Pricing Strategy Analysis: Cadbury Double Decker and Competitors

This report provides a detailed analysis of the pricing strategies employed by Cadbury, specifically focusing on its Double Decker chocolate bar, and compares them with those of its major competitor, Nestle. The report begins with an introduction to Cadbury, its history, and its market position, followed by an overview of seven key pricing strategies, including skimming, cost-plus, positioning, demand-based, competitive, discount, and differential pricing. The core of the analysis centers on Cadbury's use of skimming pricing and Nestle's non-price competition strategy. The report examines the tactics used by both companies, evaluating their effectiveness and impact on market positioning and consumer behavior. Furthermore, the report discusses a hypothetical scenario where Cadbury aims to introduce the Double Decker in Spain, proposing a detailed pricing structure based on pack sizes and flavors. The report concludes by emphasizing the importance of strategic pricing to maintain demand and achieve a competitive advantage in the chocolate market. The report includes references to academic sources to support its claims.

Running head: PRICE PSYCHOLOGY
PRICE PSYCHOLOGY
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Executive Summary
In this report, the aim will be to strategize the price of Cadbury Double Decker, a product of
Cadbury, and to compare the pricing strategy of Cadbury and nestle, one of the major
competitor of Cadbury.

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Table of Contents
Introduction................................................................................................................................3
Pricing Strategy of Cadbury.......................................................................................................3
Pricing Strategy of Cadbury.......................................................................................................4
Pricing Strategy of Nestle..........................................................................................................5
Pricing Strategy to be followed by Cadbury..............................................................................5
Conclusion..................................................................................................................................6

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Introduction
In this report, the aim of the discussion will be to analyze the pricing strategy of
Cadbury, which will be compared with the pricing strategy of Nestle. The positioning
statement will also be evaluated in this report. The name of the pricing strategy along with
that of the tactics will be discussed as well. Cadbury which was known as Cadbury
Schweppes was founded by John Cadbury and has its origin in Birmingham, England in the
year 1824. The first royal warrant of Cadbury was granted by Queen Victoria in the year
1854. It is owned by Mondelez International from 2010. Cadbury has been named as
Britain’s most successful export product. Irene Rosenfeld is the Chairperson of the company.
Nestle, which is a Swiss brand, has been taken as its competitor. It has its headquarters in
Vaud, Switzerland. Founded by Henry Nestle in the year 1866, it is a worldwide company
which exports several products like baby food, coffee, dairy products, pet foods etc (Verna
2013).
Pricing Strategy of Cadbury
There are seven pricing strategies of Cadbury which are mentioned as follows:
1. Skimming pricing – To take the advantage of people’s demand for an upcoming
product at any cost, prices are marked very high in this pricing.
2. Cost Plus pricing – This is a successful method for pricing as it accounts all cost
accurately and more reliably. It ignores any competition as well as the desire for any
product.
3. Positioning pricing – To throw light upon a consumer’s perspective of the chocolate
bean, this method helps to position the costs.

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4. Demand based pricing – According to the payment capability of the customers, prices
are set according to this method. If paid at customer’s price, the company will gain
reputation and more customer output.
5. Competitive Pricing – This pricing strategy depends on the type of competition
available in the market. It consists of the number of sellers as well as the number of
buyers in the marketplace.
6. Discount Pricing – This is the pricing strategy which is needed to increase the sales in
a rapid rate or to attract new people within a less span of time. This happens when
competition in the marketplace is very tough.
7. Different Pricing – This is the strategy which is based on the elasticity of need and
want of the people. Cadbury may have to change the price of a particular product at
different times, based on the situation (Bonnet & Requillart 2011).
Pricing Strategy of Cadbury
Cadbury follows the skimming pricing strategy mainly. It is a strategy where the price
of any product is set high in the beginning but then the price is decreased over time. Price
skimming defines the pricing of a product in which a brand like Cadbury charges the
customers a high price initially. When the desire of the first round of customers has been
fulfilled, the company decreases the price for the next level of cost sensitive customers.
Though this strategy is useful for technological markets, a brand like Cadbury applies this
strategy to frequently launch new products in the market. It affirms the fact that there are
certain customers who wants to be the first to buy the product. When a product matures in the
market, then its pricing is lowered accordingly. Though there are a few things to be taken
care of while price skimming for a product. A price skimmer must be well aware of the law

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as it is illegal in several jurisdictions. It also paves way for many other competitors to enter in
the market. Due to skimming there remains a chance of product diffusion and adoption
(Sirajuddin & Kumar 2018).
Pricing Strategy of Nestle
Nestle follows the strategy of non-price competition. The company is offering the one
and only price to all the customers. They also keep a track on the distributors as well as the
other supply chain system to offer one single price only to the customers. To maintain this
regularity for the distributors, the company offers trade discounts to the distributors, so that a
uniform is maintained by them in the marketplace. The price of the product directly or
indirectly has an effect on the wages, interests, rent and profits. Some customers of the
company are interested about the low price if the product, the fluctuations in the price will
help to decide the buying factor of the customer, while some customers are interested and
decide the buying factor on the factors like the quality of the product, the service provided by
the company and the brand image and value of the company. The perception of the consumer
is controlled by some other factors also which include store and process of advertising apart
from the factor of pricing. As Nestle is involved in a production of bulk quantity of
chocolates, they have a less cost of production, which is actually done by their rival Cadbury
also, and tastes a high margin of profit due to the low cost of production (Steenhuis,
Waterlander & De Mu 2011).
Pricing Strategy to be followed by Cadbury
The Cadbury Company wants to distribute their product Cadbury Double Decker in
Spain. The company has decided to categorize the product along with the price in the
following way (Mate 2014):
WEIGHT PRICE

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20gm Pack 1 Euro each
50gm Pack 3 Euro each
150 gm Pack 5 Euro each
250 gm Pack 7 Euro each
5000 gm Pack 10 Euro each
The product is to be sold from different gas stations in Spain, in all the available packs
mentioned above in the table. Another price package is to be introduced in the market of
Spain and that is to make a combine pack of 3 single packs of 20gms each. This can be sold
for rewarding the students and the working professionals and to present someone. The
product will be available in 3 different flavors: Dark Chocolate and Almond, White and
Peanuts and Milk Chocolate and Rice Crispi’s. Recyclable paper is to be used while packing
the chocolate. It can be sold to the children among the tourists who will visit the stadiums like
Nou Camp, the home stadium of Barcelona Football Club, and some tie-ups can be done with
Cadbury and the management of the football club. The product will be sold as a good quality
product and to maximize the revenue of the company. The price should be non-elastic, like
the demand for the product will not change much, if the price of the product rises or falls
(Steven White & Griffith 2013).
Conclusion
From the above report, it can be concluded that Cadbury, if wants to earn the revenue
from the marketplace of Spain with the product of Cadbury Double Decker, they have to
strategy their price accordingly so that the change in the price will not affect the demand of
the product. If demand falls, it will affect the revenue earning f the company. They must
enjoy a competitive advantage over the competitors like Nestle, with the proper selling of this
product in Spain.

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Reference
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Bonnet, C., & Requillart, V. (2011). Strategic pricing and health price policies. Toulouse:
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Spann, M., Fischer, M., & Tellis, G. J. (2014). Skimming or penetration? Strategic dynamic
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Steenhuis, I. H., Waterlander, W. E., & De Mul, A. (2011). Consumer food choices: the role
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Steven White, D., & Griffith, D. A. (2013). Combining corporate and marketing strategy for
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Verna, R. (2013). The history and science of chocolate. The Malaysian journal of
pathology, 35(2), 111.