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Pricing Strategies to Increase Sales – The pricing of any product is extremely

complex and intense as it is a result of a number of calculations, research work, risk


taking ability and understanding of the market and the consumers. The management
of the company considers everything before they price a product, this everything
includes the segment of the product, the ability of a consumer to pay for the
products, the conditions of the market, action of the competitor, the production and
the raw material cost or you can say the cost of manufacturing, and of course the
margin or the profit margins.
Pricing Strategies Definition
The main aim of the management of every organization is to maximize profits by
effectively getting the products of the shelf; let’s define and explain this better.

Pricing strategy is a way of finding a competitive price of a product or a service. This


strategy is combined with the other marketing pricing strategies that are the 4P
strategy (products, price, place and promotion) economic patterns, competition,
market demand and finally product characteristic. This strategy comprises of one of
the most significant ingredients of the mix of marketing as it is focused on generating
and increasing the revenue for an organization, which ultimately becomes profit
making for the company. Understanding the market conditions and the unmet
desires of the consumers along with the price that the consumer is willing to pay to
fulfill his unmet desires is the ultimate way of gaining success in the pricing strategy
of a product or a service.

Do not forget the ultimate goal of the company is to maximize profit being in
competition and sustaining the competitive market. However to maximize profits
along with retaining your consumer you have to make sure you choose the right
pricing strategy. The correct strategy will help you attain your objectives as an
organization.

Pricing Strategies in Marketing


1.

Penetration Pricing or Pricing to Gain Market Share


2.

A few companies adopt these strategies in order to enter the market and to gain
market share. Some companies either provide a few services for free or they keep a
low price for their products for a limited period that is for a few months. This strategy
is used by the companies only in order to set up their customer base in a particular
market. For example France telecom gave away free telephone connections to
consumers in order to grab or acquire maximum consumers in a given market.
Similarly the Sky TV gave away their satellite dishes for free in order to set up a
market for them. This gives the companies a start and a consumer base.

In the similar manner there are few companies that keep their product cost low as
their introductory offer that is a way of introducing themselves in the market and
creating a consumer base. Similarly when the companies want to promote a premier
product or service they do raise the prices of the products and services for that
particular time.

1.

Economy pricing or No Frill Low Price


2.

The pricing Strategies of these products are considered as no frill low prices where
the promotion and the marketing cost of a product are kept to a minimum. Economy
pricing is set for a certain time where the company does not spend more
on promoting the product and service. For example the first few seats of the airlines
are sold very cheap in budget airlines in order to fill in the airlines the seats sold in
the middle are the economy seats where as the seats sold at the end are priced very
high as that comes under the premium price strategy. This strategy sees more
economy sales during the time of recession. Economy pricing can also be termed as
or explained as budget pricing of a product or a service.

1.

Use of Psychological Pricing Strategies


2.

Psychological pricing Strategies is an approach of gathering the consumer’s


emotional respond instead of his rational respond. For example a company will price
its product at Rs 99 instead of Rs 100. The price of the product is within Rs 100 this
makes the customer feel that the product is not very expensive. For most consumers
price is an indicating factor for buying or not buying a product. They do not analyze
everything else that motivates the product. Even if the market is unknown to the
consumer he will still use price as a purchase factor. For example if an ice cream
weighted 100 gms for Rs 100 and a lesser quality ice cream weighted 200 gms is
available at Rs 150, the consumer will buy the 200 gms ice cream for Rs 150 because
he sees profit in buying the ice cream at lower cost ignoring the quality of the ice
cream. Consumers are not aware price is also an indicator of quality.

1.

Pricing Strategies of Product Line


2.

Products line pricing is defined as pricing a single product or service and pricing a
range of products. Let us take and understand this with the help of an example.
When you go for a car wash you have an option of choosing a car wash for Rs 200 or
a car wash and a car wax for Rs 400 or the entire package including a service at Rs
600. This strategy reflects a strategic cost of making a product popular and consumed
by the consumer with a fair increment over the range of the product or the service.
In another example if you buy a pack of chips and chocolate separately you end up
paying a separate price for each product; however of you buy a combo pack of the
two you end up paying comparatively less price for both and if you buy a combo of
both in a higher quantity you end up paying even lesser.

For the manufactures of the product manufacturing and marketing of larger pack is
much more expensive as it does not fetch them good amount of profit, however they
do the same to attract more consumers and keep them interest in their products. On
the other hand manufacturing smaller packs and lesser quantity is more beneficial
and fetches more profit for the manufacturer of the product.

Recommended courses

 Certification Course in Brand


 Sales Promotion Training Bundle
 Complete CBAP Course

1.

Pricing Optional Products


2.

It is a general approach, if the companies decrease the price of a product or a service


they do increase their price for their other available optional services. Let’s take a
very simple and a common example of a budget airline. The prices of their airfare are
low however they will charge you extra if you want to book a window seat, if you
want to travel with your family and want to book an entire row together you might
have to end up paying extra charges as per the their guidelines, in case you have too
much of luggage to carry you will end up paying extra on the same, in fact you will
end up paying extra charges even if you need extra leg space in a budget airlines. You
can say that even if the price of the air fare is low you will end up paying more for the
extra yet mandatory services that you will require as you travel.

1.

Pricing of Captive Products


2.

Captive products have products that compliment the products without which the
main product is of no use or is useless. For example an inkjet printer is of no use
without its cartridge it will not work and have no value and a plastic razor will have
no value without its blades. If the company is manufacturing the inkjet printer it will
have to manufacture its cartridges and if the company is manufacturing a plastic
razor it will have to manufacture blades for the same. For a simple reason that any
other company cartridge will not fit into the inkjet printer and neither will any other
companies blade fit into the plastic razor. The consumer has no other option but to
buy the complementary products from of the same company. This increases the sales
and the profit margin of the company anyways.

1.

Pricing for promotions


2.

Promotional pricing is very common these days. You will find it almost everywhere.
Pricing for promoting a product is another very useful and helpful strategy. These
promotion offers can include, discount offers, gift or money coupons or vouchers,
buy one and get one free, etc. to promote new and even existing products
companies do adopt such strategies where they roll out these offers to promote their
products. An old strategy yet it is one of the most successful pricing strategies till
date. Reason of its success is that the consumer considers buying the product and
service for the offer that the consumer receives.

1.

Pricing as Per Geographic Locations


2.

For simple reasons such as the geographic location the companies do vary or change
the price of the product. Why does location of the market affect the price of the
product? The reasons can be many well some are scarcity of the product or the raw
material of the product, the shipping cost of the product, taxes differ in a few
countries, difference in the currency rate for products, etc.

Let’s take a few pricing strategies examples, when a few fruits are not available in a
country they are imported from another country, these fruits are exotic fruits, they
are also scarce this increases their value in the country they are imported to, scarcity,
the shipping cost of the imported product along with its quality increase its price,
where as it is much cheaper where it is originally grown. Similarly the government
implies heavy taxes on a few products such as petrol or petroleum products and
alcohol to increase their revenue; hence such products are expensive in a few
countries or part of the country compared to the other parts. Geographic location
does create a huge impact on the pricing strategy of a product as the company has to
consider every aspect before they price a product. Hence the price needs to be
perfect and appropriate.

1.

Value Pricing a Product


2.

Let me first be clear about what value pricing means, value pricing is reducing the
price of a product due to external factors that can affect the sales of the product for
example competition and recession; value pricing does not mean that the company
has added something or increased the value of a product. When the company is
afraid of factors such as competition or recession affecting their sales and profits the
company considers value pricing.

For example McDonalds the famous food chain has started value
meals for their consumer since they have started facing competition
with other fast food chains. They offer a meal or a combination of a
few products as a lower price where the consumer feels emotionally
content and continues to buy their products.

1.

Pricing of Premium Products


2.

Well this strategy works just the other way round. Premium products are priced
higher due to their unique branding approach. A high price for premium products is
an extensive competitive advantage to the manufacturer as the high price for these
products assures them that they are safe in the market due to their relatively high
price. Premium pricing can be charged for products and services such as precious
jewelry, precious stones, luxurious services, cruses, luxurious hotel rooms, business
air travel, etc. The higher the cost the more will be the value of the product amongst
that class of audience.

Conclusion
Lets us conclude by summarizing. Pricing completely depends on the 4P pricing
strategy in marketing which is very important and it needs to be considered before
pricing any product. The management of the company needs to price their products
and services very effectively as they do not want to enter into any situation where
their sales take a hit due to relatively high price when compared with their
competitors, neither would the company want to keep a price too low to maximize
profits or enter into losses. Hence pricing needs to be done very smartly and
effectively making sure the management of the organization considers every aspect
before they price a product.

Pricing Strategies Definition


The main aim of the management of every organization is to maximize profits by
effectively getting the products of the shelf; let’s define and explain this better.

Pricing strategy is a way of finding a competitive price of a product or a service. This


strategy is combined with the other marketing pricing strategies that are the 4P
strategy (products, price, place and promotion) economic patterns, competition,
market demand and finally product characteristic. This strategy comprises of one of
the most significant ingredients of the mix of marketing as it is focused on generating
and increasing the revenue for an organization, which ultimately becomes profit
making for the company. Understanding the market conditions and the unmet
desires of the consumers along with the price that the consumer is willing to pay to
fulfill his unmet desires is the ultimate way of gaining success in the pricing strategy
of a product or a service.

Do not forget the ultimate goal of the company is to maximize profit being in
competition and sustaining the competitive market. However to maximize profits
along with retaining your consumer you have to make sure you choose the right
pricing strategy. The correct strategy will help you attain your objectives as an
organization.

Pricing Strategies in Marketing


1.

Penetration Pricing or Pricing to Gain Market Share


2.

A few companies adopt these strategies in order to enter the market and to gain
market share. Some companies either provide a few services for free or they keep a
low price for their products for a limited period that is for a few months. This strategy
is used by the companies only in order to set up their customer base in a particular
market. For example France telecom gave away free telephone connections to
consumers in order to grab or acquire maximum consumers in a given market.
Similarly the Sky TV gave away their satellite dishes for free in order to set up a
market for them. This gives the companies a start and a consumer base.

In the similar manner there are few companies that keep their product cost low as
their introductory offer that is a way of introducing themselves in the market and
creating a consumer base. Similarly when the companies want to promote a premier
product or service they do raise the prices of the products and services for that
particular time.

1.

Economy pricing or No Frill Low Price


2.

The pricing Strategies of these products are considered as no frill low prices where
the promotion and the marketing cost of a product are kept to a minimum. Economy
pricing is set for a certain time where the company does not spend more
on promoting the product and service. For example the first few seats of the airlines
are sold very cheap in budget airlines in order to fill in the airlines the seats sold in
the middle are the economy seats where as the seats sold at the end are priced very
high as that comes under the premium price strategy. This strategy sees more
economy sales during the time of recession. Economy pricing can also be termed as
or explained as budget pricing of a product or a service.
1.

Use of Psychological Pricing Strategies


2.

Psychological pricing Strategies is an approach of gathering the consumer’s


emotional respond instead of his rational respond. For example a company will price
its product at Rs 99 instead of Rs 100. The price of the product is within Rs 100 this
makes the customer feel that the product is not very expensive. For most consumers
price is an indicating factor for buying or not buying a product. They do not analyze
everything else that motivates the product. Even if the market is unknown to the
consumer he will still use price as a purchase factor. For example if an ice cream
weighted 100 gms for Rs 100 and a lesser quality ice cream weighted 200 gms is
available at Rs 150, the consumer will buy the 200 gms ice cream for Rs 150 because
he sees profit in buying the ice cream at lower cost ignoring the quality of the ice
cream. Consumers are not aware price is also an indicator of quality.

1.

Pricing Strategies of Product Line


2.

Products line pricing is defined as pricing a single product or service and pricing a
range of products. Let us take and understand this with the help of an example.
When you go for a car wash you have an option of choosing a car wash for Rs 200 or
a car wash and a car wax for Rs 400 or the entire package including a service at Rs
600. This strategy reflects a strategic cost of making a product popular and consumed
by the consumer with a fair increment over the range of the product or the service.
In another example if you buy a pack of chips and chocolate separately you end up
paying a separate price for each product; however of you buy a combo pack of the
two you end up paying comparatively less price for both and if you buy a combo of
both in a higher quantity you end up paying even lesser.

For the manufactures of the product manufacturing and marketing of larger pack is
much more expensive as it does not fetch them good amount of profit, however they
do the same to attract more consumers and keep them interest in their products. On
the other hand manufacturing smaller packs and lesser quantity is more beneficial
and fetches more profit for the manufacturer of the product.

Recommended courses

 Certification Course in Brand


 Sales Promotion Training Bundle
 Complete CBAP Course

1.
Pricing Optional Products
2.

It is a general approach, if the companies decrease the price of a product or a service


they do increase their price for their other available optional services. Let’s take a
very simple and a common example of a budget airline. The prices of their airfare are
low however they will charge you extra if you want to book a window seat, if you
want to travel with your family and want to book an entire row together you might
have to end up paying extra charges as per the their guidelines, in case you have too
much of luggage to carry you will end up paying extra on the same, in fact you will
end up paying extra charges even if you need extra leg space in a budget airlines. You
can say that even if the price of the air fare is low you will end up paying more for the
extra yet mandatory services that you will require as you travel.

