WEEK 9 Activity: You make the call PRICING, understanding the pricing process better. Consider the following pricing and positioning scenario designed by Fripp (2012). Dick Smith Foods virtually acts as the umbrella brand for a number of independent Australian manufacturers that are trying to compete with the large international firms whose products often dominate the supermarket shelves. Dick Smith Foods attempt to 'copy' major selling brands/products and introduce similar products. As an example, they have tried to duplicate the top-selling Arnott's Tim Tams biscuits, with a product that they have named "Temptims' (note the similar name). Dick Smith's positioning is based on two aspects: That their products are Australian made, and consumers, therefore, are supporting other Australians. That their products offer more value than other leading brands/products (as Dick Smith's products sell at a discount mainly because they don't have an advertising budget). Assume the role of a marketing consultant at Dick Smith's. You have hired an independent market research company to conduct a series of taste-tests, with the research comparing Arnott's Tim Tams and Dick Smith's Temptims. The resultant research reveals that 60% of consumers prefer the taste of the Dick Smith product (over Tim Tams). As a result, the market research company has recommended that Dick Smith's should increase their price from $1.75 (below Arnott's $2.50 price) to $3.00, in order to communicate the superior quality of the product to the market. Decide: Should Dick Smith's (which tries to provide price value) increase their price to be more reflective of their product's perceived quality? What impact will your decision have on Dick Smith's overall positioning? (Compare your pricing strategy with others in your learning group.)
Dick Smith's Temptims against Arnott's Tim Tams We are unaware of the group composition for the research results taste-tests. Have to presume it was a sample across all social levels. I drew upon our e Text for most of my decisions. Based upon the perception that a higher priced item will provide a consumer with a predicted better quality, yes, Temptims could raise their retail price to indicate more quality than an inferior product. Using the 10%: 20% parameters for pricing a private brand against a national brand, the following figures can be calculated. Arnotts Tim Tams @$2.50. $2.50 less 10% is $2.25. If Temptims were priced $2.25 or more, they would not be likely to persuade the buyer, who would tend to favour the recognised 'superior' brand of Arnotts. Dick Smith's Temptims @$1.75 is greater than 20% less than Tim Tams. This is probably too low. Conversely, $3.00 is too high. The price indicates the aim of an economically-minded market, without distinguishing itself from Home brand lesser quality items. The social concerns that this is an Australian product, which maintains its higher values by minimising it's retail pricing through lack of advertising, can do with a tweak to increase the retail price - up to $2.25ea. Once the consumer has assessed the price-quality more accurately - hopefully through sampling - they can