Marketing mix — practice questions

A coherent marketing mix is crucial for KicksCo to successfully launch the 'Aero' model. Each element must support the others to appeal to the target market.

1. Price: The price must signal quality while being attainable. Using a cost-plus pricing strategy:

• Cost per pair: $30$
• Mark-up: 50% of cost = 0.50 × $30 =$15
• Calculated Selling Price: $30 (Cost) + $15 (Mark-up) = $45$

A price of $45 positions the shoe as a quality item, not a budget option. To address the target market's potential income limitations, KicksCo could offer a 10% student discount or partner with a 'buy now, pay later' service.

2. Product: The product itself must be desirable. This includes a modern, 'on-trend' design, visible branding (logo), and perhaps using sustainable materials to appeal to youth values. Offering limited-edition colourways can create hype and a sense of exclusivity.

3. Place: Distribution must be selective to maintain brand image. The 'Aero' model should be sold through KicksCo's own e-commerce website and in popular youth-focused fashion and footwear chains. It should NOT be sold in discount stores or supermarkets, as this would devalue the brand.

4. Promotion: Promotion should happen where the target audience is most active. This means a heavy focus on digital channels like TikTok and Instagram, using influencers who are popular with teenagers. Sponsoring local skate or music events could also build brand credibility.

Coherence: The $45 price is justified by the trendy product design and selective distribution. The digital promotion strategy effectively reaches the target audience and builds the brand image necessary to command that price.

To determine the selling price, we must first calculate the total cost per unit and then add the desired profit.

Step 1: Calculate the total cost per cup.

• Variable Cost (VC) per cup: $4.00$
• Fixed Cost (FC) allocation per cup: Total Fixed Costs / Expected Sales Volume = $200 / 100 cups = $2.00 per cup
• Total Cost per cup: VC + FC per cup = $4.00 +$2.00 = $6.00$

Step 2: Calculate the selling price.

• Target Profit per cup: $3.00$
• Required Selling Price: Total Cost per cup + Target Profit per cup = $6.00 +$3.00 = **$9.00**$

Justification within the Marketing Mix:

• Price: A price of $9.00 is set. This premium price reflects the sustainable materials and the shop's profit needs.

• Product: The product is a 'reusable bamboo coffee cup', which has a unique selling proposition (USP) of sustainability. The quality and design must be high to justify the $9.00 price.

• Promotion: To justify the price, Bean Scene should run a promotion, such as: 'Buy the $9.00 cup and get your first coffee free' or 'Get a 10% discount on all future coffee purchases when you use this cup'. This communicates long-term value.

• Place: The cup will be sold exclusively at the 'Bean Scene' coffee shop. This allows staff to explain the benefits and the promotional offer directly to customers.

Coherence: The premium $9.00 price is supported by the eco-friendly, high-quality product. The promotional offer bridges the gap between price and customer value, and the exclusive place of sale allows for direct communication. The mix is consistent and targets environmentally conscious customers.