Custom «New Product Pricing Strategy» Essay Paper
What is the product name? Describe the product.
NEXT is to launch a brand extension to its Online Director (online store) with the name of NEXT’s Chit Chat Chic Club or C4. This is a unique service offering that combines online shopping with online social networking that stimulates shopping experience with friends in a virtual set up. It is designed and targeted specifically for young females, who enjoy shopping with their girl friends and like discussing fashion products before making purchases. NEXT’s Chit Chat Chic Club will function as a website service with design features that stimulate a real shopping environment with options to chat, polling, take and share pictures and, of course, shopping.
The success of NEXT’s Directory in the online retail industry and the key trends in the fashion retail industry are the two main reasons which frame the need for this service brand extension followed by the internal strengths of NEXT in the form of the minimum financial muscle and capital investments required to execute this service. The e-store is to sell four product lines: Super Girl, Party Chic, Trendy Casual, Simply Casual and Humble Styler.
The fashion industry trends that are being referred to here are: (1) the fashion retailer’s expansion to online selling to cover a much broader market of consumers and target using behavioral marketing techniques and specific social trends prevalent amongst the consumers and furthering refinement of segmentation and positioning; (2) the extensive use of online advertising incorporating the clever use of social networking and social marketing; (3) fashion retailer’s use of viral advertising to get their message across to a broad range of audience in the form of videos, and acquire trial through the most cheapest tool of promotion; (4) owing to the economic meltdown, the frequent use of sales offers that condemn the retailers to sell most of their product lines in cheap prices; and finally (5) the use of celebrity endorsements and use of in-house designers as part of the effective supply chain and creation of unique brand identities, most importantly (Berman 210).
Explain how you are segmenting the market. Why did you choose this method of customer segmentation? Please be specific.
The present service idea incorporates the combination of two basics of segmentation. For the females the brand is to target at: demographic and psychographic models (Kotler and Keller 370).
Demographic segmentation entails the use of income, gender, age, physical location and family size to differentiate different customer groups. Inthe present case, the females belonging to the age group of 18 to 30, living in US are to be used.
On the other hand, there is a very wide range of population that accounts for this segment and to further refine the segmentation, the service brand uses the model of psychographic variables (Hines 130). These include the personality and behavioral characteristics and the likes and dislikes to differentiate the potential from the customers who are not likely to ever purchase the service offering of NEXT’s Chit Chat Chic Club. The specific personality types most suited for the service offering are consumers who are social, out-going and are fashion followers and innovators.
Who is the target market?
The target market is based on the segmentation identified using two key variables. The following profile of potential customers may be drawn, as shown in Table 4 below.
Table 4: Most Attractive Customer Segment to Target
Student or Young professional
Income to Spare on Shopping
Up to $100 per month
Fashion Innovator, Fashion Follower
What are your products’ benefits to the target market?
A key trend in the fashion retail is using social networking websites to link fashion follow-up with the latest trends offered by the fashion retailers to attract not only online shoppers, but also those who are highly influenced by social groups and peers with regard to shopping (Newman and Patel 780). This is what the idea of NEXT’s C4 is based on. The cultural aspect of fashion purchase behavior underpinned in the concept of the plan of NEXT C4 is related towards the need for social belongingness amongst the female gender. The website triggers their need to relate with other females and get influenced with others’ style.
At what price will your product be introduced? Why?
Each product line corresponds to a different price range. Price ranges are set differently to allow consumers to identify the most affordable product line for them. Product lines are prriced up to $100, the distribution is shown below.
Super Girl – $100
Party Chic – $70
Trendy Casual -$50
Simply Casual – $35
Humble Styler – $15
What pricing strategy are you using? Why?
Value based pricing and price skimming are the two pricing models to be used for NEXT’s C4. Value based pricing will be based on the added services the website offers in the form of a social environment; together with that, initially higher prices will be introduced (which will be affordable nonetheless), followed by discounts and cheaper offers. In six months after, the bottom line profitability is attained. Discounts are to be offered quarterly once the initial stock is sold generating breakeven and a preliminary profit.
What objectives will be accomplished by using this strategy? Be specific.
The pricing strategy would allow the brand to position itself as an affordable fashion retail location in the online market and attract consumers. Discounts are offered for the products priced above £40. This strategy is used to remove risk of hampering the price based market positioning of the company if all products are offered for sale using promotional pricing. This will restrain the company to charge higher later on as customers are looking for cheaper deals (Smith 240). The shop is to position itself in the middle market and low priced market, so that customers perceived it to be offering value deals and did not expect further discounts, as sales discounts are offered mainly because of seasonal trends such as holidays.
What is the product worth this price?
The price is, actually, underpriced based on the fact that the product is a unique and innovative idea that no other fashion retailer is selling. The price is set at a standard rate which incorporates the pricing strategy of affordable product lines in the brick-and-mortar outlets of NEXT. But at the same time, the price allows the potential consumers to know that the e-store is for people looking for affordable fashion only.
Identity and explain what prices you should charge at each stage of the PLC?
The prices will be increased by 5 pounds in the third year of the product life cycle as the website enters to maturity. During the growth stage, the prices will remain stagnant so that the positioning as desired by the company for the e-store was perceived as affordable and trendy. As the technology industry and fashion retail market change at a fast pace, the product life cycle is quite short. Due to inflation, the prices will increase. However, the brand has to evoke further innovation into the service.
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