Pricing Strategy:

1. Selecting the Pricing Objective:

We chose the Market Penetration Pricing Strategy, as our main objective to maximise the market share
even before the increase in competition in this Book Holder segment. This will help us in decreasing the
per unit production cost and to increase the profits in the long run.

2. Determining Demand:

We estimate our sales in the starting year to be ** and we will keep on trying to increase sales over next
few years through various promotions. These days even though some people choose to read in Mobiles
or Tablets instead of Books as these are convenient. We have a strong faith in ourselves that we can
increase sales as our book holder is capable of holding Tablets, Mobiles and can be used as a portable
travel pillow too.

3. Estimating Costs:

From Manufacturing of Book Holder to selling it, we incur so many costs which we segregated into fixed
and variable costs. Warehouse rent, Advertising on social media and salaries to employees comes under
fixed costs as we pay them irrespective of number of units manufactured. Cost of Raw materials (like
Faux suede fabric, Perspex page holder, Loop carry handle, polystyrene beads) and wages to labourers
are the variable costs. To run our plant at full capacity and to decrease our per unit cost we also
manufacture Book Holders for Industrial Buyers like IKEA with their branding.

Warehouse Rent Rs. 1020000 per year

Salaries to Employees Rs. 1225000 per year
Promotion Budget Rs. 600000 per year
Total Fixed cost Rs. 2845000 per year

*The total estimated cost to produce one unit is Rs. 1769 based on estimated sales of 5000 units per
year. If the production increases, the cost to produce one product will come down.

Details Estimated Cost

Raw Materials
Faux Suede(Fabric) Rs. 410/metre
Polystyrene beads Rs. 220/kg
Page holder Rs. 45/unit
Carry handles Rs. 20/ unit
Cotton for filling Rs. 180/kg
Additions
Clip neck light Rs.220/unit
 Particulars Cost
Raw Materials Cost
Faux suede @ 0.8 metres ( 80 Centimetres) Rs. 328
Polystyrene beads @ 100 gms Rs. 22
Perspex Page holder Rs. 45
Loop Carry handles Rs. 20
Pure Cotton @ 50 gms Rs. 9
Clip Neck light Rs. 220
Warranty Service Cost Rs. 300
Distribution Costs Rs. 120
Wages Rs. 83
Other Costs Rs. 53
Total Variable cost per unit Rs. 1200
Total Fixed Cost per unit* Rs. 569
Total Cost per unit Rs. 1769

4. Analysing competitors' costs, prices and offers:

In the Book Holder market, the competition is very less and we want to take advantage of this by
increasing our market share beforehand the increase in competition. Our major competitor is "The Book
Seat". Even though they were in the market since 2012, they failed in creating proper awareness about
the usefulness of the Book Holder in India. And also we get tax advantage over them as we are based in
this country. So we can offer more value at the same price.

5. Selecting a Pricing Method:

We selected Going Rate pricing method as we price our product based on our competitor - The Book
Seat. We offer our product with more value at little less price than our competitors.

6. Selecting the Final Price:

While selecting the Final price 5999, The reason behind 9 as the unit's digit was the "Most significant
digit pricing study" which shows that sales will be significantly higher if a product is priced at 5999
instead of 6000. Even though we offer the product at price not more than 5999, we print our Price tag at
7999 keeping in mind psychological discounting.

Cost per unit* Rs. 1769

Manufacturer Margin Rs. 2950
Retailer Margin Rs. 1180
Final Price Rs. 5899