1.

Pricing of Captive Products


2.

Captive products have products that compliment the products without which the
main product is of no use or is useless. For example an inkjet printer is of no use
without its cartridge it will not work and have no value and a plastic razor will have
no value without its blades. If the company is manufacturing the inkjet printer it will
have to manufacture its cartridges and if the company is manufacturing a plastic
razor it will have to manufacture blades for the same. For a simple reason that any
other company cartridge will not fit into the inkjet printer and neither will any other
companies blade fit into the plastic razor. The consumer has no other option but to
buy the complementary products from of the same company. This increases the sales
and the profit margin of the company anyways.

1.

Pricing for promotions


2.

Promotional pricing is very common these days. You will find it almost everywhere.
Pricing for promoting a product is another very useful and helpful strategy. These
promotion offers can include, discount offers, gift or money coupons or vouchers,
buy one and get one free, etc. to promote new and even existing products
companies do adopt such strategies where they roll out these offers to promote their
products. An old strategy yet it is one of the most successful pricing strategies till
date. Reason of its success is that the consumer considers buying the product and
service for the offer that the consumer receives.

1.

Pricing as Per Geographic Locations


2.

For simple reasons such as the geographic location the companies do vary or change
the price of the product. Why does location of the market affect the price of the
product? The reasons can be many well some are scarcity of the product or the raw
material of the product, the shipping cost of the product, taxes differ in a few
countries, difference in the currency rate for products, etc.

Let’s take a few pricing strategies examples, when a few fruits are not available in a
country they are imported from another country, these fruits are exotic fruits, they
are also scarce this increases their value in the country they are imported to, scarcity,
the shipping cost of the imported product along with its quality increase its price,
where as it is much cheaper where it is originally grown. Similarly the government
implies heavy taxes on a few products such as petrol or petroleum products and
alcohol to increase their revenue; hence such products are expensive in a few
countries or part of the country compared to the other parts. Geographic location
does create a huge impact on the pricing strategy of a product as the company has to
consider every aspect before they price a product. Hence the price needs to be
perfect and appropriate.

1.

Value Pricing a Product


2.

Let me first be clear about what value pricing means, value pricing is reducing the
price of a product due to external factors that can affect the sales of the product for
example competition and recession; value pricing does not mean that the company
has added something or increased the value of a product. When the company is
afraid of factors such as competition or recession affecting their sales and profits the
company considers value pricing.

For example McDonalds the famous food chain has started value
meals for their consumer since they have started facing competition
with other fast food chains. They offer a meal or a combination of a
few products as a lower price where the consumer feels emotionally
content and continues to buy their products.

1.

Pricing of Premium Products


2.

Well this strategy works just the other way round. Premium products are priced
higher due to their unique branding approach. A high price for premium products is
an extensive competitive advantage to the manufacturer as the high price for these
products assures them that they are safe in the market due to their relatively high
price. Premium pricing can be charged for products and services such as precious
jewelry, precious stones, luxurious services, cruses, luxurious hotel rooms, business
air travel, etc. The higher the cost the more will be the value of the product amongst
that class of audience.

Conclusion
Lets us conclude by summarizing. Pricing completely depends on the 4P pricing
strategy in marketing which is very important and it needs to be considered before
pricing any product. The management of the company needs to price their products
and services very effectively as they do not want to enter into any situation where
their sales take a hit due to relatively high price when compared with their
competitors, neither would the company want to keep a price too low to maximize
profits or enter into losses. Hence pricing needs to be done very smartly and
effectively making sure the management of the organization considers every aspect
before they price a product.

Pricing Strategies Definition


The main aim of the management of every organization is to maximize profits by
effectively getting the products of the shelf; let’s define and explain this better.

Pricing strategy is a way of finding a competitive price of a product or a service. This


strategy is combined with the other marketing pricing strategies that are the 4P
strategy (products, price, place and promotion) economic patterns, competition,
market demand and finally product characteristic. This strategy comprises of one of
the most significant ingredients of the mix of marketing as it is focused on generating
and increasing the revenue for an organization, which ultimately becomes profit
making for the company. Understanding the market conditions and the unmet
desires of the consumers along with the price that the consumer is willing to pay to
fulfill his unmet desires is the ultimate way of gaining success in the pricing strategy
of a product or a service.

Do not forget the ultimate goal of the company is to maximize profit being in
competition and sustaining the competitive market. However to maximize profits
along with retaining your consumer you have to make sure you choose the right
pricing strategy. The correct strategy will help you attain your objectives as an
organization.

Pricing Strategies in Marketing


1.

Penetration Pricing or Pricing to Gain Market Share


2.

A few companies adopt these strategies in order to enter the market and to gain
market share. Some companies either provide a few services for free or they keep a
low price for their products for a limited period that is for a few months. This strategy
is used by the companies only in order to set up their customer base in a particular
market. For example France telecom gave away free telephone connections to
consumers in order to grab or acquire maximum consumers in a given market.
Similarly the Sky TV gave away their satellite dishes for free in order to set up a
market for them. This gives the companies a start and a consumer base.

In the similar manner there are few companies that keep their product cost low as
their introductory offer that is a way of introducing themselves in the market and
creating a consumer base. Similarly when the companies want to promote a premier
product or service they do raise the prices of the products and services for that
particular time.

1.

Economy pricing or No Frill Low Price


2.

The pricing Strategies of these products are considered as no frill low prices where
the promotion and the marketing cost of a product are kept to a minimum. Economy
pricing is set for a certain time where the company does not spend more
on promoting the product and service. For example the first few seats of the airlines
are sold very cheap in budget airlines in order to fill in the airlines the seats sold in
the middle are the economy seats where as the seats sold at the end are priced very
high as that comes under the premium price strategy. This strategy sees more
economy sales during the time of recession. Economy pricing can also be termed as
or explained as budget pricing of a product or a service.

1.

Use of Psychological Pricing Strategies


2.

Psychological pricing Strategies is an approach of gathering the consumer’s


emotional respond instead of his rational respond. For example a company will price
its product at Rs 99 instead of Rs 100. The price of the product is within Rs 100 this
makes the customer feel that the product is not very expensive. For most consumers
price is an indicating factor for buying or not buying a product. They do not analyze
everything else that motivates the product. Even if the market is unknown to the
consumer he will still use price as a purchase factor. For example if an ice cream
weighted 100 gms for Rs 100 and a lesser quality ice cream weighted 200 gms is
available at Rs 150, the consumer will buy the 200 gms ice cream for Rs 150 because
he sees profit in buying the ice cream at lower cost ignoring the quality of the ice
cream. Consumers are not aware price is also an indicator of quality.

1.

Pricing Strategies of Product Line


2.

Products line pricing is defined as pricing a single product or service and pricing a
range of products. Let us take and understand this with the help of an example.
When you go for a car wash you have an option of choosing a car wash for Rs 200 or
a car wash and a car wax for Rs 400 or the entire package including a service at Rs
600. This strategy reflects a strategic cost of making a product popular and consumed
by the consumer with a fair increment over the range of the product or the service.
In another example if you buy a pack of chips and chocolate separately you end up
paying a separate price for each product; however of you buy a combo pack of the
two you end up paying comparatively less price for both and if you buy a combo of
both in a higher quantity you end up paying even lesser.

For the manufactures of the product manufacturing and marketing of larger pack is
much more expensive as it does not fetch them good amount of profit, however they
do the same to attract more consumers and keep them interest in their products. On
the other hand manufacturing smaller packs and lesser quantity is more beneficial
and fetches more profit for the manufacturer of the product.

Recommended courses

 Certification Course in Brand


 Sales Promotion Training Bundle
 Complete CBAP Course

1.

Pricing Optional Products


2.

It is a general approach, if the companies decrease the price of a product or a service


they do increase their price for their other available optional services. Let’s take a
very simple and a common example of a budget airline. The prices of their airfare are
low however they will charge you extra if you want to book a window seat, if you
want to travel with your family and want to book an entire row together you might
have to end up paying extra charges as per the their guidelines, in case you have too
much of luggage to carry you will end up paying extra on the same, in fact you will
end up paying extra charges even if you need extra leg space in a budget airlines. You
can say that even if the price of the air fare is low you will end up paying more for the
extra yet mandatory services that you will require as you travel.

1.

Pricing of Captive Products


2.
Captive products have products that compliment the products without which the
main product is of no use or is useless. For example an inkjet printer is of no use
without its cartridge it will not work and have no value and a plastic razor will have
no value without its blades. If the company is manufacturing the inkjet printer it will
have to manufacture its cartridges and if the company is manufacturing a plastic
razor it will have to manufacture blades for the same. For a simple reason that any
other company cartridge will not fit into the inkjet printer and neither will any other
companies blade fit into the plastic razor. The consumer has no other option but to
buy the complementary products from of the same company. This increases the sales
and the profit margin of the company anyways.

1.

Pricing for promotions


2.

Promotional pricing is very common these days. You will find it almost everywhere.
Pricing for promoting a product is another very useful and helpful strategy. These
promotion offers can include, discount offers, gift or money coupons or vouchers,
buy one and get one free, etc. to promote new and even existing products
companies do adopt such strategies where they roll out these offers to promote their
products. An old strategy yet it is one of the most successful pricing strategies till
date. Reason of its success is that the consumer considers buying the product and
service for the offer that the consumer receives.

1.

Pricing as Per Geographic Locations


2.

For simple reasons such as the geographic location the companies do vary or change
the price of the product. Why does location of the market affect the price of the
product? The reasons can be many well some are scarcity of the product or the raw
material of the product, the shipping cost of the product, taxes differ in a few
countries, difference in the currency rate for products, etc.

Let’s take a few pricing strategies examples, when a few fruits are not available in a
country they are imported from another country, these fruits are exotic fruits, they
are also scarce this increases their value in the country they are imported to, scarcity,
the shipping cost of the imported product along with its quality increase its price,
where as it is much cheaper where it is originally grown. Similarly the government
implies heavy taxes on a few products such as petrol or petroleum products and
alcohol to increase their revenue; hence such products are expensive in a few
countries or part of the country compared to the other parts. Geographic location
does create a huge impact on the pricing strategy of a product as the company has to
consider every aspect before they price a product. Hence the price needs to be
perfect and appropriate.
1.

Value Pricing a Product


2.

Let me first be clear about what value pricing means, value pricing is reducing the
price of a product due to external factors that can affect the sales of the product for
example competition and recession; value pricing does not mean that the company
has added something or increased the value of a product. When the company is
afraid of factors such as competition or recession affecting their sales and profits the
company considers value pricing.

For example McDonalds the famous food chain has started value
meals for their consumer since they have started facing competition
with other fast food chains. They offer a meal or a combination of a
few products as a lower price where the consumer feels emotionally
content and continues to buy their products.

1.

Pricing of Premium Products


2.

Well this strategy works just the other way round. Premium products are priced
higher due to their unique branding approach. A high price for premium products is
an extensive competitive advantage to the manufacturer as the high price for these
products assures them that they are safe in the market due to their relatively high
price. Premium pricing can be charged for products and services such as precious
jewelry, precious stones, luxurious services, cruses, luxurious hotel rooms, business
air travel, etc. The higher the cost the more will be the value of the product amongst
that class of audience.

Conclusion
Lets us conclude by summarizing. Pricing completely depends on the 4P pricing
strategy in marketing which is very important and it needs to be considered before
pricing any product. The management of the company needs to price their products
and services very effectively as they do not want to enter into any situation where
their sales take a hit due to relatively high price when compared with their
competitors, neither would the company want to keep a price too low to maximize
profits or enter into losses. Hence pricing needs to be done very smartly and
effectively making sure the management of the organization considers every aspect
before they price a product.

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Cost plus pricing


December 08, 2018
Cost plus pricing involves adding a markup to the cost of goods and services to arrive
at a selling price. Under this approach, you add together the direct material cost, direct
labor cost, and overhead costs for a product, and add to it a markup percentage in
order to derive the price of the product. Cost plus pricing can also be used within a
customer contract, where the customer reimburses the seller for all costs incurred and
also pays a negotiated profit in addition to the costs incurred.

The Cost Plus Calculation

As an example, ABC International has designed a product that contains the following
costs:

Direct material costs = $20.00



Direct labor costs = $5.50



Allocated overhead = $8.25



The company applies a standard 30% markup to all of its products. To derive the price
of this product, ABC adds together the stated costs to arrive at a total cost of $33.75,
and then multiplies this amount by (1 + 0.30) to arrive at the product price of $43.88.

Advantages of Cost Plus Pricing

The following are advantages to using the cost plus pricing method:

Simple. It is quite easy to derive a product price using this method, though you should
define the overhead allocation method in order to be consistent in calculating the
prices of multiple products.

Assured contract profits. Any contractor is willing to accept this method for a
contractual agreement with a customer, since it is assured of having its costs
reimbursed and of making a profit. There is no risk of loss on such a contract.

Justifiable. In cases where the supplier must persuade its customers of the need for a
price increase, the supplier can point to an increase in its costs as the reason for the
increase.

