Problem
You own a boba smoothie store. Your line up of smoothies is similar to those offered at Jamba Juice or Juice It Up. The difference is, you have different kinds of boba (small boba, big boba, jelly, pudding) to offer as add-on to the smoothies.
You need to decide how much your menu items should be.
This is a simplified calculation of how you determine the retail price of this product. Retail price is the price you will charge the customers. There are 3 questions (A, B, C) to answer and a chart to fill.
I. Take into account the price your main competitors are charging
A. Name 3 competitors
B. List the Retail Price of those competitors
i. Competitor 1's prices
ii. Competitor 2's prices
iii. Competitor 3's prices
C. Decide on the pricing strategy for your product. Do you want to be at a Premium Pricing? Competitive Pricing? Lower than Competitor?
i. What is your pricing strategy? The question here is strategy, not the actual price.
ii. Why is this strategy best for you?
D. What is the actual Retail Price you will be charging? $___________ . Indicate range of prices if you have a range.
E. If you have several sizes, list the sizes and the prices for those sizes.
II. Work out the math.
A. First, fill in the "Researched Costs" column. Do the research to identify Fixed Costs, Variable Costs, and Cost of Goods. Indicate how much Profit you wish to make.
B. Once Research Costs are done, go back and calculate the "Running Balance". Use the hint given to help you with the math
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Item Name
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Researched Costs
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Running Balance
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Retail Price - Your Price to customers
Price of your best-selling smoothie with regular boba, medium size
How many do you intend to sell per month? Be realistic. Write the total.
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(1) $
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hint: same as (1) $
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Fixed Costs based on research
rent
utilities
equipment
loan
etc.
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(2) $
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hint: (1) - (2) $
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Variable Costs based on research
salary
promotion (advertising)
etc.
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(3) $
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hint: (2) - (3) $
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Cost of Goods based on research
cups and straws
ingredients to make the drinks
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(4) $
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hint: (3) - (4) $
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Desired Profit
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$ or % of Retail Price
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Left over balance $
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III. Analyze the result.
A. What was your initial Desired Profit amount?
B. Doing the math and looking at the Running Balance, is there any Profit to be made with this Pricing you have set forth for your product? How much was the Profit?
C. What was the Cost of Goods based on your research?
D. What was the Running Balance after subtracting Variable Cost? How much did you have left for the Cost of Goods?
E. Where are you procuring the ingredients for your drinks? How are they rated in terms of giving you quality goods?
F. If you want to make more Profit, what do you need to change?
You still need to take into consideration the brand image you need to adhere to, whether it be the cheapest, moderate or premium brand.
G. Identify 3 actions you would need to take to ensure your Retail Pricing is the best scenario for your business.