Case 2

Bea’s Pricing Dilemma

Group 2 Members:

Abacan, Crispin Mahrion B.

Arcega, Diana Ruth R.

Bae, Chan Young

Balderia, Paolo G.

De Ocampo, Nasreen Joy L.

Espiritu, Rovil A.

Mojar, Alyssa Kaye S.

October 4, 2013

MGT 151-B

Prof. Nanette Aquino

Point of View

The group assumes the point of view of Ms. Bea Lim, the Marketing Assistant of Prime Meat,

Inc. This is because she conducted a storecheck which made her well-aware of the necessary

information that can be used for planning the pricing strategy.

Market Situation Analysis

a. Opportunities

-They are located in a 1st class city, Lipa, which is also the Capital of Batangas.

-There is high demand for tocino and hotdog alone. (Tocino is 89.312 metric tons per

month while hotdogs, the total estimated market potential is 95.14 metric tons per

month)

-They are independent because they are separated from their mother company to be a

distinct business unit.

-They rank second in the tocino market.

-The housewives as the main decision maker in buying tocino while children are

powerful influencers in hotdog buying

b. Threats

-There are a number of competitors like and Lipeno’s pride (best attributes; tocino) and

Pampanga’s best (favorite brand), etc.

-There are plenty of industry players fighting for market share woth little or no difference

in quality. These are Lipeño’s Pride, Carmen’s, Emma Homemade Meat Products, Tita’s

Mekeni and Pampanga’s Best.

- Consumers do not consider Prime Meat hotdog as a favorite hotdog brand.

c. Strengths

- Hotdog and tocino are two with biggest share of sales in the processed meat market.

- They are only 85km away from Manila which is relatively near.

- Aside from walk-in dealers they also have regular dealers.

- With the planned transfer, their operation will be largely mechanized.

- They have AA accreditation (semi-mechanized) which helps them produce products

with the best quality.

-They have good promotional strategies (with signs along highways, streamers,

banderitas, radio ad, played in local radio, billboard along slex

-Prime Meat Inc. uses best quality raw materials straight from members’ hog produce

and flavored with imported spices to enhance taste.

-They have deep line of meat products with 14 meat items.

d. Weakness

- Relatively, they are low in brand rating and other indicators. They are always on the

third or fourth position.

-Prime Meat Inc. has a low production capacity of 10 metric tons per month for double

shifts and 8 metric tons for regular shifts. They only have a small-scale processing plant

with an area of 240 sq. m. This is one factor that prevents them from taking over a larger

share of the 89.312-metric ton demand for Lipa City alone.

- They have low market share at low 2.17%.

.

Product-Life Cycle

Prime Meat, Inc. is currently between the Introduction and Growth Stages. They are on the

initial phase of growth stage and just about to leave the introduction stage. Furthermore, they

are using Red Ocean Strategy which means they are in the market where there are many other

players or competitors.

Although they are just starting the growth stage, they already have a deep product line with 14

meat products. They are also expected to expand and increase their distribution coverage by

having a branch in Santo Tomas. This is in addition to their products being distributed thru LCM

branches all over Southern Luzon and portion of Northern Luzon.

Target Market

Prime Meat, Inc.’s target market are those in the Class B and Class C or those belonging in the

middle and low income segment. But taking the buying roles, housewives are the main decision

makers in tocino while children are powerful influencers in hotdog buying. Also, majority of the

consumers are members of cooperative.

Product position

The products of Prime Meat, Inc. are positioned to have good quality but of affordable prices.

They are said to have good quality because their products are made from the best quality raw

and fresh materials, and are also flavored with imported spices to enhance the taste. As for the

price, they have relatively lower price compared to the leading brands.

High Price

Low Quality

High Quality

Low Price

Jaka Food Processing Foodsphere

Prime Meat, Inc RFM

Purefoods

Figure1. Mapping of hotdog producers

High Price

Low Quality

High Quality

Low Price

King Sue CDO Native Favorites

Prime Meat, Inc LOI’s

Pampanga’s Best

Figure2. Mapping of tocino producers

Current Marketing Mix or Marketing Strategies

a. Product

Prime Meat, Inc. have a deep line of products with 14 meat products. Using their AA accredited

plant, they offer the best quality products. Their processed meats are produced using the best

quality materials directly from the members hog produce. They even import spices to give a

better taste for their processed meats.

For the packaging of their products, they use polyethylene or plastic bags with the company’s

logo, product type, ingredients, and best before date. They package the meats into 200 gram,

250 gram, 450 gram, and one kilogram for their consumers to choose.

b. Price

The company is using mark-up pricing for determining the price they will assign to a product

such that it will give them enough profit. They add the cost of the raw materials, packaging,

labor, and other expenses. They use a fifteen percent mark-up policy for all their products.

c. Place

The company has a mother branch in Lipa City, Batangas. But aside from this, they also

distribute all their products through their mother company, LCM. This means they distribute all

over Southern Luzon and some parts of Central Luzon. Each branch have regular and walk-in

dealers who help in distributing the products in their respective areas.

d. Promotions

Prime Meat, Inc. uses a number of promotional strategies. Among these are stand-up signs

along highways, streamers, and banderitas. They also have a billboard along the South Luzon

Expressway, a radio advertisement in the local station of Batangas, and a TV

commercial in ABS-CBN Regional Network Batangas TV 10.