Disadvantages of Cost Plus Pricing

Ignores competition. A company may set a product price based on the cost plus
formula and then be surprised when it finds that competitors are charging
substantially different prices. This has a huge impact on the market share and profits
that a company can expect to achieve. The company either ends up pricing too low and
giving away potential profits, or pricing too high and achieving minor revenues.

Product cost overruns. Under this method, the engineering department has no
incentive to prudently design a product that has the appropriate feature set and design
characteristics for its target market. Instead, the department simply designs what it
wants and launches the product.

Contract cost overruns. From the perspective of any government entity that hires a
supplier under a cost plus pricing arrangement, the supplier has no incentive to curtail
its expenditures - on the contrary, it will likely include as many costs as possible in the
contract so that it can be reimbursed. Thus, a contractual arrangement should include
cost-reduction incentives for the supplier.

Ignores replacement costs. The method is based on historical costs, which may have
subsequently changed. The most immediate replacement cost is more representative
of the costs incurred by the entity.

Evaluation of Cost Plus Pricing

This method is not acceptable for deriving the price of a product that is to be sold in a
competitive market, primarily because it does not factor in the prices charged by
competitors. Thus, this method is likely to result in a seriously overpriced product.
Further, prices should be set based on what the market is willing to pay - which could
result in a substantially different margin than the standard margin typically assigned
using this pricing method.

Cost plus pricing is a more valuable tool in a contractual situation, since the supplier
has no downside risk. However, be sure to review which costs are allowable for
reimbursement under the contract; it is possible that the terms of the contract are so
restrictive that the supplier must exclude many costs from reimbursement, and so can
potentially incur a loss.

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Copyright 2019
How to Determine the Mark-Up on Cost-Plus Pricing
by William Adkins

Related Articles
 1What Is Cost-Plus Pricing Strategy?
 2Calculate Markup Cost
 3What Percentage Should You Mark Up Your Material for Doing HVAC Work?
 4Work Out Markup Percentages
Setting prices for products is a critical task for a businessperson. If you set prices too
low, you may not generate enough revenue to cover all of your expenses. Price your
products too high and customers will go to your competitors to get a better deal.
Many businesses rely on a cost-plus pricing strategy for setting prices in a systematic
and consistent manner.
Description
The cost-plus pricing strategy is pretty much what the name implies. You set a price
by calculating a markup, which is a percentage of the cost of a good. Then you add
the markup to the cost of the good. This has the advantage of being simple and it
enables you to keep pricing consistent from one item to the next. For example, if you
are selling athletic shoes and use the same markup percentage for every style of
running shoe, your prices will follow a pattern that reflects your per unit cost. Using
markup for cost-plus pricing also makes it easy to adjust prices when the cost of
goods change.
Cost of Goods
The cost of a good is the sum of all the expenses a business pays to have that item in
its inventory. Thus, for a manufacturing firm, the cost of goods includes raw
materials, direct labor and an allowance for incidentals, such as breakage. For a
retailer, the cost of goods is the wholesale price plus allowances for damaged or lost
merchandise. Cost of goods does not include operating expenses, such as rent,
administrative salaries and advertising.
Markup
Once you calculate the cost of a good, multiply that cost by the markup percentage
to determine the markup for cost-plus pricing. Suppose an item costs $20 to produce
and your markup percentage is 50 percent. The dollar amount of the markup is 50
percent of $20, or $10. To arrive at the price, add the cost of the good and the
markup. In this example, add $20 and $10 for a price of $30.
Considerations
Your markup percentage needs to be large enough to provide a margin that is
sufficient to cover operating expenses plus profit. You should track your business’s
gross margin to ensure this is the case, according to INC. Gross margin is price minus
cost of goods divided by the price. For the example in the previous section, gross
margin is $10 divided by $30, or 0.33. Multiply by 100 to convert to 33 percent.
Compare the gross margin to the percentage of revenue that goes to pay operating
expenses to see if it is adequate. It’s a good idea to check gross margin against
operating expenses on a regular basis to spot potential problems.
What is cost-plus pricing?

Cost-plus pricing is also known as markup pricing. It's a pricing method where a fixed
percentage is added on top of the cost to produce one unit of a product (unit cost) --
the resulting number is the selling price of the product.

This pricing method looks solely at the unit cost and ignores the prices set by
competitors. For this reason, it's often not the best fit for many businesses because it
doesn't take external factors, like competitors, into account.

Cost-Plus Pricing Strategy

A cost-plus pricing strategy, or markup pricing strategy, is a simple pricing method


where a fixed percentage is added on top of the production cost for one unit of
product (unit cost). This pricing strategy ignores consumer demand and competitor
prices. And it's often used by retail stores to price their products.

Cost-plus pricing is often used by retail companies (e.g., clothing, grocery, and
department stores). In these cases, there is variation in the items being sold, and
different markup percentages can be applied to each product.

If you sell software as a service (SaaS), this pricing method isn't the best fit because
the value your products provide is often greater than the costs to produce the
products.

The cost-plus pricing method is a good fit for businesses who want to pursue a cost-
leadership strategy. Their cost-plus pricing can be used as part of their value
proposition by sharing their pricing policy with consumers and saying something like,
"We'll never charge more than X% for our products." This transparency helps build
trust with potential customers and allows businesses to build a reputable brand.

Cost-Plus Pricing Formula

The cost-plus pricing formula is calculated by adding material, labor, and overhead
costs and multiplying it by (1 + the markup amount). Overhead costs are costs that
can't directly be traced back to material or labor costs, and they're often operational
costs involved with creating a product.

Markup

This is the percentage difference between the unit cost and the selling price of the
product. Markup can be calculated by subtracting the unit cost from the sales price
and dividing the resulting number by unit cost. Then multiply the final result by 100
to get the markup percentage.

Cost-Plus Pricing Example


Let's say you started a retail clothing line and you need to calculate the selling price
for the jeans. Here are the costs to produce one pair of jeans:

 Material costs: $10


 Labor costs: $30
 Overhead costs: $15

The total cost adds up to $55.00. With a markup of 50%, the formula would look like
this:

Selling Price = $55.00 (1 + 0.50)

Selling Price = $55.00 (1.50)

Selling Price = $82.50

This gives you a selling price of $82.50 for each pair of jeans.

Advantages and Disadvantages of a Cost-Plus Pricing Strategy

If you're considering using a cost-plus pricing strategy, you'll want to weigh the
advantages and disadvantages. Here are a few of the key points to examine.

Advantages
1. It's simple to use.

Using a cost-plus pricing strategy doesn't require extensive research. You just need to
analyze your production costs (e.g., labor, materials, and overhead) and determine a
markup price.

2. The price can be justified.

The cost-plus pricing strategy makes it easy to communicate to consumers why price
changes are made. If a company needs to raise the selling price of its product due to
rising production costs, the increase can be justified.

3. It provides a consistent rate of return.

When calculated correctly, the cost-plus pricing should result in all costs being
covered. And you should expect a consistent rate of return due to the markup
percentage.

Disadvantages
1. The price can be set too high.

Since this pricing strategy doesn't take competitor prices into consideration, there's a
risk that your selling price is too high. This could result in a loss of sales if consumers
choose to do business with a competitor with lower prices.

2. There's no guarantee all costs will be covered.


Sales volume is projected before pricing the product, and sometimes this estimate is
inaccurate. If sales are overestimated and a low markup is used to price the product,
fewer items are sold and the costs to produce the product might not be covered. This
often results in a financial hit for the company.

3. There isn't an incentive to operate efficiently.

If the business bases the selling price they could potentially make the same
percentage from a product even if production costs rise. This eliminates the incentive
for the business to operate more efficiently and lower the costs to create their
products. When businesses don't adapt their strategies to changing conditions, it's
unlikely they'll be successful in the future.

With a cost-plus pricing strategy, you can simply markup your product to determine
its selling price. However, you'll want to look at the benefits and drawbacks of this
markup method to determine if it's a good fit for your business.

Looking for more pricing strategies? Learn about going rate pricing next.
Originally published Mar 7, 2019 9:04:39 AM, updated March 07 2019
Topics:
Pricing Strategy

HOW TO USE COST-PLUS PRICING IN MANAGERIAL ECONOMICS

RELATED BOOK
Managerial Economics For Dummies

By Robert J. Graham

Cost-plus pricing means that you determine price by starting with the good’s cost and

then adding a fixed percentage or amount to that cost. One of the primary reasons

cost-plus pricing is so popular is its simplicity.

Often information on marginal revenue and marginal cost is difficult to obtain with

precision, making it impossible to exactly determine the point of profit maximization.

By using cost-plus pricing, you can simply include a desired rate of return in the mark-

up.

Another advantage of cost-plus pricing is its desirability from the standpoint of public

relations. This pricing technique provides an obvious rationale for price increases

when cost increases occur.

Cost-plus pricing typically involves two steps. First, the firm determines the per unit

cost or average total cost of producing the good. Because average total cost varies as

the quantity of output produced changes, the firm’s determination of per unit cost

requires the specification of an output level.

After the firm establishes the per unit cost, the firm adds a mark-up to the per unit

cost. The mark-up is typically in the form of a percentage, and it represents costs that

can’t be easily allocated to a specific product produced by the firm plus a return on

the firm’s investment.


The following equation illustrates how to determine price with cost-plus pricing:

where P is the good’s price, ATC is the average total cost or cost per unit, and the

mark-up is the percentage added to average total cost.

One criticism of cost-plus pricing is that it focuses on average rather than marginal

costs. Because profit maximization requires marginal cost equals marginal revenue,

cost-plus pricing may not result in profit maximization.

Another criticism of cost-plus pricing is that it ignores demand conditions. By ignoring

demand, the firm can establish a cost-plus price that’s above the market’s

equilibrium price, resulting in a surplus. As a consequence, the firm doesn’t sell all

the units it produces.

It’s logical to wonder whether cost-plus pricing ever maximizes profit. In order for

profit-maximization to occur, cost-plus pricing must result in the firm producing the

output level where marginal revenue equals marginal cost.

In the short-run, the difference between marginal cost and average total cost may be

sizeable. However, studies have shown that long-run average total cost is typically
constant for many firms. Constant long-run average total cost implies constant

marginal cost; therefore, marginal cost equals average total cost in this situation. The

use of average total cost in the place of marginal cost for pricing results in minimal

differences, or

Still, because this simple approach ignores demand, it’s unlikely to result in maximum

profit. However, when you use marginal cost in the previous equation, it looks very

similar to the profit-maximizing equation.


Thus, if one plus your mark-up equals the second part of the earlier equation, or

cost-plus pricing maximizes your profit.

Manipulating the earlier equation allows you to determine the mark-up

Your company determines that the price elasticity of demand for its product is –4. In

order to determine the profit-maximizing mark-up, you take the following steps:

Substitute –4 for the price elasticity of demand in the mark-up equation.

Calculate the value of the denominator.

.
.

Divide the numerator by the denominator.

The resulting value is 0.33, or the markup should be 33%.

In cost accounting, cost-plus pricing is a pricing method that starts with full costs

(fixed and variable costs — the entire cost of your product). You then add a

percentage markup (that is, a percentage of the costs). Here’s the entire formula for

cost-plus pricing:

Proposed selling price = cost base (full costs) + markup

Say you sell vinyl siding for homes. Your cost for a 10-foot unit of siding is $7. You

compute a 10 percent markup: ($7 × 10 percent = $.70). Your proposed selling price

is shown as follows:

Proposed selling price = cost base (full costs) + markup


Proposed selling price = $7 + $0.70
Proposed selling price = $7.70

REDUCE YOUR MARKUP IN COST ACCOUNTING

If you have to cut your selling price, it’s easier to reduce markup than to cut costs. So

be flexible about that markup. If customers make a judgment that they can buy the

same siding for $7.25 a unit, they may buy somewhere else.
You need to consider cutting your selling price and accepting a smaller markup. A

$7.25 selling price would be made up of a $7 cost basis and a $.25 markup. That

markup is 3.6 percent of cost rather than 10 percent. You’re price-competitive, but at

the cost of operating at a lower profit level.

Larger companies with sufficient assets (and especially big cash balances) sometimes

accept breaking even for short periods of time. Breakeven means that revenue only

covers cost. The product generates $0 in profit.

Often, companies that make it through difficult times end up with more business

when things improve. They get new clients — those that previously were dealing

with companies that closed.

One of the most important things about being in business is staying in business.

COMPUTE A TARGET RATE OF RETURN ON INVESTMENT IN COST ACCOUNTING

There are several methods to decide on your markup. Although customer judgments

about price and competitor pricing can limit the markup, there’s another view.

Target rate of return on investment is a method you can use to compute a markup.

It’s a rate of return on the assets (investment) that you’ve invested in your business.

First, consider rate of return on investment (also known as ROI).

Recall that assets exist to make money. You should have some idea about a

reasonable rate of return on those assets. After all, you have choices. You can use the

same assets to make several different products or provide several different services.

You could also invest those assets in other companies and earn a rate of return. For

example, the owner of a men’s and women’s shoe store might wonder if adding a

line of sport shoes would have a better ROI than adding a line of children’s shoes.

Say you operate a combination pizza parlor and barbeque restaurant (which is not an

impossible fusion). You’ve added $100,000 in capital (cash) to your business. You buy
equipment and expand. You base your product decisions on how the $100,000

investment would generate the most profit.

