Question 1: Bob has identified his product as a shopping good within the grocery industry. Do you agree with this identification? Why or why not? How does this decision impact his overall pricing strategy?
I agree with Bob’s identification of his pierogis as shopping goods within the grocery industry. Being the only manufacturer of fresh pierogis in the West Central Florida area, Pauline’s Pierogi Pleasures is likely to gain dominance in the grocery stores in West Central Florida. In addition, the high quality of pierogis that the company produces will apparently make the products in high demand. Other than the external environmental factors affecting the identifications, the company has also the ability of higher production to meet the demands in the grocery industry. Under the leadership of Bob, the company has shown great improvement in infrastructure, transitioning from hand- made pierogis to production lines manufacturing pierogis that appear to be hand- made. Under pricing strategy, the company has to ensure that he revenue it gets from the pierogis covers all the costs and also provides a desirable profit margin (Dolgui, & Proth, 2010). For this reason, the company’s choice of mark- up pricing mechanism is appropriate for pricing the pierogis. Given that Pauline’s Pierogi Pleasures manufactures higher quality pierogis than its competitors, it is justifiable for its pierogis to have higher prices than those of the competitors. A higher mark- up is appropriate in pricing the pierogis where the production is of lower quantity and higher quality. However, when the company takes its pieroigs to the grocery industry, its production will be higher, and, therefore, it will be appropriate for it to use a lower mark- up in pricing, and subsequently lower the prices (Kotler, Philip & Kevin 2012).
Question 2: Should he maintain his value/image based pricing mechanism? What are the strategic implications in terms of the other marketing mix variables if he maintains his current pricing strategy? Based on the current information, what would you recommend as his pricing point for the consumer? Support your answer.
Bob should maintain his value- based pricing mechanism. Consumers have a notion of associating the prices of products to their quality. A product that higher price than that from a different brand is more likely to be associated with higher quality (Dolgui, & Proth, 2010). In this manner, the high quality of pierogis from Pauline’s Pierogi Pleasures should be reflected in their prices. Using the mechanism, Bob should consider the value of his pierogis, as opposed to the cost incurred in producing them. Furthermore, the company has been using value- based pricing mechanism, a change in the strategy would probably result in lower prices of the pierogies, which would be associated with a reduction in quality. For this reason, Bob should maintain the pricing mechanism in determining the value his pierogis will generate for the customers and set appropriate prices that would reflect the prices in the groceries. Bob could obtain this value from factors such as increased happiness and satisfaction in …