Pricing is one of most important elements of marketing mix, as it is the only mix

which generates a turnover for the company.

Adjusting the price has a huge impact on the marketing strategy but also affects
the demand and the sales as well. The company should set a price that
complements the other elements of the marketing mix. A well-chosen price
should always: increase profit, generate sales, gain market share and establish
an appropriate image.
Considering the innovative aspect of our product, we believe that the best
strategy is Skimming Pricing. Initially, our company sets a high price that
consumers will pay. As the demand of the first costumers is satisfied, the
company slowly lowers the price to make the product available to a wide
market- more price-sensitive segment. The main goal is to skim the profits of
the market layer by layer. Therefore, our strategy is based in skimming
successive layers or customer segments, as prices are lowered over time.
This strategy is very useful because it is a unique technique to quickly recover
the cost of research development (R&D) and the initial investment in the
product.
Besides that, it is the adequate strategy because we estimate that:

There are enough prospective customers willing to buy the product at a

high price;
The initial high price affects other competitors to enter the market;
Lowering the price would have only a minor effect on increasing sales
volume and reducing unit costs
The high price is interpreted as a sign of high quality

There are a set of factors that must be taken in consideration for the launch of
the new product related with pricing decisions as: costs, consumer perception
and competitors prices.
Costs are the factor that obviously will most influence the price. By this way, in
order to compute the price we must need to take into account the variable costs
of direct materials as well and the distribution costs.
Our pricing method is Cost Based Value in which we use manufacturing or
production costs and distribution costs as its basis for pricing.

As already mentioned, Warm On is composed by the following components: PVC

plastic; a infrared lamp; the electrical and electronic systems and the sensors
device. These materials will be bought and produced in a large scale which
makes the costs per unit lower at around 10 for the infrared lamp; 1 for the
sensor device, 3 for the the PVC plastic and 7 for the electric and electronic
systems and 1 for distribution cost.
Materials
Infrared Lamp
Sensor device

10
1

PVC Plastic
Electric and
electronic systems
Distribution

3
7
1

Total unit cost = 22

Therefore we came at an estimated cost per unit of 22 .

In terms of consumer perception, our market research show as that most of our
buyers are willing to pay a higher price for the product in which they recognize
the technologic innovation value and the products utility.
Approximately 60% of the responses answered that they were willing to pay
around 65 for the Warm On. Our direct competitors have priced from x to x,
however their products are sold online which means that to the total products
price can be add an extra amount of shipping costs for the consumer.
When the company sets the price must have to keep in mind that an efficient
price is a price that is very close to the maximum that customers are prepared to
pay but also keeping a delivered value sufficiently high. Our cost pricing strategy
uses its costs to find a price floor and a price ceiling. The floor and the ceiling
are the minimum and maximum prices for our product, they serve as a price
range. As market conditions arent such that the going competitive price is above
the price floor so our company dont need to price at the floor or attempt to
lower its costs to lower the floor. In this case, we attempt to price somewhere in
between the floor and the ceiling.

Therefore, we estimate that the price floor corresponds to the total costs per
unit - 22 and a ceiling price of 57.
The selling price will be 57 of which our company will extract 70% which means
that retailers will retain the remaining 30% of the selling price.

70% of the selling

price for the
company
30% of the
selling price for
Gross Margin

59*0,7 = 41,3

59*0,3 = 17,7
41,3 22 = 19,3
19,3