You invest the asset (cash) in equipment, labor, and advertising, finding a good

balance between pizza ovens and barbeque equipment. Good news! You earn an

additional $10,000. Your incremental rate of return is 10 percent ($10,000 ÷

$100,000).

Now you need to consider whether 10 percent floats your markup boat. To

determine a reasonable rate of return, think about the source of your $100,000 in

capital. If you borrowed, and if the interest cost was 7 percent on a $100,000 loan, a

10 percent ROI would probably be reasonable. The rate of return is higher than the

interest cost.

If you’ve sold an ownership interest in your business, consider what rate of return

your investors expect on their investment.

Selling pizza and barbecue together isn’t the strangest restaurant concept in the

world. In California, there’s a hot two-store chain called Tex Wasabi’s Rock ‘n’ Roll

Sushi BBQ. How’s that for giving customers what they want? It may sound like an odd

combination of products, but the company is filling a customer need.

WEIGH OTHER ISSUES WITH COST-PLUS PRICING IN COST ACCOUNTING

Cost-plus pricing is an inexact science. It can be difficult to determine the amount of

capital you need for your product, and how to best spend it. Consider the $100,000

in assets in the last section. Converting the $100,000 cash asset to different assets

(such as equipment and labor) is an exercise in estimating.

One way to think through your decision is to consider different cost bases and

different markups on each cost base. For example, maybe you use variable cost as a

cost basis and add a 6 percent markup. Next, you can look at full cost and add a 3

percent markup.
By adding markups and cost bases, you come up with different prices. You can then

decide which price is most realistic. By realistic, consider your competition and

markup percentage.

In the end, product pricing is about balancing factors. Consider the cost-plus pricing

method (cost plus a markup). Balance that against target pricing (setting a price and

then estimating costs).

Cost Plus Pricing 101: The Necessities and Your Pricing Strategy

by Vivian Guo

Please note: This post is the first post in a five part, week long series on the main
pricing methodologies, highlighting the pros and cons of each.

Pricing is the most important aspect of your business. Period. If you don’t believe us,
check out the evidence in our previous pricing strategy blog post. To summarize
though, a 1% improvement in pricing results in an average increase in profits of
11.1%. It’s that huge. Hence, why understanding pricing is essential to the success of
your business. We’ve put together this series to show you the landscape of pricing
strategies, and to help you be more educated about your pricing decisions.

As we explained in a previous post, pricing is a process with the goal of your pricing
strategy to reduce as much doubt as you can to make a final, profit maximizing
decision. Think of pricing like a dartboard. You want to get a bullseye, but if it were as
easy as simply wishing, we’d all be dart divas. Instead, we use data to hone in more
and more on the all important central point.
To understand this a bit better, let's take a look at what cost plus pricing entails,
uncover the methodology's pros and cons, before exploring who should and
shouldn't utilize cost plus pricing.

Cost plus pricing: The oldest and simplest (mostly) method of setting prices

Cost plus pricing is the simplest method of determining price, and embodies the
basic idea behind doing business. You make something, sell it for more than you
spent making it (because you’ve added value by providing the product), and buy your
wife a bouquet of flowers and yourself a nice bottle of scotch with the difference. At
least that's how the black and white movie player in my mind imagines the corner
store working in the 19th century. Nowadays, many businesses still use cost plus
pricing and it still works pretty similarly, except in color.

A lot of companies calculate their cost of production, determine their desired profit
margin by pulling a number out of thin air, slap the two numbers together and then
stick it on a couple thousand widgets. It’s really that simple. This method involves
very little market research, and also doesn't take into consideration consumer
demands and competitor strategies.

The mark up is often only a target rate of return, similar to a thought through wishlist
a kid makes for Santa when he knows it's really his parents stuffing the stockings. In
other words, it's not completely off the deep end in unicorn land, but it still doesn't

have a great chance of becoming reality, because you’ll never truly calculate all of
your costs nor does an arbitrary margin have anything to do with how much your
customer is actually willing to pay. As such, cost plus pricing still leaves quite a bit of
the dartboard intact.
Pros of cost plus pricing

1. It takes few resources.

Cost plus pricing doesn't require a lot of additional market research. Cost of
production is something businesses are mostly aware of by adding up different
invoices, labor costs, etc. Businesses can then take the summed costs and place a
margin on top of them that they believe the market will bear. It’s pretty simple and
for this reason, it's a popular strategy among small businesses or businesses where
other aspects of production must take precedent.

2. It provides full coverage of cost and a consistent rate of return.

As long as whomever is calculating the costs per user or item is adding everything up
correctly, cost plus pricing ensures that the full cost of creating the product or
fulfilling the service is covered, allowing the mark-up to ensure a positive rate of
return. Yet, often times there are many additional costs that can’t be accounted for,
which results in reduced margins. Fortunately, by increasing the arbitrary margin,
businesses can create a buffer against uncalculated costs and fluctuations in demand.
Additionally, because your prices remain inert, you can easily estimate revenue for a
given month based on conversion history, marketing spend, etc.

3. It hedges against incomplete knowledge.

Cost plus pricing is especially helpful when you have no information about a
customer’s willingness to pay and there aren’t direct competitors in the marketplace.
Essentially, the only data you have to guide your pricing decision is the calculation or
estimation of your costs, which allows you to push forward at least a starting price to
work from as the market and customer develop.

Cons of cost plus pricing

1. It's horribly inefficient.

The guarantee of a target rate of return creates little incentive for cutting cost or for
increasing profitability through price differentiation. Stakeholders easily become
passive towards pricing, facilitating laziness and an atrophy of profits as the market
and customer continues to change. Just for some perspective, the government uses
this strategy of guaranteed profit margins on costs to make contracts with private
businesses “easier.” The result is an incentive to maximize costs, which wastes
billions of dollars and results in shoddy workmanship.

2. It creates a culture of profit losing isolationism.

This inward facing approach discourages market research. Although watching


competitor prices isn’t the end all, be all of pricing, it is pretty important. You should
be aware of how much a competing good costs because it can affect your own
marketing and pricing strategies. Plus with no research, you have little to no data on
your customer's perceived value of the product (more in the last point).

3. It doesn’t take into account consumers.


Perhaps the biggest downfall of cost plus pricing is that it completely disregards the
customer’s willingness to pay. To make money, a customer must be involved. They’re
the most important part of selling anything, so any pricing strategy that doesn’t
take customer value into account is creating a vacuum that’s sucking all of the profit
out of the business.

Furthermore to be blunt, customers don't care about how much something cost you
to make. They understand there are costs associated with doing business, but
consumers care more about how much value you’re providing. For example, making
a bottle of Rogaine may cost $3, $10, or $50, but consumers only weigh price against
the value of a husband with hair on his head, which depending on the customer
could be 2x, 10x, or 100x the cost depending on follicle effectiveness. Simply
barreling ahead with a desired rate of return can result in declining demand that is
disregarded until substantial losses occur. Even if consumers are buying your product,
there could still be a better price for revenue optimization and price differentiation.

Summary: Very few companies should use cost plus pricing

To summarize, cost plus pricing isn’t ideal for most businesses, unless you truly
cannot spend some extra time on the most important aspect of your business, which
sometimes happens when you’re bogged down by fulfilling orders or the sheer
number of items you’re offering customers. Additionally, some businesses have very
uniform costs surrounding their offerings that are the same for all competitors. In
this case, margins will probably be uniform, as well, which means the pricing
methodology should be more competitive (tomorrow’s post) or market based
(Thursday’s post). No software or SaaS company should use cost plus pricing,
because the value you’re providing is traditionally much more than your costs of
doing business.
To learn more, check out our Pricing Strategy ebook, our Pricing Page Bootcamp (it’s
free!), or learn more about our price optimization software. Also, check back in
tomorrow to learn more about competitor based pricing.

It’s no secret that small businesses play a vital role in the US economy. However,
most non-employer small businesses average just $44,000 a year in annual revenue,
with many of these companies earning $25,000 or less. While various factors can
affect a business’ revenue potential, one of the most important is the pricing strategy
utilized by its owners.

Good pricing strategy helps you determine the price point at which you can maximize
profits on sales of your products or services. When setting prices, a business owner
needs to consider a wide range of factors including production and distribution costs,
competitor offerings, positioning strategies and the business’ target customer base.

While customers won’t purchase goods that are priced too high, your company won’t
succeed if it prices goods too low to cover all of the business’ costs. Along with
product, place and promotion, price can have a profound effect on the success of
your small business.

Here are some of the various strategies that businesses implement when setting
prices on their products and services.

1. Pricing at a Premium
With premium pricing, businesses set costs higher than their competitors. Premium
pricing is often most effective in the early days of a product’s life cycle, and ideal for
small businesses that sell unique goods.

Because customers need to perceive products as being worth the higher price tag, a
business must work hard to create a value perception. Along with creating a high-
quality product, owners should ensure their marketing efforts, the product’s
packaging and the store’s décor all combine to support the premium price.

2. Pricing for Market Penetration


Penetration strategies aim to attract buyers by offering lower prices on goods and
services. While many new companies use this technique to draw attention away from
their competition, penetration pricing does tend to result in an initial loss of income
for the business.

Over time, however, the increase in awareness can drive profits and help small
businesses to stand out from the crowd. In the long run, after sufficiently penetrating
a market, companies often wind up raising their prices to better reflect the state of
their position within the market.

3. Economy Pricing
Used by a wide range of businesses including generic food suppliers and discount
retailers, economy pricing aims to attract the most price-conscious of consumers.
With this strategy, businesses minimize the costs associated with marketing and
production in order to keep product prices down. As a result, customers can
purchase the products they need without frills.

While economy pricing is incredibly effective for large companies like Wal-Mart and
Target, the technique can be dangerous for small businesses. Because small
businesses lack the sales volume of larger companies, they may struggle to generate
a sufficient profit when prices are too low. Still, selectively tailoring discounts to your
most loyal customers can be a great way to guarantee their patronage for years to
come.

4. Price Skimming
Designed to help businesses maximize sales on new products and services, price
skimminginvolves setting rates high during the introductory phase. The company
then lowers prices gradually as competitor goods appear on the market.

One of the benefits of price skimming is that it allows businesses to maximize profits
on early adopters before dropping prices to attract more price-sensitive consumers.
Not only does price skimming help a small business recoup its development costs,
but it also creates an illusion of quality and exclusivity when your item is first
introduced to the marketplace.

5. Psychology Pricing
With the economy still limping back to full health, price remains a major concern for
American consumers. Psychology pricing refers to techniques that marketers use to
encourage customers to respond on emotional levels rather than logical ones.

For example, setting the price of a watch at $199 is proven to attract more
consumers than setting it at $200, even though the true difference here is quite
small. One explanation for this trend is that consumers tend to put more attention on
the first number on a price tag than the last. The goal of psychology pricing is to
increase demand by creating an illusion of enhanced value for the consumer.

6. Bundle Pricing
With bundle pricing, small businesses sell multiple products for a lower rate than
consumers would face if they purchased each item individually. Not only is bundling
goods an effective way of moving unsold items that are taking up space in your
facility, but it can also increase the value perception in the eyes of your customers,
since you’re essentially giving them something for free.

Bundle pricing is more effective for companies that sell complimentary products. For
example, a restaurant can take advantage of bundle pricing by including dessert with
every entrée sold on a particular day of the week. Small businesses should keep in
mind that the profits they earn on the higher-value items must make up for the
losses they take on the lower-value product.

Pricing strategies are important, but it’s also important to not lose sight of the price
itself. Here are five things to consider, alongside your strategy, when pricing your
products.
Pricing is one of the classic “4 Ps” of marketing (product, price, place, promotion). It’s
one of the key elements of every B2C strategy.

Yet for many B2B marketers, the pricing strategy in their marketing plan is
challenging to write; many aren’t even involved in creating their pricing strategy.

There are many factors to consider when developing your pricing strategy, both
short- and long-term. For example, your pricing needs to:

 Reflect the value you provide versus your competitors

 Match what the market will truly pay for your offering

 Support your brand

 Enable you to reach your revenue and market share goals

 Maximize your profits


Note: You can access guided pricing strategy templates and step-by-step
instructions for writing the pricing strategy section of your marketing plan in
our marketing planning and management app. Try it free!
When you offer a truly unique product or service with little direct competition, it can
be challenging to establish your price. Define a strong strategy and competitive
analysis so you can view:

 What your prospects might pay for other solutions to their problems

 Where your price should fall in relation to theirs


When your price, value proposition and positioning are aligned, you’re in the best
situation to maximize revenue and profits.

Deviating from Your Pricing Strategy

If sales are slow, many companies lower their price. That’s not always the best option.
Here are three price change examples:

HIGHEST PRICE AVERAGE PRICE LOWE

Company A is one of the best Company B’s value proposition is The market cares m
consulting firms in the world. Their operational excellence, so their price is because the produc
consultants come from top schools, important. There’s a lot of competition commodity.
and they work with Fortune 100 and their product is only slightly better Company C focuses
clients to implement complex, large- than the alternatives. to lower costs and p
scale projects. Company B’s messages focus on their customers. Their va
Company A’s value proposition is product value with a secondary focus on operational excellen
product leadership. Their clients are price. They regularly review the market, consistently deliver
buying the best expertise they can run promotions, and adjust prices to a better price.
find, and they’re less sensitive to maintain their competitive position.
price because they care most about Company C regular
getting top talent. The company is also working to develop competitors’ prices
a premium product that can warrant a delivering on their p
Therefore, Company A’s services can higher price. competitor runs a p
be priced as high or higher than C counters with a b
their competitors.