Case Problem

What is the best pricing strategy that can project a better brand image and increase the market

share of Prime Meat, Inc.?

Case Objective

The main objective of this case is to come up with the best pricing strategy for Prime Meat Inc.,

to create a better image for their products, considering their acceptability in the market. The

recommended strategies focus on increasing their market share by considering factors such as

the competitors’ price, product attributes, and other internal and external environmental factors.

Alternative Solution to the Problem

ALTERNATIVE 1: Use Going-Rate Pricing (Prices are to be set in comparison with

competitors’ products, either by charging the same, more, or less than the major competitions.)

Pros

1. If this strategy is adopted, positive status of the competitors’ product could influence Prime

Meat Inc.’s brand image.

2. Prime Meat Inc. would be able to adjust marketing mix strategically, making it competitive in

the market.

Cons

1. This strategy does not consider other factors like costs and demand.

2. SInce the pricing strategies are dependent on the competitors,’ there could be the tendency

for association (i.e. undifferentiated brand image).

3. SInce the pricing strategies are dependent on the competitors,’ Prime Meat Inc., may not

match the competitor if ever it swiftly changes its pricing strategy, that is, either decrease or

increase the price.

ALTERNATIVE 2: Use Perceived Value Pricing. (Done by determining the market perception

of the offers’ value through market research and then, basing the price on research).

Pros

1. There is a greater possibility for an increase in profit sales because of the application of the

marketing concept (i.e. considering the market preference in strategy formulation).

2. This could be attributed as a positive brand image.

3. There is a greater possibility for gaining the market’s share of the heart.

Cons

1. There could be a problem in generalizing the marketing strategy, since the research was

conducted only in the context of Lipa City.

ALTERNATIVE 3: Use a mark-up policy of 25%.

Pros

1. This pricing strategy would somehow secure an increase in profit sales.

2. This pricing strategy could affect the company’s brand image.

Cons

1. This pricing strategy does not consider other factors like competition and demand.

2. This could gain a negative reaction from the price sensitive consumers.

ALTERNATIVE 4: Geographical pricing (Pricing to meet different customers in different

locations)

Pros

1. There is a greater possibility for an increase in profit sales because of the application of the

marketing concept (i.e. considering the market preference in strategy formulation).

2. This could be attributed as a positive brand image in that certain place.

3. There is a greater possibility for gaining the market’s share of the heart.

Cons

1. There could be a problem in generalizability.

Proposed Strategies or Plans

1. Target Market

The company could consider in expanding their target market. They could widen their market

scope by targeting those who belong in the class A. They could increase the price of some of

their products for it to be appealing in the high-income bracket. They could still cater to low-

income bracket since the price of their products are relatively low.

2. Product positioning

The product would be positioned as offering quality products, both in a high or low price. This

implies that whatever the income-bracket of the customers, they could still enjoy high quality

products. They could use the brand name “Prime” as the position of the product (i.e. Prime,

meaning, key, major).

3. Marketing Mix

Table 1. Proposed Marketing Mix

Short Term Medium Term Long Term

Product/Offering

(In pursuing its plan of reaching those

who belong in the Class A, the

company should produce premium

products that could satisfy the taste

and preference of the premium

market.)

Produce

premium

products to

penetrate the

Class A market

More additions,

catering the

Classes A, B,

and C

Wider variety of

products

Price

(The company started with fairly low

priced products. If it plans to venture

out in producing premium products,

they should also offer high price that

would accompany that high quality

premiums.)

Increase/

Decrease,

depending on

the perceived

value

Maintain/

Change,

depending on

the perceived

value

Maintain/

Change,

depending on

the perceived

value

Place

(The product’s availability should also

be widen if it pursues to produce

premium products. Premium products

can only be available to the Class A if

it is distributed to place where they

usually shop. For this reason, it is

advisable for the company to

penetrate the supermarket)

Expanded

distribution

channel (i.e.

Santo Tomas,

Batangas)

Penetrate the

shopping malls

for the Class A

market

Expand to other

locations

(Visayas and

Mindanao)

Promotion

(The promotional strategy of the

company is actually good. They

should maintain their current

employed advertising channels.

Possible expansion of promotional

channels could be done by buying

airtime at local cable TV channels.)

Maintain Promote in more

areas

Try investing to

other

promotional

media with a

wider reach

Future Trends

In the future, competition will be expected to increase because of new entrants who want to

enter the industry. Also, current players may opt to expand their selection of products. This can

lead to price marketing, a need for increased promotions and product improvement. Advances

in technology may also become a factor since competitors may produce new and improved

products that would be more appealing to customers.

Contingency Plan

If the first alternative fails, the group suggests to use the Going-rate pricing strategy.

Marketing Management Lessons

a. Scan the environment (both internal and external )to get iinformation on needs and wants of

consumers which will be leading in product Improvement

Ex. identify product attributes to know the areas for improvement

b. Price as crucial in image building. But then, price must not only the basis. There could be

other factors to be considered aside from the price

c. Competition, Costs, and Consumer Demand should be taken into consideration in formulating

pricing strategy.