Forecasting the Pricing Strategy

This report discusses the pricing strategies for Nanaimo Café, a gluten-free local bakery. It explores the impact of an increase in manufacturing cost on pricing and customer base. Two alternative price increase strategies are suggested - complementary pricing and customer loyalty discounts. The report also discusses the external and internal factors affecting these strategies and provides recommendations for retaining customers and sustaining competition.

Forecasting the Pricing Strategy

Table of Contents
Nanaimo Café Introduction.............................................................................................................4
Price Increase Strategies..................................................................................................................4
External and internal factors affecting these strategies...................................................................5
Conclusion.......................................................................................................................................5
References........................................................................................................................................6

Nanaimo Café Introduction
Nanaimo Café is a gluten free local bakery based in 101-120 Commercial St
Nanaimo, BC V9R 5G6 [phone]. It serves all gluten-free cakes, pastries, bread and the
like. Gluten is a protein component found in grains like barley, wheat, rye, etc. It consists of two
parts- gliaden and glutenin. People are concerned about gliaden and do not want this protein to
be present in their food.
The following report summarizes the fact as how an increase in the manufacturing cost of a
bakery has affected the pricing and the customer base. The customers will bear the increase in
the cost, as now they will have to pay more prices for the same thing (Cauvain, 2015).
The number of customers of the bakery in Nanaimo is 30-40 daily on an average basis and the
average demand for each customer is two packets of gluten-free bread and 1-2 pieces gluten-free
buns and pastry.
Price Increase Strategies
Two alternative price increase strategies have been devised to retain the customer and increase
the customer base-
Complementary Pricing-the bakery has decided to apply the complementary pricing strategy in
order to survive in the competition and retain the customers. It is a method where price of an
item is reduced and the price of another is increased in order to compensate. The bakery has
decided to introduce coffee in a lower price range and increase the price of its baked goods. This
will attract the customers to come into the bakery for the coffee and they are likely to purchase
the higher priced item as well because bread is a necessity (Amit, Zott, 2012)
Customer Loyalty Discounts- the bakery has decided to offer discounts to its loyal customers.
This will retain the consumers and new customers will be given free vouchers increasing the
consumer base. This will help the bakery to sustain and give a strong competition to its rivals
(Lu, Wang, Wu et al., 2017).

External and internal factors affecting these strategies-
The external factors include the competitors, suppliers and consumers, and economical factors.
The competitors will now try to implement various strategies to compete and sustain the
business. The consumers are aware of inflation leading to the price increase hence will not think
much about the increase. The economy is stable and thus will not cause any harm to the baking
industry if they decide to increase their prices.
The internal factors refer to the marketing strategies, manufacturing costs and the types of
products. The bakery is introducing new and attractive products, which will appeal to the
customers. The fixed costs are the labor costs, electricity, and cost of the machines. Variable cost
is the cost of the raw material; gluten-free flour (Balassa, 2013).
Recommendations
 The bakery can spend more of its profits on advertising to gain new customers.
 The reason of price increase should be mentioned clearly, so consumers do not have a
doubt.
Conclusion
Thus it can be deduced that if Nanaimo café introduces the above two pricing strategies and
keeps the external and internal factors stable, then it will be able to retain its customers and
sustain the competition inspite of the increase in the price of the main raw product which is the
gluten-free flour.

References
Amit, R., & Zott, C. (2012). Creating value through business model
innovation. MIT Sloan Management Review, 53(3), 41-49.
Balassa, B. (2013). The theory of economic integration (routledge revivals).
Routledge.
Cauvain, S. (2015). Bread: the product. In Technology of breadmaking (pp. 1-22). Springer,
Cham.
Lu, T. Y., Wang, S. L., Wu, M. F., & Cheng, F. T. (2017). Competitive Price
Strategy with Activity-Based Costing–Case Study of Bicycle Part
Company. Procedia CIRP, 63, 14-20.