What would happen if these companies used a different pricing strategy?

HIGHEST PRICE AVERAGE PRICE LOWE

By dropping their hourly rate, If Company B charges a premium price If Company C’s pric
Company A gains more clients. They for an average product, they’ll have a those of their comp
hire more consultants, but since very difficult time generating interest in plummet – their ma
they’re charging less per hour, they their it. price, not factors lik
can’t afford the same top-tier talent. Yet Company B may be able to or customer intima
Company A is putting their implement a small price increase to If Company C canno
“prestige” brand in jeopardy. raise revenue and profits; it depends operational efficien
how much more its customers are leadership, it will ne
However, if there isn’t a strong willing to spend. products or market
market for prestige, this strategy product.
may be the best one for the By analyzing price sensitivity and testing
company long-term. different prices, they can evaluate the
strength and potential of this new
strategy.

Do you see your company in one of these scenarios?

Best Case Neutral Case Wor


Company A provides a premium Company B charges an average price for Company C provide
product, sold through carefully- an average product. services.
selected retail outlets. When they’re behind their sales targets, To grow, they drop
Their pricing is typically 15% above individual reps are given the green light up to 40%. This give
the competition – they’re the most to discount if needed to meet their entire new set of cl
expensive product in their class. sales quotas.
Low rates mean the
Their demand curve is relatively Management doesn’t want to get in a same top-tier consu
inelastic, meaning that their market price war, but is willing to ensure that
isn’t that sensitive to price. they hit their short-term numbers. The quality of their
they end up provid
Much of that results from the Management knows that they could for both markets.
carefully selected positioning and spend more in R&D to differentiate their
branding over the past five years. offering and have greater pricing power, By lowering the pric
but they haven’t yet committed the brand to access a n
budget to do so. C has increased its
reducing its profit m

Price in the Marketing mix of Coca cola

Due to the availability of wide range products, the pricing is done according to the
market and geographic segment. Each sub-brand of coca cola has different pricing
strategy. Their pricing strategy is based on the competitors pricing, Pepsi is the direct
competitor to coke. Beverage market is said to be a oligopoly market (few sellers and
large buyers), hence they form into cartel contract to ensure a mutual balance in
pricing between the sellers.

The importance of Pricing

The price a business charges for its product or service is one of the most important
business decision that management makes. For example, unlike the other elements
of the marketing mix (product, place & promotion), pricing decisions affect revenues
rather than costs. Pricing additionally has an essential part as a focused weapon to
enable a business to misuse advertise openings. Pricing likewise must be predictable
with alternate components of the marketing mix, since it adds to the view of a
product or service by customers.

Coca-Cola

Coca-Cola or popularly known as Coke, is a world famous carbonated soft drink.


Coca-Cola dominated the world’s soft drink market throughout the 20th Century. The
main ingredients of the drink are hidden in its name – Coca leaves and Kola nuts i.e. a
source of caffeine. In view of Interbrand's "best worldwide brand" investigation of
2015, Coca-Cola was the world's third most profitable brand, after Apple and Google.
In 2013, Coke items were sold in more than 200 nations around the world, with
shoppers drinking more than 1.8 billion organization refreshment servings each day.

Pricing Strategy used by Coca-Cola

There are three different pricing strategies which a company can primarily follow:

1) Price Skimming: Charging premium prices initially to earn maximum revenue.

2) Market Price: Setting price as going market rate (by competitors)

3) Market Penetration: Charging lowest price to achieve highest possible sales.

To first decide its price, they utilized a cost-based estimating framework for its
Original Coke. They initially composed the item, the first coke, decided the expenses
for the (item costs, capital expenses, and operational costs), set a cost considering
the cost of Coke, lastly persuaded the customers of the pop's esteem. From that
point, Coke utilized market-entrance evaluating at its cost. At present, Coca Cola
items to meet the opposition against significant players like Pepsi, items valuing is set
around a similar level of rivalry. In this way, their essential methodology is Market
Price since they trust cost ought not be too low or too high than the value contender
is charging from.

Coca-Cola uses the following alternate pricing strategies over the year for Coke:

1) Psychological Pricing

In 2009, Coca-Cola utilizes the psychological estimating system for their Original
Coke. For example, the cost of a 2-liter jug of Original Coke was $2.49. They set the
cost to end in 9, since this influences clients to think the cost is under $2.50, to speak
to the client.

2) Promotional Pricing

Coke also uses the promotional pricing strategy. Coca Cola has offered promotional
prices as often as possible. In store that offer Coca-Cola, costs are regularly
incidentally valued underneath the rundown cost to build short-run deals.
Particularly on some event Coca Cola diminishes its rates like in Ramadan Coca Cola
decreases its rate unto 5 Rupees on 1.5 litre container. It gives the item a feeling of
criticalness and customers buy the item in view of the lower cost. Coca cola
organization offers motivations to middle men or retailers in way a that they offer
them free example and free purge bottles, by this these retailers and centre man
push their item in the market. Also, that is the reason coca cola seen more in the
market.

3) Segmented Pricing

Coke uses the segmented pricing strategy. Based on different packages, Coca Cola is
available at different price. By their product in different sizes and at different costs,
they get to increase their revenue, because there is not much difference in the costs
required to produce the products. Following are the different packages available for
different target audience:

i) RGB - Returnable/ Refillable Glass bottles

ii) PET – Plastic Bottles

iii) CAN – Aluminium Cans (Tins)

iv) Tetra – Tetra Packs

v) BIB - Beverages in bag

Following are different prices for different sizes:

4) Discriminatory Pricing
Discriminatory Pricing Coke also follow discriminatory pricing strategy, because they
have different pricing when sold through different channels. Following are the
different channels where it is charged differently.

· Wholesalers/ distributers

· Retail/ corner stores/ super markets

· Restaurants/ cafes/ night clubs

· Petrol stations

· Automated teller machines (AMTs)

Coca Cola is sold through following ways:

1. Direct Selling: In this type of selling their products are supplied in shops and
departmental stores by using their own transports. In this type of selling company
have more profit margin.

2. Indirect Selling: In this type of distribution, they have their whole sellers and
agencies to cover all area to assure their customers for availability of Coca Cola
products.

1) International Pricing

Coke additionally utilizes the international pricing strategy. For example, the cost of a
2-liter container of Coke in the United States is unique in relation to the cost of a
similar item in China. This needs to do with the distinction in financial conditions,
aggressive circumstances, and laws. Along these lines, Coca Cola has been following
different evaluating procedures in view of the necessity and considering the
presentation of new items focusing on various gathering of people.

Cold War between Coca Cola and Pepsi

Cola Wars between Coca Cola and Pepsi Soft drink holds 51% (dominant part of piece
of the pie) of the aggregate refreshment advertise. Soda can be additionally isolated
into carbonated beverages (Coca-Cola, Pepsi, Thumbs up, Diet coke, Diet Pepsi and
so on.) And non-carbonated beverages (Orange, Cloudy lime, Clear lime and Mango).
The predominant players in soda pop market are Coca Cola and Pepsi, which possess
for all intents and purposes the greater part of the North American market's most
generally circulated and best-known brands. They are overwhelming in world
markets too.

Pricing Strategy used by Pepsi v/s Coca Cola

PEPSI: It has reliably used its valuing technique as an encouragement to test,


expecting to transform trial into habit. It propelled the 500-ml bottle in 1994 at Rs.8
versus ThumsUp's Rs.9. Its 1.5-liter container took after Coke into the commercial
centre at Rs.30 – Rs.5 not as much as Coke's. Pepsi raised the cost once utilization
balanced out, depending on the propensity to adjust at the absence of a cost
advantage. It could proceed with bring down value situating because of the way that
in the soda pop industry the retailers infrequently pass on the organization the value
favourable circumstances picked up by them from the shoppers by offering
contending brands at a similar cost and taking the rebates.

COCA COLA: Initially Coke mimicked Pepsi by introducing 300 ml cans at an invitation
price of Rs.15 before raising it to Rs.18. When it realized that the brand did not hold
enough attraction to fork out a premium from the consumers, it introduced a lower-
priced, similar-sized version to gain consumers

It can be derived from the above article that Coca-Cola and Pepsi are perfect
substitutes and henceforth the evaluating procedure of one specifically impacts the
interest for the other item. Subsequently, the lack of interest bend of Coca-Cola and
Pepsi would be a straight line with parallel inclines over all focuses on hold.

References:

PRICING STRATEGY OF COCA COLA


The amount of money charged for a product or service, or sum of the values that Consumers exchange fo
services. As price gives us the profit so this P is very important for business price of product should be th
which gives maximum satisfaction to the customer.

Following factors Coca Cola kept in mind while determining the pricing strategy.

➢ Price should be set according to the product demand of public.

➢ Price should be that which gives the company maximum revenue.


➢ Price should not be too low or too high than the price competitor is charging from

Their customers otherwise nobody will buy your product.

➢ Price must be keeping the view of your target market.

The price of Coca Cola, despite being market leader is the same as that of its competitor

Sometimes, Pepsi places its customers into some psychological pricing strategies by reducing a high price
money from this.

PRICES OF DIFFERENT BOTTLES:

Size of Coca Cola Price of Coca Cola (RS.)

Regular bottle 13

Non returnable or disposable bottle 30

1.5 liter bottle 70

2.25 liter bottle 90

Coca Cola can 40

PRICING STRATEGIES:

Coca Cola has intense competition with Pepsi so its pricing can’t exceed too much nor decrease too much
Coca Cola exceed too much from the Pepsi then people will shift to the Pepsi Cola and on the other hand
the impression that its quality is also low.

PROMOTIONAL PRICING POLICY

Coca Cola has offered promotional prices very frequently. Especially on some occasion Coca Cola reduces
unto 5 Rupees on 1.5 liter bottle.

MARKET PENETRATION PRICING POLICY

In an economy like that of Pakistan, consumers tend to switch towards a low priced product. Coca Cola’s
so Coca Cola has to set its prices at such a level which no one can offer to its consumers. That is why Coc
by its competitors. Otherwise, consumers may go for Pepsi Cola in case of availability of Coca Cola at rela

DISTRIBUTION CHANNEL
Coca Cola Company makes two types of selling

➢ Direct selling

➢ Indirect selling

DIRECT SELLING

In direct selling they supply their products in shops by using their own transports. They have almost 550
company have more profit margin.

INDIRECT SELLING

They have their whole sellers and agencies to cover all area. Because it is very difficult for them to cover
whole sellers and Agencies to assure their customers for availability of Coca Cola products.
Steal Coke’s Pricing Strategy Based on Value Created Instead of Quantity Sold
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strategy lessons from the retail shelves

by Kurian M. Tharakan

American pharmacist John Pemberton (shown at right) invented a non-alcoholic


version of his Pemberton’s French Wine Coca, in his Columbus, Georgia drugstore
in 1886. He called it Coca-Cola.
It was first sold as a patent medicine at drugstore soda fountains for 5 cents a glass.
Initial claims for the concoction included being a cure for many diseases, including
“morphine addiction, dyspepsia, neurasthenia, headache, and impotence.”

By 1894, the company (now under new ownership) started


selling beyond the soda fountain by bottling the popular beverage and selling it
through various retail outlets. This was the start of Coke’s global expansion. At the
soda fountain in 1886, Pemberton sold just 9 glasses of Coke a day. In 2013 it was
estimated that over 1.8 billion servings were drank daily.

Coke has one of the most formidable consumer research capabilities in the world. It
is deeply interested in how you perceive, find, view, reach, buy, hold and drink their
products. With this knowledge, they can deliver exactly the KIND of value the
customer wants in any situation.

Take the following Coca Cola offerings. A


355 ml can, 355 ml bottle, 710 ml plastic, and a 2 litre party size. A recent excursion
to a grocery store with my calculator told me that:

 The 355 ml can sells for $1.48 per litre


 The 355 ml glass bottle sells for $3.86 per litre!!
 The 710 ml plastic sells for $1.17 per litre
 The 2-litre party size sells for $1.34 per litre

… creates a separate value proposition for the customer based on


their in-situation usage.
Here’s the takeaway

Coke’s pricing strategy is not based on the quantity sold, but on the value created.
Each one of the offerings creates a separate value proposition for the
customer based on their in-situation usage.

 If I’m going on a road trip in my car, the can fits perfectly in my car cup holder,
the huge 2 litre won’t.
 If I need some mix for a party I’m throwing, the 2 litre is perfect. I’d need
almost 6 cans to make up for the convenience of one large bottle.
 The nostalgia relived by the 355 ml glass bottle will cost you almost double
the next nearest offering.
 But one of the priciest bottles here is the 710 ml plastic. Although you can
buy it at the grocery store for only $1.17 per litre, if you are at a
baseball/football/hockey game or movie theatre you will be asked to pay
almost $7.75 per litre or $5.50/bottle to go along with your $9 tub of popcorn.

