Since we are introducing the Keurig Kold as a new product it is important to follow the 6 steps of pricing. The Keurig has been a huge success for hot beverages like coffee and tea. The public has accepted this idea, and so far it is not being accepted as a trend but something here to stay. Therefore, Keurig wants to continue the momentum with offering a cold beverage machine. Pricing Objective: Setting the pricing objective is essential as the first step. This enable the company to explore who their target market is. They have to pursue the demographic that enjoys refreshing cold drinks. Completing a demographic profile is important in making sure the objectives are met.
Estimating Demand: Determining the demand of the Keurig Kold is important to marketing strategies and price objectives. The company will more than likely have to start marketing and receiving feedback from customers. The company would market the Keurig Kold not as an alternative to the regular Keurig, but in conjunction with it. Since the Keurig brand has already established an audience, it is important to use the hot beverage demand as a partner in the brand.
Estimating Cost: Estimating costs for the new beverage machine will include supply and demand. However, it will also need to include production, distribution, marketing and costs on a profit return.
Select price level: Selecting a price level includes estimating costs. The company also has to take into consideration competitor costs when selecting the price level. For the Keurig Kold the company will review costs associated with the original Keurig and perform research on cost feasibility.
Set List Price: The list price will cover all other costs, but it will be the cost that the customer sees. The list price may vary depending on distribution. The company will also need to review brand quality, pricing policy and competitor pricing.
Make Adjustments: After production and a set number of beverage machines are distributed and sold, the company will give a six to nine month window for adjustments. Adjustments will take into consideration the market demand of the machine and any future forecasting. The price determinant is paramount when it comes to a product. The price associated with the Keurig needs to take into consideration that in a weak economic climate, it is important to make sure that the machine will be affordable. Using the hot beverage Keurig is an important indicator of how well the brand does in a weak economic climate. Nonetheless, quality is essential in brand marking. The Keurig name has become popular within recent years and quality is associated with it. Any adjustments will take into consideration consumer attitudes about the Keurig brand.
For this product, it is best to use the demand model. The company would have to establish that there is a need for the product first. Since cost-oriented takes into account profit objectives, this would not be feasible when introducing a new product. When introducing a new product it is feasible to focus on supply and demand. While the Keurig has been instrumental working for hot beverages, we cannot guarantee that cold beverages will have the same impact. The positive element here is that Keurig has now become a brand that is well known and people buy into. Yet, at this point it is associated with the idea of hot beverages. Therefore, the best option to take here is using the demand-oriented pricing. Charging higher when the demand is strong and lower when the demand is weak can provide the company with some ideas in future costs for the product. Forecasting a product’s feasibility is important. Overall, choosing the right cost model for the first roll out of the product will eventually provide the company with an indicator of what to do moving forward in selling the product.
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