Final Project: Price

PRICE

For most purchases, consumers don’t have all the skill or information they need to figure out whether they are paying a good price. They don’t have the time, ability, or inclination to research different brands or stores, compare prices, and get the best deals. Instead, they may rely on certain cues that signal whether a price is high or low.

FOB prices will be set with three objectives in mind:

1. The price will be right in order to penetrate the market
2. The price should always cover the costs of production
3. The price should allow for profitability

Product cost will not vary greatly with size of package, since the form-fill-seal machinery has maximum speed regardless of size. Thus, price will decrease with volume of production. We estimate that the experience curve effect will allow a decrease of cost of 20% when sales volume doubles.

Allowing for 15% profit before taxes, the FOB price will be:

	12,000/day	24,000/day
8 oz packet	$0.93	$0.83
4 oz packet	$0.83	$0.66

FOB price will be adjusted every week in order to take into account daily variations in the price of the raw material (raw materials account for 20% of product cost).

Edwards Salads pricing policy will be flexible enough to maintain market position once competition arrives. This will be done by providing for better quality and extra features without necessitating dramatic price reductions which may jeopardize "positioning" as a high quality product.

In assessing competitors’ pricing strategies, the company should ask several questions. First, how does the company’s market offering compare with competitors’ offerings in terms of customer value? If consumers perceive that the company’s product or service provides greater value, the company can charge a higher price.