The Pricing Objective Of The Marketing Strategy

786 Words Jun 23rd, 2015 4 Pages
The pricing objective of the marketing strategy is profit centered, meaning the new services are expected to maximize the company profits. In evaluating the target audience, gym participants are not found to be price sensitive, generally. Rather, they are value-conscious and tend to place a high emphasis on quality in evaluating the membership cost. People have various motives in joining a gym including socializing, recreation, taking shape, losing weight, or health requirements. Because of the intangible nature of the gym experience and health-related matters, people do tend to be more value-conscious than price sensitive.
Understanding how the customers evaluate the price aids in choosing an appropriate pricing basis strategically. For the new services, ABC Fitness will take a markup pricing approach with a predetermined rate of 40%, set by the executives. 24-hour access. The costs associated with this service include a video surveillance system, access cards, club fixtures, and promotional programs. Using secondary data (Snap Fitness, 2014), a rough estimate has been developed and presented in Table 1.
Assuming a 40% markup, the total cost of adding this service comes to a total of $43,400. The new service is expected to increase the memberships by 25% annually. Over a window of 5 years, under this assumption, the current membership size will grow from 200 to 488; an expected 288 sign-ups for this add-on service which is equivalent to an average of 58 new…
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