Cowgirl Chocolates: Pricing Strategy

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1. The suggested retail price and wholesale prices of Cowgirl Chocolates products are displayed in Exhibit 2 (p. 491) along with the product and packaging costs. Based on this information, discuss the relative merits of using a cost-based, demand-based, and competition-based pricing method. With 66% of revenues being generated from Spicy Chocolate Truffle Bars and the ¼ pound Muslim Bag Cowgirl Chocolates, the pricing strategy selected will determine of the business is profitable or not. The benefits of using a cost-based approach to pricing include the potential for greater pricing stability, predictability, and a parity or stronger position relative to competitors who also price using this strategy (Chung, Li, 2013). Demand-based pricing provide the greatest opportunity for the business to grow profitably over time. Taking a demand-based approach to pricing will also drive the marketing, promotion and sales all in the direction of those customers who most value the unique and highly differentiated nature of the chocolates. A demand-based approach will most likely alter the current distribution of sales by category as well, aligning to the relative levels of interest by customers (Grewal, Roggeveen, Compeau, Levy, 2012). The benefits of having a competition-based pricing strategy will ensure the chocolates are considered in the same market area as competitors, and will also force choices by consumers based more on preferences for specific attributes or qualities of the

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