The hot potatoe Pricing Strategy and Channel distribution

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Pricing Strategy
Penetration or Skimming Strategy
The pricing strategy for Hot Potatoe products should be based on demand, as well as on costs.
We have determined that the value to the consumer is in offering a healthier fast food option that
meets dietary guidelines and satisfies the consumer's needs for convenience and satiety. Perceived
value to the consumer, competitor pricing and costs are all factors that should determine price
(California Institute of Technology, 2008). As a new entrant into the fast food market, Hot Potatoe is
introducing an entirely new food concept. Consumers will be hesitant to switch, so penetration pricing
that encourages them to do so is a suitable approach. However, competitors may react by offering a
similar product at the same or lower price. Fast food chains that already have a large market share in
the fast food industry may be able to offer replacement products at an even lower price, relying on
existing supply chains and customer loyalty to choose their products over those of Hot Potatoe.
Therefore, pricing should take and intermediate approach, that falls somewhere between
penetration and skimming strategy. While skimming is commonly used in introducing new and
innovative products, penetration pricing is used to gain market share. The offerings of hot baked
potatoes with healthy toppings that make it more like a satisfying meal should not be considered snack
or value items. If a strictly penetration pricing strategy is used, consumers may perceive Hot Potatoe as
merely offering snack items. Panera bread, which is categorized somewhere between a fast food
establishment and a casual dining place, has been able to maintain market share through tough
economic times, by maintaining its price structure, while offerings new products and improving quality
of its products (Kraus, 2009). Hot Potatoe does not have an existing customer base, but does have a
product with the potential to gain market share, through differentiation, much like Panera Bread.
Pricing Tactics
Pricing tactics should consider how Hot Potatoe may need to react in the future, as well as how
it should approach pricing during the introductory phase. Because the intermediate strategy falls
somewhere between penetration and skimming, there is some allowance for lowering prices, in the
event that competitors may offer a similar product at a lower price. If the focus on Hot Potatoe
products is on differentiation, however, low price is not likely to generate additional interest. The
way a product is priced does have an influence on consumer perceptions. Many organizations use
$1.99, $4.99 or $9.99, as a means of offering consumers a perceived discount. On the other hand,
products prices designed to signify a higher quality often end in '0' (Toolika, 2010). Therefore, Hot
Potatoe products will be priced at $3.50, $4.00 and $4.50. They are comparable to an entire value meal
at a fast food chain, but imply a higher quality food choice. Hot Potatoe ...