Heinz Ketchup
Define the Problem:
Heinz was experiencing a significant issue with its strategy in term of distributing their product to a retailer that shelves not only Heinz’s product but their own as well. The retailers have a commanding role in placing Heinz products alongside the in-house ketchup they make as well as other brands. This creates a significant problem for Heinz in terms of maximizing profits by increasing sales since the retailer is not only concerned about Heinz but also concerned about the private label it sells itself. Heinz sees a benefit in selling the larger bottles of ketchup but the retailers see that as a threat to its own brand and therefore creates a conflict of interest.
List any outside concepts that can be applied:
A company such as Heinz needs to strategically set their prices keeping in mind historical data relevant to its consumers and at the same time have enough margin for the retailers that are shelving their product. There are different avenues that Heinz could primarily take in order to alleviate itself from any discrepancy through price setting that could arise from the retailer and/or the consumer.
Cost-based pricing: This method of pricing is contingent upon accounting data and keeps the Return On Investment (ROI) in mind when setting prices. Typically, cost-based price approaches are cost-plus pricing, target return pricing, markup pricing or breakeven pricing.
Competition-based pricing: This can be simply stated as the prices are being set with keeping in view what price tag the competition are putting up on their products.
Customer value-based pricing: In this method of price setting value-based pricing is given significance. The perceived customer value of the product has leverage in price setting and therefore the price revolves around how a company such as Heinz could increase customer value. This method of price setting for a commodity such as Heinz ketchup could be an intricate issue for the company.
Heinz understood
Heinz was experiencing a significant issue with its strategy in term of distributing their product to a retailer that shelves not only Heinz’s product but their own as well. The retailers have a commanding role in placing Heinz products alongside the in-house ketchup they make as well as other brands. This creates a significant problem for Heinz in terms of maximizing profits by increasing sales since the retailer is not only concerned about Heinz but also concerned about the private label it sells itself. Heinz sees a benefit in selling the larger bottles of ketchup but the retailers see that as a threat to its own brand and therefore creates a conflict of interest.
List any outside concepts that can be applied:
A company such as Heinz needs to strategically set their prices keeping in mind historical data relevant to its consumers and at the same time have enough margin for the retailers that are shelving their product. There are different avenues that Heinz could primarily take in order to alleviate itself from any discrepancy through price setting that could arise from the retailer and/or the consumer.
Cost-based pricing: This method of pricing is contingent upon accounting data and keeps the Return On Investment (ROI) in mind when setting prices. Typically, cost-based price approaches are cost-plus pricing, target return pricing, markup pricing or breakeven pricing.
Competition-based pricing: This can be simply stated as the prices are being set with keeping in view what price tag the competition are putting up on their products.
Customer value-based pricing: In this method of price setting value-based pricing is given significance. The perceived customer value of the product has leverage in price setting and therefore the price revolves around how a company such as Heinz could increase customer value. This method of price setting for a commodity such as Heinz ketchup could be an intricate issue for the company.
Heinz understood