Bumble Bee Balm Pricing Consideration - Report Example

Introduction

The initial consideration of the reasonable price for either a service or a product is usually influenced by competition influence, among other factors such as demand, profit objectives, and costs. Pricing approaches that are demand-oriented chiefly stress on the income implications concerning the underlying consumer demand. Various aspects constitute demand-oriented pricing, including yield management, penetration, price lining, to mention but a few (Boon & Edler, 2018). Pricing approaches that are cost-oriented consider the aspects involved in pricing such as experience-curve pricing, coat plus, and standard markup. Pricing profit-oriented approaches consider the equilibrium between costs and revenues and consider factors such as target return on sales and target profit (Juo et al., 2015). Pricing approaches that are competition-oriented focus on analyzing the current competition (Simon & Fassnacht, 2019). A marketing professional must utilize these pricing approaches to achieve the ultimate results—the analysis presented hereon recommends pricing considerations for the new Bumble Bee Balm products.

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Analysis of Carmex and The Lip Balm Industry

Carmex and other lip balm players price their products between $0.99 and $2.99. It is majorly the case to facilitate easy affordability, for the prices are considered to be well within the affordability range of the consumer client base, which is chiefly price –sensitive. Suffice to note that Carmex utilizes a very tactical and efficient strategy to maximize its sales regarding the lip balm products.

Therefore, Carmex has duly considered that consumers are more responsive to $0.99 pricing Vs. one of $1.00 (Tsai & Lai, 2020). This is because they utilize the concept of psychological pricing, which is alternatively referred to as charm pricing (Kumar & Pandey, 2017). It is a concept that is chiefly based on the theory that postulates that various psychological impacts manifest in consumers regarding specific prices. Evidence research provides a tendency in consumers to perceive the odd prices, otherwise known as just-below prices, whereby they are perceived as being lesser than they are. As a result, Carmex and other companies in the lip balm industry tend to price their products with prices ending with a $.9. Additionally, the Carmex Moisture Plus product has been noted as being priced between $2.49 to $2.99, which is a considerable high price in comparison to its Carmex tube priced at $0.99. This was due to Carmex managers' consideration that consumers would express more interest in going for additional ingredients, sleek packaging, and exclusive benefits.

Pricing Recommendations

Six out of ten women tend to use lip balm. It implies that there exists a vast consumer base (Yusof et al., 2018). Bumble Bee Balm can employ pricing as one of the various strategies to maximize sales and revenue. Consideration of what customers are willing to pay must be taken into account while pricing. Additionally, the psychological pricing strategy should be adopted, for research proves its efficacy. It would provide Bumble Bee Balm with a marketing and competitive edge if prices were set lower than Carmex’s. However, prices should not be set too low, for it may be perceived that the products are substandard. The pricing objectives should take into account incurred resources such as time and money while setting price points. Bumble Bee Balm can set itself distinctively by selling lip balm products with unique scents and unique colors.

Conclusion

Factors, including competition, determine price, costs incurred, product value, competition, and demand (Rezapour et al., 2015). Bumble Bee Balm should consider these aspects to achieve the optimal price ranges to maximize revenue. Price determination is an art which is essential to any business.

References

Boon, W., & Edler, J. (2018). Demand, challenges, and innovation. Making sense of new trends in innovation policy. Science and Public Policy, 45(4), 435-447.
https://doi.org/10.1093/scipol/scy014

Juo, J.-C., Fu, T.-T., Yu, M.-M., & Lin, Y.-H. (2015). Profit-oriented productivity change. Omega, 57, 176–187. https://doi.org/10.1016/j.omega.2015.04.013

Kumar, S., & Pandey, M. (2017). The impact of psychological pricing strategy on consumers' buying behaviour: a qualitative study. International Journal of Business and Systems Research, 11(1/2), 101-117. https://doi.org/10.1504/ijbsr.2017.080843

Rezapour, S., Farahani, R. Z., Fahimnia, B., Govindan, K., & Mansouri, Y. (2015). Competitive closed-loop supply chain network design with price-dependent demands. Journal of Cleaner Production, 93, 251–272. https://doi.org/10.1016/j.jclepro.2014.12.095

Simon, H., & Fassnacht, M. (2019). Decision: One-Dimensional Prices. In Price Management (pp. 173-208). Springer, Cham.

Tsai, W. C., & Lai, Y. C. (2015). The communication of value proposition: Case studies on franchise business model. The Journal of Global Business Management, 11(1), 47-48.
http://www.jgbm.org/page/6%20Wen-Chun%20Tsai.pdf

Yusof, A. A. B., Ajit, A. B., Sulaiman, A. Z., & Naila, A. (2018). Production of lip balm from stingless bee honey.