In each of these situations, the value proposition is primarily created by the


packaging and location availability, and not just by the quantity of beverage sold.

Your customers have many situational needs for your product, and you can easily
tailor your offer and pricing based on their motives in any specific moment.

Want more? You can also read: A Simple Pricing Strategy to Increase Your Revenues

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About Kurian Tharakan


Kurian Mathew Tharakan is the founder of sales and marketing strategy firm
StrategyPeak Sales & Marketing Advisors, and a 27 year veteran of the sales and
marketing industry. He has consulted for companies in numerous sectors, including
Manufacturing, High Technology, Software, Non-Profit, and the Life Sciences. In
addition to his consulting practice, he is also an Executive in Residence at two
business accelerators, NABI and TEC Edmonton, where he assists clients with their go
to market strategies. Prior to StrategyPeak, Mr. Tharakan was vice-president sales &
marketing for an enterprise class software firm where his team achieved notable
wins with several members of the US Fortune 500. Previous to his software
experience, Mr. Tharakan directed the sales and marketing programs for the Alberta
practice of an international professional services firm.
Coca Cola pricing strategy
”Meet-the-competition pricing”: the Coca-Cola products pricing are set around the
same level as its competitors, Coca Cola has to be perceived different but still
affordable.
Like any company who has successfully been existing for more than a century, Coca
Cola has had to remain tremendously fluent and consistent with their pricing
strategy. They have had worthy and “dangerous” competitor constantly driving them
to be smarter, faster, and better. A quote from Pepsi Co's CEO "The more successful
they are, the sharper we have to be. If the Coca Cola Company didn't exist, we'd pray
for someone to invent them."

Throughout the years Coca Cola has made many pricing decisions but there is no
doubt that their ultimate goal is to maximize shareholder value. In order to grab
market share, Pepsi generally start to drop prices, and shortly after, Coca Cola decide
to decrease theirs slightly but not for all products. For example, in Indi or Pakistan,
Coca Cola is focused on reducing prices of their 200ml container (cans) .
Coca Cola uses lower price point to penetrate new markets that are especially
sensitive to price. Coca Cola does that to face the competition and to raise brand
awareness among the population. Once it is strongly implemented, it reposition itself
as “premium” compared to numerous competitors (ex: Pepsi), the brand have an
image of bringing intangible benefit in lifestyle, group affiliation, moment of joy &
happiness… but the marketing strategy still focus on an affordable enjoyment of life.
At retailers’, regular on-pack promotions are available in order to meet the
company’s objectives and also to attract consumers to buy more.

Sources:
http://fr.scribd.com/doc/22027744/Coca-Cola-Branding-Strategy
http://mba.tuck.dartmouth.edu/pdf/2004-1-0085.pdf
http://fr.scribd.com/doc/46403814/Coca-Cola-CBBE-Model

The marketing plan is the part of the business plan.

It is a detailed and complete document or manuscript covering company`s marketing


activities.
Usually, marketing plan made for one year.

It contains a solid and complete set of marketing and advertising activities for the
particular brand.

Marketing plan designs to achieve marketing objectives, this leads toward business
objectives.

The marketing plan also covers the current position of the business, its target market
and a set of marketing tools or marketing mix that business will use to achieve
marketing objectives.

Article Information: This step-by-step guide covers all aspects of the marketing plan
with a Coca-Cola example.

This guide can be used as a marketing template for businesses.

Marketing students and teachers can use this guide for their projects and
assignments.

The marketing plan has always designed to differentiate the business from
competitors so it also contains some market research data about the current
business, market situation, competitors’ information, and involves specific strategies
and actions to achieve specific objectives.
Marketing Plan Definition

Wikipedia explains marketing plan as a comprehensive document or blueprint that


outlines a company’s advertising and marketing efforts for the coming year.

It describes business activities involved in accomplishing specific marketing


objectives within a set time frame.

Basically, a marketing plan is the base of any business.

Let me explain this deeply. Every business starts to cover a market gap which no one
else fulfills.

The gap is unfilled needs of a particular segment or not properly fulfilled needs.

So it means you must do market research to identify that gap.

Marketing definition explains that marketing is set of actions of activities to fulfill


customers` needs profitably.

By going through this definition marketing starts with market research and market
research is also the first step to start a business.

Now it is easy to understand that why a marketing plan is the base of any business
and every business depends on its marketing activities.

This process involves market analysis, competitor analysis, business and marketing
objectives, action plans, budgets, business forecasts and most importantly how to
use resources in best favor of business.

Recommended Read: Marketing Plan Of SUNSILK

To make it easy for you, I’ve put an example of Coca-Cola that how the Coca-Cola
marketing plan can be made.

Important Things Companies Need To Do In Marketing Plan

While making a marketing plan, there are some points must consider.

We can say these points are the pillars of the marketing plan:
Marketing Research

As I already explained, that research is the most important and basic element of any
business.

In order to make near to perfect marketing plan, one must need to do thorough
marketing research regarding:

Company: Research should be done about the business.

What is the nature of business?

What is the need of business?

What is the potential gap?

How much will this business be profitable?

How will it start?

How much finance required?

How will be the workforce for this business?

All these questions must be addressed before the status of business.

Coca-Cola is known as beverage manufacturer worldwide.

The company started in back 1892 by Asa Candler.

Coca-Cola headquarter is located in Atlanta, Georgia, United States.

Coca-Cola manufactures syrup concentrate and ship to the bottlers, franchises,


where they mix it with other ingredients.

To know more about Coca-Cola, visit the website.

Customers: Before starts of business, research must be done to the target market.

Who will be the customers?

What are the basic needs of the target market?

What are their preferences?


What are the possible ways to serve them?

The more you know about your target market, more easily and efficiently to serve
them.

Coca-Cola currently offers more than 500 brands in over 200 countries.

It serves 1.6 billion customers each day.

The target market of Coca-Cola is not limited to age, area or gender, it is a global
brand and is serving people at offices, homes, parties, restaurants, bars and every
place where one can be present.

It usually represents itself as a market for youngsters but products are also being
offered specifically for older people.

Competitors: It is always important to know that who your competitors are.

In which market, you are going to operate?

What are the basic needs to operate in that particular market?

What are the characteristics of the market?

What competitors already offering to target market?

How can business differentiate from competitors?

The more you know about competitors and external market factors, the more easily
and efficiently to serve target customers.

Coca-Cola says its biggest competitor is ‘Tap Water’.

This is the vision of Coca-Cola Company.

Other than Pepsi Cola, local brands, i.e. Gourmet Cola and Next Cola by Meezan
Group.

Marketing Objectives

Once you have completed marketing research, you’ve almost started your business.

After concluding market research, business goals can be designed easily.


Now it’s time to achieve those goals. Draw business’s marketing objectives and align
them with business goals.

Marketing objectives must be most relevant to business goals and objective so that
you can achieve your targets fast and accurately.

Marketing objectives and business objectives must be co-related.

Let me explain.

if your business objective is to earn 30% net profit this year, your marketing objective
should also be the same, to increase 30 % customer base.

Marketing activities should also design to achieve 30 % net profit objective.

You need to draw all possible marketing objectives to achieve every business goals.

The goals of the Coca-Cola Company are very straight and specific, which includes;

 Increase ingesting of their product.

 Offering products at maximum outlets, more suitably to be present

universally at each and every store in all part of the world.

 Increase Brand association with reputed fast foods, i.e. McDonalds.

 To finance more on research and development, the estimated amount being

$50 million.

 Ensure safety and health of the customers by investing more on natural

sweeteners.

 Providing the customers, an exact figure of what they are consuming in each

of their serving (value).

 Low Caloric product formation to meet the global health needs.

Marketing Strategies

Marketing research has been done, data has been processed and analyzed.

Business and marketing objectives have been drawn.

Now it’s time to design marketing strategies to achieve those marketing objectives.
Marketing strategies are the process to achieve marketing objectives that involve set
tools, tactics, instruments, actions, and activities.

Tools like promotions, sales, advertisement instruments, and activities like personal
selling, customer service, advertisement.

Recommended Read: 8 Tips to Improve Brand Awareness

Marketing strategies are always in written shape that describes how marketing
activities will be performed?

Who will perform?

What tools need to use?

Where will all activities be performed?

Which strategy is for which objective?

For example, if your marketing objective is to increase product knowledge, then your
marketing strategy will be different as compared to the second marketing objective,
which increases customer base.

For the first objective, you need to advertise more product related information and
for second objective you need to give promotions, discount and customer services.

The key strategies of the Coca-Cola Company include;

 The main strategy and slogan of the company are availability, affordability,

and acceptability of the brand throughout the entire world.

 Sustainable growth of the company, keeping pace with the market to ensure

its future presence.

 Periodic assessments of business plans, product response, and planning.

 Training sessions of tools and planning to the associates, for the excellent and

active performances at the ground.

 Keep the balance of relations regarding goodwill and strategies with anchor

bottlers and franchises to keep the process running.

 Enhancements of necessary culture and capabilities.

 Engaging other partners in development through a leadership team.


Marketing Plan Budget

Without finance, no business can run.

You need a budget for your business.

After completion of designing marketing objectives and strategies, you need a budget
to execute those strategies.

Marketing budget will be allocated according to the requirements of the marketing


plan.

The Coca-Cola Company’s total marketing expenses reached US$6.8 billion or 15.4%
of total revenue in 2015.

Monitoring Process

Last important thing to consider is how to monitor all above discussed plans and
activities.

There should be a strong monitoring system with the intention of achieving best
results.

With the help of monitoring system, it will be easy to know that either marketing
objectives are achieving or not?

Either marketing strategies are going well or not?

What are the flaws and weaknesses of marketing strategies?

Purpose of Marketing Plan

Everything has a purpose to exist in this universe, marketing plan too.

The purpose of the marketing plan should be clear in management’s mind so that
they can work better and achieve more.

Here are some common purposes of the marketing plan:

 Very the first purpose of the marketing plan is to run and grow the business

profitably.
 To achieve business objectives

 To achieve sales objectives

 To increase customer volume/base

 To increase market share

 To increase customer satisfaction/trust

 To increase brand image

 To increase customer awareness

These are common purposes of marketing objectives. Each business has its own
purpose.

Content of Marketing Plan

A marketing plan is a formal document that describes all business and marketing
activities need to be done.

It should be detailed and comprehensive so that everyone can easily understand how
marketing activities will be performed and what is necessary tools need for
execution?

Under-discussed points are the content of marketing plan, which is elaborated for
better understanding:

Executive Summary

This part of the document explains whole plan shortly and briefly.

It covers all necessary elements so one can easily understand after reading it.

Situation Analyses

This heading involves information regarding the situation in which business exist.

It is a necessary element of the marketing plan as it gave information of current


situation.
This heading involves:

Macro Environment Analyses: Information regarding the macro environment in


which business exist, for example, the economic condition of the country, legal
procedures, and laws, concerning business, governments rules and procedures to
operate a business.

Coca-Cola is a global brand and every country’s economic condition, legal procedures
and law affect independently. In Pakistan, Coca-Cola faces local trade laws for
operating here.

Market Analyses: Complete market information should be described under this


heading.

For example, market size, segmentation, marketing share, competition.

For Coca-Cola, Market size is huge and its market share is 30% of total Pakistani
market.

Consumer Analyses: Complete consumer information should be disclosed under this


heading. Who is target customer?

How geographical segmentation and psych graphical segmentation will be done?

What are common traits of consumers, needs and preferences of the target market,
and their buying behavior?

The target market of Coca-Cola is not limited to age, area or gender, it is a global
brand and is serving people at offices, homes, parties, restaurants, bars and every
place where one can be present.

Internal Analyses: complete internal analyses should also be included under this
heading, for example, Information about finance, and financials activities, a
workforce of business, skills and time required for a marketing plan.

SWOT Analyses: SWOT stands for S-Strengths, W-Weaknesses, O-Opportunities, and


T-Threats.

Strengths and weaknesses are internal factors concerning business and opportunities
and threats are external factors concerning external market and the environment.

A SWOT analysis is a tool used to get knowledge about the business current situation
and external environment where the business operates.

Under this heading conclude business’s strengths and weaknesses fairly as it will give
a better look that where business is standing right know.
What are the competitive advantages of business to compete in the market i.e. high
marketing budget, large customer base, or strong brand image and what are the
weaknesses business should overcome to compete in the market i.e. new in the
market, or less information about competitors’ strategies?

Discuss also opportunities for the business i.e. favorable country economic condition,
favorable rules, and laws.

Discuss threats for business exists in the market i.e. low barriers of entrance into the
market, new unfavorable policies from governments.

SWOT analysis for Coca-Cola discussed as under:

 Strengths

o Advertising and marketing capabilities

o Extensive and diversified product portfolio

o Strong partnerships with bottling companies

o Leading player in the global beverages industry

o Brand recognition and reputation

o Extensive distribution channels

 Weaknesses

o Coca cola is implying all its research and development on beverage

section and is not putting efforts on snacks whereas its major competitor PepsiCo is

earning 42% from beverages and other snacks.

o Political lobbying often imposes pressure on the manufacturing

section so the company should refrain itself from the political scenario.

