Pricing simulation game

MKTG 2150-005

Mount Royal University

Introduction and segment chosen

Carry on is an outdoor backpack company with great features at a competitive price. We have devoted our company to construct backpacks for outdoor enthusiasts as they have a deep and lifelong commitment and investment to the outdoors that is not just a casual interest, but a lifestyle.We believe that people will put their money where their passion is. In order to create an ideal backpack for our target market, we needed to understand the demographic segment of these consumers. Statistically, about 30% outdoor enthusiast have a household income of $100,000+ and about 33% of them are 45+ years old. About 70% are Caucasian and 26% are College Graduates (Outdoor Foundation, 2014, p.10). Also, 54% of outdoor participants are male (Outdoor Foundation, 2014, p. 7). We kept this in mind as our backpack had to be created for potential consumers with both the willingness and ability to buy.

Product Features

We’ve adopted the Large rectangular backpack as it has a quite a large capacity and helps create enough comfort for the outdoor enthusiast. We’ve chosen the Wide-padded because it creates enough durability and comfort for the outdoor enthusiast, and provides a more cost-effective approach than Wide + Chest or the Advanced support straps. Outdoor enthusiasts are more concerned with the capacity and water proof of the backpack, rather than comfort and durability. We’ve added features such as a water bottle holder to allow the traveller to grab water at their convenience, waterproof material to help protect the backpack from weather related issues. We avoided a GPS tracker in our backpack because it is too costly for our price. We chose advanced material as the material for our backpack which offers excellent durability with its synthetic coating and also provides enhanced waterproofing. As for color, we chose green to promote and relate to the outdoor enthusiast. The green color provides camouflage and symbolises the outdoors.

Pricing strategy

The total production cost of Carry-on’s backpack will be $45. This is very efficient in comparison with the demands of an outdoor enthusiast. Everything is provided, and we save production costs by avoiding extra benefits such as a GPS system and advanced support straps. We have decided to price our backpack at $96 as the average an outdoor enthusiasts spends is $90 on a backpack. This provides a $51 margin per unit cost.

Distribution decisions

We decided to distribute our backpacks directly, with a $5 discount due to %0 distributer cut. We also decided to distribute a High End Outdoor store, similarly giving a $5 discount. Distributing at High End Outdoor Stores with a $5 discount can be efficient as it promotes purchases in the most customer reaching area, and only takes a %28 distributor cut. We will also distribute through Department stores and Online Discount Retailers to spread the likeliness of customers discovering and purchasing our backpacks. We will not offer a discount in Department stores and Online Discount Retailers as they take a larger distributer cut.