Cowgirl Chocolate Market Acceptance Assesment

1. The suggested retail price and wholesale prices of Cowgirl Chocolates products are displayed in Exhibit 2 (p. 491) along with the product and packaging costs. Based on this information, discuss the relative merits of using a cost-based, demand-based, or competition-based pricing method.

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Cost - based pricing

Everything in the business industry is equivalent to a certain amount. Understandably, such process in pricing is carried into consideration by almost all entrepreneurs. When they decide on the price of their products, they first calculate the cost expenses of the production of the said items or services. For the Cowgirl Chocolates, coming up with a price in a cost-based pattern would mean  a decrease on certain expenses that the company undergoes with regards the products that they release in market which includes packaging and the amount of raw materials used to make the chocolate products of the company.

Demand - based pricing

If the products are in demand, the price of the items could be safe in terms of increase. However, if the demand for the product is low, it is not that easy to decide when the prices are supposed to increase. This is the reason why creating alternative products for the company is necessary. Even though the company is focused on promoting spicy chocolates, it should always create an alternative to cater to the needs of those who might not like the said type of product.

Competititon based pricing

What other products are in the market and what does the company product have in advantage? The good points as well as limitations of the produced items should be carried into consideration as the pricing is being decided upon. For cowgirl chocolates, most competition in the industry comes from the businesses producing sweet chocolates. An advantage maybe is that the Cowgirl chocolates are exceptional in taste and packaging.

2. What are four (4) options that Cowgirl Chocolates may consider as far as pricing? What would you recommend?

• (a) Price lining
• (b) Promotional Pricing
• (c) Premium Pricing
• (d) Demand-based Pricing

Suggested pricing for the business: demand - based pricing 

It is suggested that demand pricing be adapted by the company as their products have an advantage in the market that is determined by their products’ original taste. It is through this particular pricing that the business could be able to find the most effective way in placing their product in the market. Setting it in a high rate could hurt the sales profit though. This is the reason why there is a need to balance the elements that are contributing to the production costs of the chocolates and how they balance out with their competitions. This way the company would be able to increase market demand and therefore expect an increase in profit sales as well.

References

1. Pricing Strategies. http://www.marketingteacher.com/Lessons/lesson_pricing.htm. (August 1, 2008).

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