 Opportunities

o Growing alcoholic beverage industry

o Expansion of ready-to-drink (RTD) coffee products in the U.S. market

o Growing RTD tea market, with many smaller brands that can be easily

acquired

 Threats
o Obesity concerns may reduce demand for some of the company’s

products

o The rising U.S. dollar exchange rate could negatively affect the

company’s revenue and profits

o Water scarcity and its poor quality could negatively impact The Coca-

Cola Company’s production costs and capacity

o Increased competition and their capabilities could hurt the company’s

business

Market Research

Include all information which you got from previous research about company’s
current situation, its competitors, and its customers.

Conclude all information and draw final results so that one can easily understand
that what should next to do and how to do?

Coca-Cola invested more than $50 Million on Research and Development and market
research in 2015.

Recommended Read: What is Market Research?

How It Helps Organization to Perform Well?

Marketing Objectives

Write down all marketing objectives you design for your business.

Marketing objectives must be correlated with business objectives.

Marketing objectives should be SMART. Smart stands for M-Measurable, A-


Achievable, R-Real, and T-Time bound. Marketing objectives for Coca-Cola have been
discussed previously.

Marketing Strategy
The most important element of the marketing plan is a marketing strategy.

Whole marketing plan revolves around it.

Marketing strategy is the way, path, and process to achieve marketing objectives.

Marketing strategy depends on some critical factors i.e. marketing objectives, target
customers, competitors, and nature of products.

4 P’s of marketing strategy; Product, Price, Place, and Promotion are discussed in this
heading.

All P’s strategies will be designs under this document.

Marketing strategy for Coca-Cola has been discussed previously.

Marketing Strategy- Product

The product is the number one P of the marketing mix.

The product is what business will sell to its customers.

The product is something that business offers to its customers at some price.

It can be anything i.e. a needle or airplane.

The product can be tangible or intangible.

For example, Coca-Cola offers soft drinks for its customers. Coca-Cola soft drink
bottle is a tangible product.

Someone on his website offers online computer course, which is an intangible


product.

If human efforts involve, then the product will be services i.e. a plumber goes home
and do some plumbing work, he is offering services.

This service is his actual product.

While creating product strategy, there are some points need to consider:

Product Mix
While designing product strategy first thing to analyze target customers and then
design product.

What are the needs and demands of your target customers?

After analyzing needs of the target market, you will know that what should be the
product mix?

The product mix is the blend of concepts about product i.e. width, length, depth, and
consistency.

All four concepts must be addressed in product strategy.

A longer product line with similar products may cause competition within the
product line and eventually leads to decrease in revenue and a shorter product line
may limit the customers’ choice and ultimately leads customers to move to another
company.

Carefully strategies should be implemented regarding product line in order to retain


customers.

Width: Width refers to the numbers of products line a company sells to its
customers. A number of different product lines carry by the company.
Width in product Mix = (product Line 1 + product line 2 + product line 3 + ……)

In Coca-Cola, Beverages are divided into the different product line, i.e. 100% fruit
juices, fruit drinks, water, energy drinks, tea, and coffee etc.

Length: Length in product mix denotes to the total number of products sold by any
company in the particular product line. The company may have different product
lines and different products in each product line.

Length refers to product line produced and sold by the company.

Length in Product mix = [Product Line 1 (product 1 + product 2 + ………)

The company may have different product lines with same products.

For example a company product food items and stationary items under the
same brand name so the length of product mix will be food items + stationary items.

Coca-Cola has different product lines i.e. soft drinks, mineral water, and juices.

In particular soft drink product line; products are Coke, Diet Coke, Fanta Orange,
Fanta Citrus, Sprite and Zero Sprite.
Depth: Depth in product mix refers to the variants of product within the same
product line.

For example, OLPERS milk has different size packing.

The product is same ‘milk’ but packing size is different which depth in milk product
line of OPERS is.

Variation can be on size, flavors, colors, shapes, or other distinctive factors.

Depth is Product mix = (Variant 1 + variant 2 + variant 3 + ……) of one product.

Coke itself has different in terms of packaging: 250ml, 330ml regular bottle, 330 ml
tin, 1000ml, and 1500ml.

Consistency: Products in the same product line may be closely associated with each
other.

This concept called Consistency of product mix. Consistency can be in term of use,
production or distribution.

Product mix can be consistent in one term i.e. distribution however exceedingly
different in another term i.e. use.

For example, a company produces health products and beauty products.

Although both product lines distribution style is same but the use of both product
lines is totally different.

Coca-Cola has consistency in terms of use and distribution.

All soft drinks, juices and mineral water distributed through same channels.

Brand Name/Brand Image

While considering product strategy, it is tremendously important to consider the


brand name and its image. Actually, all efforts are made for creating a better brand
image.

Brand name and brand image use as synonyms in marketing.

Both refer to the value or worth of any brand. What do its customers think about it?

How they perceive its quality?


Again back to market research, brand image will be correlated with what research
has been done.

What customer want and how they think about any brand.

Under product strategy, brand image/ brand name must be addressed as per
business objectives.

The brand image of Coca-Cola is high especially in Pakistani market.

The tag line: Open Happiness is all time favorite of the young generation.

Coca-Cola presents itself as a part of happy occasions.

Marketing Strategy—Price

Once you have developed product strategy, it’s time to design pricing strategy.

Price is the monitory value of your product and services or the money and value you
will charge from your customers against your product or services.

Designing price strategy is very crucial because target market needs and market
competition must consider.

Price should be so competitive to competitors but at the same time very near to
customers’ expectations.

Pricing objectives

Before moving to any other step, pricing objectives must be designed so that
everyone knows that why pricing strategy is going to design, why not just set the
price with the own choice.

Pricing objectives will direct the whole strategic process to the right way.

How to extract pricing objectives?

There are 4 points to consider while developing pricing objectives:

 Strategic and financial objectives of the company


 Marketing and product objectives

 Target market price elasticity and price points

 Available resources

Examples of pricing objectives are given below:

 To maximize long run profit

 To increase Sales Volume

 To increase sales in monetary term

 To increase market share

 To set the benchmark for the whole market


 To obtain a set target of return on investment (ROI)

 To obtain a set target of return on sale (ROS)

 To control the price fluctuation in open market

 To obtain customer satisfaction through set price

 To discourage new entrance into the industry

 Social, ethical and ideological objectives

These are just common examples of pricing objectives.

Every business has its own scenario and its own objectives.

Pricing strategies

You have pricing objectives on your table, now it’s time to draw pricing strategies for
your business.

Here I am giving you a short view of types and methods of pricing strategies, which
eventually helps you designing your strategies.

Types of Pricing Strategies:

Price Penetration
If a business initially sets a low price to achieve sales targets and increase market
share and then increase price parallel to its competitors, then it is following price
penetration.

For example, a frozen food company initially sets its one product price below 20% of
its competitors’ price just to get into the market and increase customer share.

Price Skimming

If organization launches a product with premium price and then lower down the
price to serve the wider market, it is following price skimming strategy.

For example, a games console company reduces its prices over the period of 5 years
to serve more customers.

Most companies set the high price at introduction stage and lower price at decline
stage.

Price Competition

As term describes itself, price competition is setting price against the competition.

There are three options available in this strategy, either set prices parallel to its
competitors, or lower than competitors or higher than competitors.

In common market, mostly competitive products have the same price range.

Product Line Pricing

Under same product line, setting a different price point for different products is
called product line pricing strategy.

For example, a company offers one product with different features so it will set a
different price for both products.

Bundle Pricing Strategy

When a company grouped products together to offer more value to its customers,
bundle pricing strategy activates.
This happens mostly when a company gives offers to its customer, Buy One Get One
Free Offer.

Premium Pricing Strategy

When a company wants to make product exclusive, it sets the price at a high level
than competitors’ products.

For example, PORCHE has a high price as compared to other vehicles selling in the
same market.

Psychological Pricing Strategy

Adopting this pricing strategy, the company plays with customer psychology.

The company sets price Rs. 99 instead of charging Rs. 100.

This strategy works because customer thinks he is buying a product under Rs. 100,
even though it is same to Rs. 100.

Optional Pricing Strategy

When a company set a low price for its basic product and set substantial price for its
accessories.

This strategy has been seen in mobile and computer industry, where basic product
price is set at a low level but high-profit charge for its accessories.

Cost plus Pricing Strategy

Price sets for the product on basis of its cost and defined profit.

The company defines fixed amount as profit and add the cost of the product in it.

For example, a product may cost Rs. 500, and firm fixed profit 20% of the cost and
finalize product price Rs. 600. [500 + (500 * 20 / 100)].

Cost Based Pricing


Cost-based pricing is similar to cost plus pricing strategy.

Cost plus other factors consider while setting the price.

Cost based pricing strategy is a useful tool in an industry where price fluctuates
regularly but always based on cost.

Value Based Pricing

When a company sets the price based on the value provided to customers, this is
called value-based pricing.

Value is based on benefits, a product provides to its customers i.e. image, reputation,
satisfaction, luxury, or convenience.

Technology, medicine and beauty products related firm use this strategy.

Coca-Cola has a high market share, competitor pressure has forced customer
sensitivity to price to be fairly high, sales volume is, of course, high and the profit
margin is fairly low as the Coca-Cola products are fast moving consumer goods.

This point to penetration strategy.

Penetration pricing means the setting of lower rather than high prices to achieve
potentially dominant market share.

Discounts, Allowances, and Returns

While describing price in marketing strategy, these should also address discounts,
allowances, and returns.

How must discount will be given?

What will be the duration of the discount scheme?

What actions require if returns occur?

What types of allowances will be given to whom?

Coca-Cola company offers different discounts to retailers and stockists to boost sales.
Break-even Analysis

Breakeven point has an important role in pricing strategy.

The breakeven point is the point where total cost occurred and total revenue earned
has been equal.

BEP is the stage where there is no loss any profit.

A point where opportunity costs have been paid, all risks have been adjusted, and all
costs that need to be paid are paid but business is at the stage where no profit
earned. Total profit equal to 0.

While describing pricing objectives, it must address that when and how to achieve
Breakeven Point at various prices?

Marketing Strategy—Promotion

After designing product and pricing strategy, move to promotional strategy.3rdP of 4


Ps is promotion, which explains how to endorse brand to its target market?

The promotional strategy will tell how to go to the customers?

How to promote the brand and which tactics, procedures, and actions will require for
promotion.

Before making actual strategy, you must draw promotional objectives in order to
achieve desired results.

Promotional objectives should be aligned with the marketing strategy.

Some examples of promotional objectives are discussed below:

 To spread product information

 To ensure brand awareness

 To ensure maximum reach of brand information

 To explain the purpose of product

 To achieve the attraction of target market

 To stand out amongst the competitors


 To ensure product availability

 To satisfy customers’ needs

 Social, ethical and ideological objectives

Coca cola has one main promotional objective and that is awareness.

In order to spread strong awareness, Coca-cola company use a mixture of


promotional tactics and tools.

Promotional mix

Once you have drawn your promotional objectives, move to next step and design
promotional mix for your brand.

Promotional mix is a blend of promotional variables, activities, actions and tactics


selected by the company to achieve promotional and marketing objectives.

Different types of products have different tools for promotion and budget allocation
is also different.

How to find the best promotional mix is the great challenge for marketers.

There are so many promotional techniques available in the market, most of them are
discussed below:

Advertisement

The advertisement is the paid display of ideas, concepts or information on mass


media.

The advertisement will be always identified, sponsor.

Basic information about product, brand, services, company or idea is displayed in the
advertisement.

Print ads, radio, television, billboard, direct mail, brochures, and catalogs, signs, in-
store displays, posters, mobile apps, motion pictures, web pages, banner ads, emails
are the examples of advertisement channels.

Once you’ve decided the use of advertisement for your brand, you need to identify
the theme for your brand.
What will be the frequency of advertisement shown on different media?

What will be the media source for your advertisement campaign?

What will be the reach of the ad?

Consider five M’s for advertisement during ad making; Mission, Money, Message,
Media and Measurement.

 What is you mission behind this advertisement; objectives of promotional

strategy?

 What is the budget allocated for this advertisement campaign?

 What message do you want to throw to your target market; information

about products?

 What will be the media source for this advertisement; TV or the internet?

 How will you measure the success of advertisement campaign?

Coca-Cola extensively uses advertisement for its promotion.

TV advertisements, Billboards, a banner advertisement within departmental stores


are known channels of advertisements.

Personal Selling

Personal selling or direct selling involves direct human efforts in the selling process.

Sales rep physically contact the prospect, give sales presentation/demo either
through face to face interaction or through telephone/email.

This is also a promotional activity because it involves the step of transferring product
or brand or service information to the customer.

The more sales rep provides accurate product information, the more chances to
achieve promotional objectives.

Your goal should be to make personal more effective and efficient so that you can
achieve moth objectives; sales objectives and promotional objectives.

RecommendedRead: Think Globally Act Locally: Coca-Cola Used the Chinese


Language Effectively
The sales force needs to communicate with current distribution channels for Coca-
Cola. Coca-Cola Enterprise currently distributes cooler fridges and vending units to
community centers, sports halls, and shops.

These would be replaced via a liquid dispensing vending unit which the distributor is
likely to take on board because of Coke’s market share.

