Pricing strategies and Kinder Surprise discounting

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 4^th 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.

Increasing/decreasing the quality of material received – when a price on raw materials increases, manufacturer may either increase the price of the product or decrease the product quantity. For instance, when prices on chocolate go up, a manufacturer may reduce the size of a chocolate bar.