Marketing Strategy – Happy Baby Day Care Center
Introduction
When making a decision to charge product prices, the company must consider other factors
besides setting an objective of the price change. The demand of the product, the offerings
production cost, the needs of the customers, the external environment which includes,
competition, the existing conditions of the economy, government regulations, aspects of the
product mix, the current and conditions of the products life circle, its promotion and distribution
strategy are some of the factors to consider. If the firm is considering selling its products in the
global market, then research on other factors must also be undertaken.
Pricing Objective
Customers play a very big role in the determination of prices. The response of the buyers must be
taken into account when deciding the price change of a product. How they perceive the value of
the product, how sensitive they are and their number, the size of the existing market and how
Marketing Strategy – Happy Baby Day Care Center 2
much the average customer is willing to pay for that particular product. This involves a lot of
positive judgment and also research work. Price elasticity or customer’s sensitivity to the
changes of the price will also determine the eventual demand of the product. The objective is to
offer an affordable price that’s also profitable to the company.
Pricing
To set the price of child care products, the cost-plus pricing can be used. The cost of
manufacturing the product plays an integral part when determining the price of the product. The
product development, packaging needs, testing and other related costs have to be considered. For
instance, when a new drug is being introduced into the market, its marketing and distribution
costs are much higher and they are likely to influence the cost of the product to be high. Cost-
plus method of pricing takes care of the costs of the processes involved in the manufacturing
process. There is also a profit margin that can be utilized to calculate the real cost of the product
and how much it should be sold to achieve the desired profit margin.
Cost- Plus pricing method
Production costs are calculated and then the profit margin is determined. For example, if the
production costs of a particular product is $100 and the company wants a 20% profit then they
will charge $120. For Happy Baby Day Care Center the costs would be:
($) All figures are in US. Dollars Happy Baby Day Care Center
Land 100,000
Vans (3 No’s) 6000
Renovations (existing bld) 5000
Preliminary Exp 10,000
(Business registration, legal
advice, licences, feasibility
Marketing Strategy – Happy Baby Day Care Center 3
Studies and other consultancies)
Total cost 121,000
Pricing strategy ( Cost plus pricing method) Cost
Target of the number of children
in the first three months 100
The total cost of land is spread to
be recovered in two years or 24
months i.e. 100000/24 = 4170 4170
The Preliminary & other Expenses
will be written off in the first 21000
Month.
25170
Other costs
Administrative costs
Salaries ( three drivers and their
helpers) drivers @ $3000 p.m.
and
15000
helpers @ $2000 p.m.
5 cleaners & 5 cooks (2000 each) 20000
Food and other expenses 30000
Overheads bills (power & water) 2000
Insurance & medical cover 1000
Contingencies 2000
Total Expenses 120340
Add 20% 144408
Cost per child p.m. in $ 144408/100
Initial cost per month 1444.08
Marketing Strategy – Happy Baby Day Care Center 4
Amount chargeable per child $1450 p.m.
Other alternative methods of pricing products
Targeted Return pricing Method
The total investment costs are calculated and determined. The price is then set at a rate that is
above the ROI (Return-On-Investment) For example, if you have invested $50,000 in a project
and the volume of sales is $1000, then the price of each unit should be above $50. That’s from
$51 dollars and above.
Value Based Pricing
Value based pricing involves pricing the products based on the real value it creates for the client.
For instance if a personal counseling session is worth two sessions for the client then he should
be charged accordingly.
Psychological Pricing
Psychological pricing involves pricing the products in a way that it receives a positive response
from the clients. For example, pricing a product $199.99 receives a better response than pricing it
$200.00 Also pricing the products at a lower value it may give a negative signal as people
associate very low prices with poor quality while higher prices are normally a sign of superior
quality. This is applied while positioning the product in the market.