But due to Coca-Cola’s recent failures with Coke Zero, they might need more
incentives.

Sales Promotion

Sales promotion is the marketing tactic, used to increase customer awareness,


product demand, improve product availability.

It also includes different information regarding product and company to achieve


promotional objectives.

Examples of sales promotion are coupons, sweepstakes, contests, product samples,


rebates, tie-ins, self-liquidating premiums, tradeshows, trade-ins, and exhibitions.

Sometimes marketers join the core product to another product in order to enhance
sale for the business.

This effort helps them to flow more information regarding different products and
create awareness.

Coca-Cola Company is using loyalty reward programs, price deals, and coupon
systems.

Public Relations/Publicity

Publicity is the marketing activity carried by the third party on behalf of business in
order to increase brand awareness. This may be free or paid effort.

Publicity can be done through planting a news story indirectly in the media or
presenting press release by the business itself on corporate functions.

This can also be an interview, magazine article, charitable contribution, seminar or


speech.

In order to maintain public relations, Coca-Cola Company releases press releases at


different occasion.
Direct Marketing

Direct marketing is the type of promotional activity, in which company directly


communicate with its customers.

Direct marketing methods can be mobile messages, Emails, Interactive consumer


websites, online ads, fliers, catalog and outdoor advertisement tools. The
information offers and discounts can be communicated through direct marketing.

Coca-Cola Company uses email, social media networks to interact directly with its
consumers.

The consumer can also contact through helpline number.

Sponsorship

Supporting an event, race, function or contest is also a type of promotional activity,


through a company can achieve promotional objectives.

Coca-Cola Company sponsors different events.

One biggest event in the music industry is “Coke Studio” which is solely sponsored by
Coca-Cola Company.

Corporate Image

The corporate image refers to the image or reputation of a business in the mind of
customers.

Companies take the image as a promotional tool to deliver information about quality
or price.

Coca-Cola Company’s corporate image is high so it only has to maintain it.

Viral Marketing

Viral marketing, viral advertising or buzz marketing refers to the marketing


techniques that use some social networking platforms to spread the information and
create awareness.

It is sort of word of mouth campaigns in which words go viral quickly.


Social networking websites are very helpful for this techniques.

Initially, an ad or information run by a company (identified sponsor).

Then due to its content, it goes viral and brings huge customer responses.

I will give you an example of Dubsmash videos. One person creates video and shares
it on Facebook, Twitter, Instagram, YouTube and other social networking websites.

Within no time, the video gets thousands of views. It’s all about content.

Word of Mouth techniques works in same way.

One customer experiences product, and share his experience (Satisfactory or Dis-
satisfactory) with his friends, colleagues, mates and even unknown person.

This is quite a cheap method.

You don’t have to invest much in the media but you have to invest in content.
Content can be in the shape of the video ad, interactive flash games, e-books,
software, images or even text.

Companies associate some incentives along with a viral message to get more and
quick results.

For example, a pop-up message shows on a web page, containing information that
shares this message with 10 friends and gets 10 % discount.

A great example of viral marketing from Coca-Cola Company is “Zalma Coca-Cola Pela
De”, a song by coke studio.

This song immediately went viral among the Pakistani market.

Internet Marketing

I want to mention here internet marketing as a promotional tool because of its


progress and innovations.

This is the era of the internet. Everyone uses the internet for personally as well as for
business.

Use of internet for sake of promotion is very easy, effective and efficient.

You can send promotional emails to thousands of potential customers.


With the help of Facebook like, you can share your product information with more
than million customers.

Google has 20,272,455 + my like on its FB page, which means if Google shares any
information on its FB page, more than 22 million will see this information.

There are so many other promotional tools on the internet for your business.

Marketing Strategy—Distribution

The product is made for its customers. How will customers get the products?

What will channels business use to reach customers?

How will customers get information and actual product?

All these questions will be addressed in distribution strategy.

Very first step in designing distribution strategy is to design its objectives.

Specific objectives will be achieved through distribution strategy.

Distribution Objectives

The main objective of any distribution strategy for any business is to reach maximum
target customers.

Parallel to the main objective, a business can design other objectives need to achieve
through distribution strategy.

Objectives can be different as per nature of the business and its target market.

Here is some example of distribution objectives discussed below:

 To reach maximum target customers

 To spread maximum brand and business related information

 To acquire maximum distribution channels than competitors

 To create complete distribution network for the business


 To reach every possible geographical area where a single potential customer

exist

Selection of distribution channels is an important task because a wrong distribution


channel can bring down sale to zero.

Same as managing distribution is also important because well-managed distribution


can increase sales volume.

Geographical Coverage

Selecting appropriate geographical locations are very critical at this stage.

The main purpose is to deliver product to the customer where they want.

Which area is targeted and how to target?

Geographical coverage depends on the location of the target market.

Recommended Read: Retailing Strategy: Coca-Cola Made Impression with Parivartan

Because Coca-Cola products are FMCG so it has massive expansion in retailer


network.

Almost every retailer, from large retail store to small corner shop has Coca-Cola
products.

Channels

You have decided which area will be targeted.

Now it is to decide which channel will be used to deliver products in that area.

Either you will deliver products by yourself of your distributor will perform this
service for you?

Many strategies are available under this heading.

All you need to explore the best method to reach to your customers.
Coca-Cola uses channel hierarchy with distributors, stockists, large retailers and small
retailers.

Logistics

Another aspect needs your consideration here, which is logistics.

Will you buy your own vehicles or hire services from Logistics Company?

You need to explore that which method in logistics is feasible and economical.

Coca-Cola has its own vehicles to distribute its products from the production plant to
distributors and retailers.

E-Distribution

Maybe your customers are happy to order online and want to deliver products in
your home.

For E-distribution, you need to ensure your presence online.

You need to develop e-commerce website, where customers can order their favorite
products.

Then you need someone may be your own employee of the third party contractual
employee will deliver products in customer premises.

Coca-Cola Company has no E-distribution till yet by its own. Some online retail stores
are providing Coca-Cola products to consumers.

Strategic Implementation

You’ve developed a marketing strategy.

Everything has been written on the papers. Documents have been completed.

It’s time to implement this strategy.

You’ve put your extreme efforts to build strategy, same efforts require now.

Carefully review what you need to implement marketing strategy.


Personal Requirements

Off course, every business needs a human resource to execute, yours too.

As per your marketing strategy, how many employees business need?

Which expertise will you require? Who will manage human resource?

All the question marks related to the human resource must address before
implementation.

Coca-Cola Company has a large pool of human resource for its operation from
production to distribution.

Assigning Responsibilities

Once human resource issue has been addressed, and employees hired, make sure
that everyone knows his responsibility.

Draw hierarchy according to positions. Assign them their responsibilities.

Who reports to whom?

Because Coca-Cola Company is multinational, so it has a country manager in every


country to manage operations.

The whole country is divided into different territories and every territory is managed
by territory manager.

Training

Set up training sessions for your employees. Set up training sessions as per
employees’ requirements.

Training is a basic need for employees.

Training enhances employees’ skills and capabilities.

Coca-Cola offers training to its staff from time to time.

Training is related to production, sales, marketing, and HR.


Give Incentives

It’s all about performance. Who perform well, get reward well.

Make sure you’ve attached handsome incentives with employees’ efforts to


accelerate overall performance.

Promote healthy competition within the organization and help employees to achieve
their targets.

Attaching incentives with employees’ efforts will boost overall performance, which
ultimately helps to achieve business goals.

Coca-Cola gives incentives to its sales team on achieving sales target.

Financial Requirements

Finance is the most critical part of executing a marketing plan.

You’ve to design your marketing plan but don’t have the finance to execute it, what
benefits can you get it from?

Nothing! Make sure you’ve arranged finance as per marketing plan budget.

Coca-Cola Company gives special focus to its marketing activities that are why their
marketing budget are too high against its competitors.

MIS Requirements

Technology is essential for your business, in fact, you’ve designed your marketing
plan with the help of technology.

Make sure you’ve considered all MIS requirements for your plan.

What will you do to collect information?

Which software and hardware will you use?

How will you store information and process?

What are the soft touch points for your marketing plan?
Do not leave a single pin hole of MIS requirement just to save the budget.

The more you invest on MIS, the more you will get a reward.

Coca-Cola extensively uses high-end technology for its operations.

Month-by-month Agenda

Well, this is good effort to divide your targets into short-term targets, i.e. monthly
targets.

Before going into executing a marketing plan, set your monthly targets.

Monthly targets are easy to achieve and measure.

The monthly meeting is a healthy activity to set down and evaluate the past
performance and set new goals for next.

Measuring Marketing Plan

Implementing marketing plan and not measuring results is the world’s biggest
blunder in my point of view.

You are wasting all your efforts.

How will you know that targets are achieving or not?

In fact, measuring is the most critical part of the whole marketing plan.

Usually, marketing plans are made for one year.

At the end of a first marketing plan, measure it critically to know that what you’ve
achieved and what’s next to achieve.

Sales Analysis

Marketing plans are made for increasing revenue, which comes from selling
business’s products and services.

A marketing plan is successful if you’ve achieved the target ‘increase sales by 50%’ or
increase sales by 200%’.
Analyze sales growth critically and also analyze that which marketing activity is
affecting sales more.

This evaluation will help you designing and modifying next marketing plan.

Coca-Cola measures its sales through sales reports.

As sales targets distribute to territory sales managers so they are responsible to the
results.

They send back information to the country headquarter, where all information are
managed through computer software.

At the end of every month, a sales analysis has been done and evaluate the sales and
marketing activities.

Market Share Analysis

Measuring market share is another aspect of measuring marketing plan’s efficiency


and efficacy.

If you’ve increased marketing share by 6%, you are moving forward.

Definitely, you’ve set the target that increases market share by nay number and
somehow you’ve achieved, more or less.

Coca-Cola also measures its market share analysis through open market research.

Expense Analysis

Marketing plan bears a heavy cost.

Measuring cost occurs by marketing plan will let you know that either this is going in
your favor or not.

You’ve fixed marketing budget of $1 Billion and at the end of the year, you came to
know that marketing budget increased by $1.5 Billion.

Make sure you’ve controlled the expenses and shrank them into your available limits.

Financial Analysis
There are numbers of separate performance figures and key ratios which need to be
tracked:

 Gross contribution – net profit

 Gross profit – return on investment

 Net contribution – profit on sales

There can be substantial benefit in comparing these figures with those achieved by
other organizations (especially those in the same industry).

Conclusion

A marketing plan is not a simple document.

It takes loads of information, researchers, skills, time and efforts.

Marketing plan covers all necessary information including, business and market
research, analyzing target market, product development, price setting, promotional
efforts, and distribution matters.

Injecting efforts in developing a marketing plan will give you a fruitful reward at the
end.

Marketing plan covers.

The more you insert efforts in the marketing plan, the more growth in business will
be achieved.

The marketing plan should be precise, but comprehensive and descriptive.

I’ve covered all necessary parts in this marketing plan template with an example of
Coca-Cola, which should be addressed.

This is not a real Coca Cola marketing plan, but an example.

What is your opinion about a marketing plan?

What should it be and how should it be done?

Tell us your thoughts about this marketing plan and how it can be more effective?
The world’s fourth most valuable company Coca-Cola is one of the most recognizable
brands today.

According to researchers, Coca-Cola is available in every country, including Cuba and


North Korea (through the grey market). Furthermore, Coca-Cola sells 1.8 billion
bottles every day and the numbers are still rising.

It’s quite hard for organizations to reach the magnitude of Coca-Cola, but using the
right marketing strategies may give a huge boost to increase worldwide brand
recognition.

If we thoroughly analyze Coca-Cola marketing strategy, we’ll see that it’s heavily
linked with the concept of “4P’s.”

Coca-Cola focuses on improving the community relationships and increasing


their happiness, that positively reflects on their public image, resulting in customer
and revenue rise.

Coca-Cola Marketing Strategy: How it Works


If a company plans to grow and progress, it’s essential to analyze and understand
their current situation to formulate and determine target markets.

Brands can benefit from the statement above by contributing to their marketing
objectives and corporation goals.

Developing marketing strategies is connected with high-level of planning, that helps


to achieve certain goals within a specific period of time and with limited resources.

Marketing strategies, also entail gaining an upper hand over your competitors by
efficiently managing existing possibilities.

Coca-Cola marketing strategy is one of the most complete and diverse strategies
today. To fully understand how they act, let’s discuss the components of their
marketing strategy.

Pricing Strategy – Today, it became quite popular for startups, for a day or two, to
offer their service or a product for free, and then increase their prices. Though, Coca-
Cola chose a different approach and made the challenge even tougher. From 1886 to
1959 (73 years), Coca-Cola had a fixed price and it only cost 5 cents.

Today, due to the fierce competition with Pepsi (their rivalry dates back to 1975),
Coca-Cola pricing strategy is strictly updated because if the prices between them
noticeably change, then one of the brands will definitely suffer, and the other one
will surely benefit. For instance, if the price of Cola-Cola will too much exceed Pepsi’s,
then consumers may shift to the cheaper one.

On the other hand, if the prices will drop, it might make customers doubt the quality
of the product it sell