Ginger beer would be a new distinct product in Saudi Arabia and the environment is different from the one in the US or Europe where the customer value and expect new products from leading producers. Also when it comes to food (inclusive of drinks and beverages) then people in the developing and less developed nations seem to be conservative. Following the success of ginger beer in Australia and other international markets then we are optimistic of the entrance into Saudi Arabia.
Factors Affecting Pricing Decision
The factors to be considered when pricing the ginger beer can be divided into two broad groups just like any other product that is introduced in a new environment. So we have external and internal factors.
Internal factors External factors.
Firm related factors; corporate and marketing objectives, competitive strategy, firm positioning, product development, product location and market entry modes. Environmental factors; government influences and constrains, inflation, currency fluctuations and business cycle stage.
Product factors; stage in PLC, place in product line, most important product features like quality, product positioning and product structure. Market factors; customer needs, customer’s ability to pay, nature of competition, competitor’s objectives and grey market appeal.
Internal factors can be classified in to firm related factors and product factors. Firm related factors include; corporate and marketing objectives which may be to capture a market share as a new entrant, positioning whereby we recognize our target group; to understand our potential customers. Competitive strategy which involves the strategy which the organization has adopted to gain competitive advantage over its competitors. The other firm related factor is firm positioning which depends on the how the firm has positioned itself in the market against other firm. The next factor is product development, and product location in which if the development of a product is expensive, the price of the product is also likely to be high. The other factor is market entry modes in which if the strategies used to enter the market are costly, the price of the product will also be high. Product factors include stage in PLC in which the price of the product depends on its stage since consumers have to accept it first. Second factor is place in product line and quality. The price of a product depends on its quality with high quality products being more expensive. The other factors related to the product include product positioning and product structure. It involves the raw materials and how the product has been developed. (Hollensen 2003) In this case the products are two; diet ginger beer and ginger beer.
External factors mainly consider the environment in which the market is situated and market factors. In this case the Saudi government would rate import duties on materials into the country, other costs like insurance and transport costs as in this case will be incurred too. Currency fluctuations and inflation are common in every nation today, only the percentage distinguishes its real effects. Our corporation has to factor in their effects as our plans are long term. Market factors include customer needs and their ability to pay. This is in terms of whether the consumers really need our ginger beer and if they are able to pay because the price must be affordable. The other factors related to the market are nature of competition, and competitor’s objectives. This is because if the competitors have better objectives which can meet the needs of the consumers better, the pricing should be set in such a way that it aims at meeting the objectives and needs of consumers.
Pricing Set Up
Import tax 19
Retail price 450
Total SAR 2006.5
In price set up it is crucial that all expenses are considered in order to ensure that one comes up with a price which can cater for all these expenses. The price should not be so high especially for the ginger beer which is entering the market for the first time. A lot of care is supposed to be taken to ensure that the price is competitive. Production depends on raw materials, and labor required together with bottles required for the packing of the beer. In transportation, all the expenses incurred in transporting the raw materials labor and the final product is included and care is taken to ensure that it is catered for in the price of the final product. Insurance is included to cater for all damages which might occur at any stage of production or selling. Import tax cannot be evaded hence information is collected from the current rates to come up with our figure. Warehouse is very crucial and the production may not start without it. It may be the most expensive but the price must be covered for by the final product. Retail price includes the price of the final product and it should be in such a way that it can generate profit considering all the expenses.
Terms of Payment
It is advisable to quote the price of the shipment in the currency of the buyer, exporter, Euro and a third country so as comparison may be made (Hollensen 2003). Customers prefer when the commodity prices are translated into their local currency. In this case the company will do the shipment and then use a distributor to make the products reach the outlets. The company can use cash in advance or letters of credit which will secure the payment. Terms of payments depends on the agreement by the organization and on the convenience of the consumers. The payment mode may be cash, credit card or even banker deposits depending on the agreement.
Hollensen S, 2003, Global marketing 3rd edition Pearson Education
Hollensen S, 2011, Global marketing- a decision oriented approach, Pearson Education.