Marketing Strategy – Happy Baby Day Care Center 5
To provide the basic information of the existence, the company must come up with a marketing
communication strategy that will involve making key decisions about who the customer is, how
they will be contacted and what kind of message should be conveyed. For instance, Happy Baby
Day care will target different distinct groups depending on the message and taste of the potential
customers. Happy Baby Day Care Center will target the single working class women, the
business people and those parents who can’t take care of their children. This process, known as
market segmentation divides the market into groups which are very distinct from each other. In
one of the messages, Child care services would target the working class with such messages
referring to good health and safe living environment. (Kotler, P & Armstrong, 2010)
Segmentation
. The importance of market segmentation is that it increases the efficiency in marketing
operations by narrowing the market specifically toward a designated and defined segment in a
way that is consistent with the characteristics of the segment. Market segmentation leads to
product differentiation from each segment while tangibly or intangibly differentiating it from the
rival products from the competitors. ( Sullivan , Sheffrin, 2003) The different products that would
be available at the Happy Baby Day Care center would be according to their ages. These are 1-2
years, 3-4 years, 4-5 and 5-6 years. The cost would vary as the toddlers need more attention and
care as their age’s progress their personal care decreases so will be the cost per child. The
toddlers would be charged at an increased cost $500 dollars and the 3-4 by $250.
Positioning
Positioning involves the development of brands as the images of the company’s products or
services. The combination of all the required elements of marketing mix is needed to achieve the
Marketing Strategy – Happy Baby Day Care Center 6
required strategy. Positioning explains the uniqueness of the services in the market place and
also its advantages against the other childcare products available in the market. For happy Baby
Day care center it would be its additional 24/7 service. While all the major competitor’s operator
during the day only, Happy Baby Day Care Center would operate all round the clock. Branding
is a tool that is often utilized to position the product by designing its packaging its best offers in
a way that brings out its advantages against the others. For any communication to be effective,
the customers must form a picture mentally about his perception of the product which eventually
influences the price they are willingly or a ready to pay for the product. Brand equity occurs
where customers are willing to pay much more for a product because of its position. (Wood,
2003)
Strategies
Promotional strategy is a function that involves informing, persuading or influencing the
decisions of the customer. Its major objective is to develop and promote a products primary
demand. Different companies have varied promotional strategies. Some use these strategies to
expand in their different markets while others use them to reach selected and particular markets.
Most promotional strategies goals are to provide the basic necessary information about the
product and to differentiate in order to increase its sales, its value and to stabilize its overall
market. (Kotler, Keller, Brady, Goodman & Hansen, 2012)
The development of product advertising message takes place after the product has being
successfully position and the potential customers and their needs have been identified i.e. the
requirements of the target group. A distinctive, creative and well branded advertising generates
impressive results that ensure successfully marketing and promotional strategy. To make the
Marketing Strategy – Happy Baby Day Care Center 7
product more appealing to the customers or the target group then the adverts designers should be
constantly referring to the customers to tailor according to their needs and tastes.
Happy Baby Day Care Center has identified the market for the day care business. The need to
provide the service over night will be a serious competition to the other established Day care
centers. The messages of quality service and the availability of efficient, responsible, caring and
trained staff.
Sales promotion involves other forms of increasing sales other than advertising, personal
selling or public relations through one time or occasional selling. Initially sales promotion was a
supplement to a company’s sales efforts or advertising process, but it has become part of the
promotional mix for most firms.
Finally to conclude, Happy Baby Day Care center believes that the strong demand created will
pull an item or product by compelling the marketing intermediaries to accommodate it through
the marketing channels. The introduction of Happy Baby Day Care Center would attract more
clients because of its strategic marketing skills and the uniqueness of its services.
Marketing Strategy – Happy Baby Day Care Center 8
References
Kotler, P. & Armstrong, G. (2010) Principles of Marketing. 13th edition. London: Pearson
Education Ltd.
Kotler, P., Keller, K. L., Brady, M., Goodman, M. & Hansen, T. (2012) Marketing Management.
2nd edition. Essex: Pearson Education Limited.
Sullivan , Sheffrin, S (2003). Economics: Principles in action. Upper Saddle River, New Jersey
Pearson, Prentice Hall.
Wood, M. (2003) The Marketing Plan: A Handbook. New Jersey: Pearson Education Inc.
