Which one of the following pricing methods is most suitable for a new independent coffee business called Harbour Bean? It has developed a cold-brew coffee p...
Question 1 Report
Which one of the following pricing methods is most suitable for a new independent coffee business called Harbour Bean? It has developed a cold-brew coffee product with unusual flavours and aims to recover its development costs before large competitors copy the item. The owners expect some customers to pay more for a limited product at its launch.
(a) Which pricing method should Harbour Bean use at launch: cost-plus, penetration or price skimming? [1]
(b) Identify one feature of this coffee product that could support the chosen price. [1]
(c) Explain why the business may reduce the price later. [1]
Answer Details
(a) Price skimming is suitable at launch. It means charging a relatively high initial price when a product is new, distinctive and some early customers are willing to pay more. This helps Harbour Bean recover development costs before competitors copy the product. [1]
(b) An unusual flavour supports the higher launch price because it makes the cold-brew product distinctive. A limited edition, premium ingredients or the cold-brew process would also be valid features. [1]
(c) Harbour Bean may reduce the price later to attract more price-sensitive customers, particularly once competitors enter the market or early adopters have already bought the product. [1]
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