality, its packaging, overall
outlook, advantages over comptetitors/substitutes, brand positioning. Kinder
Surprise is a product of a valuable brand. It is expected not to be cheap, but slightly
expensive for confectionery department. Moreover, the fact that it includes a
toy, increases the price of a product. Before setting a price a calculation was
made including the price of packaging for a unit, average price of a toy inside
the egg, a plastic container to put the toy inside, average cost of chocolate,
average cost of paper instructions.
Promotion: a
price should be set taking into account the value of all the types of
advertisements. Kinder is a mass user of different types of
advertisements. All costs spent on telemarketing, newspaper and journal
marketing (when such take place) should be added together and divided over the
total number of Kinder chocolate eggs produced in a month (if fees are to be
payed monthly).
Place: a
price should be set taking into account the rent paid for the place of
production. It should also include all the transportation
costs. In the case of Kinder Surprise wholesalers impose transportation costs
on products as they transfer large amounts of different products. Here come
also storage fees (rent for a place where Kinder Surprise is stocked). The price of a Kinder Surprise egg is
not the same in each country, nor it fluctuates too much from country per
country. Transportation costs, warehouse, rent prices differ per country. So do
promotion costs and prices of raw materials for producing the product.
Kinder Surprise elasticity of demand
Elastic demand refers to that
demand in which % change in quantity demanded is more than % change in price of
that commodity. Elastic products/services are usually those which can be
replaces, or which when not used, won’t affect the life of an individual. Kinder
Surprise is a product that can be substituted, plus consumers do not have
strong will for it.
Suppose a retailer shop (Jumbo)
sells 25 Kinder Surprise eggs per day with a price of €0,80 per egg. A week later, they receive new
goods from the customer and they find out Kinder Surprise has risen in price.
Adding their expenditure to the price of Kinder, one egg now costs €1,30 and its sales drop to 10 eggs per day.
Price elasticity of demand=40%/61,5%=0.65
How can a manufacturer influence consumer
price?
Price is a dangerous marketing
instrument. There are multiple ways to influence the consumer price.
When pricing a new product,
manufacturers can use price skimming or
penetration pricing. Price skimming – charging highest possible price that
buyers who most desire the product will pay. This strategy is widely used as a
pricing strategy for smartphones.
Penetration pricing – setting a
price below that of the competing price (applied when demand is highly
elastic).
Misleading
pricing practices which applied in order to intentionally confuse
consumers.
Changing the
terms of sale – manufacturers may begin to charge for
previously free transportation or stop providing free telephone support for
example.
Changing the
quality of a product – manufacturers may cut on services in order to
reduce the expenditures on a produced product. This implies that the quality of
the product will go down, nevertheless, it might generate higher profits for
the company, because consumers are likely to purchase more. Changing quality of
a product can be widely used when competing with a substitute.
