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Understanding the Concepts - Essay Example

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However, in the past few years, its profits have been declining at an alarming rate. This raised concern in the management and the problem identified was related to the pricing policy. The…
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Download file to see previous pages However, this has affected customer loyalty and the company’s profits. In order to make profits and offer quality products and services, the company has sought assistance (a better pricing policy) from Prime Pricing Solutions.
The development of a detailed pricing policy for Food and Beverage Company or operation comprises of five key stages. These stages include market feasibility study, basic price level and overall percentage gross profit, departmental gross and profit margins, differential profit margins, and other matters such as cover charges, and service charges. The stages will help the company in choosing the best price setting process to establish profitable and sustainable prices for the consumers. In designing the pricing policy for the company, the aforementioned steps will be followed as indicated. The first stage is market feasibility study. Because the company is already established, market feasibility study will not apply. However, there are important things that the company can note from the market feasibility study. First, the feasibility study generates a consumer profile; it describes in detail the consumer’s sex, socioeconomic status, age, nationality among other things. Second, it determines the consumer’s average spending power (Kotas, 1999).
If the company did not perform a comprehensive market feasibility study, it will be important that it perform it to determine how they are going to price their products and services. It is important to note that the consumer profile has the most detailed and all-pervasive impact on all the food and beverage processes (Kotas, 1999). The second stage is the basic price level and the overall percentage gross profit. Based on the ASP (average spending power) and the consumer profile, the basic price level and the overall percentage of food and beverage gross profits can be determined. Therefore, the company can decide to charge a particular price for the foods and beverages. The ...Download file to see next pagesRead More
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