Comportamiento Del Consumidor

Price of a Scent


Introduction

The insight, an unmet demand for high quality and exclusive personal and home-care products which the customer will feel identified with. The company, a start-up conceived by Andrea, an Argentine ex-mannequin and actress, with some previous experiences in the cosmetics and perfumes’ market. The value proposition, six lines -each with an original fragrance-of 8 products, consisting of perfume, body lotion, shower gel, soap, salts, candles, room spray and linen spray, all produced with the highest quality ingredients and materials, offered together with exclusive accessories such as leather bags and silver brushes, all presented in a chic store in one of the top neighborhoods in Buenos Aires. Our job is to design a pricing strategy for the mostrepresentative product of the company, the perfume.

The task of pricing a perfume is not an easy one. A perfume is part of emotional, rather than rational needs; it is used by women, and men, to highlight their personality, to affirm their presence, to cause a sensation, to feel and transmit sensuality, character, strength, femininity or even a sense of belonging. How can we price that? Ourproposal is to address this matter using the concept of economic value created for the customer, paying attention to how this product and company differentiates itself, for better or worse, from its competitors, how the customers value the attributes in which it is different, and how much of that value the customer will be able to perceive.



Recommendation

With competing products presenting awide range of qualities and prices, from $30 pesos colonies to $250 pesos premium perfumes in fragrance stores, the options for pricing strategy for this product are numerous. The challenge is to design a pricing strategy that allows the company to enhance the value created and capture a considerable portion of it, paying close attention to how this pricing strategy will interact with the company’spositioning.

First of all, we will present an overview of the factors that most influence the definition of the price strategy we are recommending.

Context

During the last four years Argentina has reached an average annual of growth of approximately 8%[1]. Consumption is growing together with this economic expansion. As noted by Nielsen[2], consumption in 2007 increased 40% with respectto 2001[3].

Consumption has increased on all levels, including the market of luxury goods. Since 2003, sales of luxury goods have increased in 32%. Market research evidences that this increase is due mainly to argentine customers who are responsible for 60% of purchases (purchases made by tourists account for the remaining 40%)[4].

The cosmetic segment follows the same trend. Accordingto the Nielsen study, during December 2007 and January 2008 there has been a 6.4% positive variation of the basket of cosmetic and bath products in comparison with the same period in the previous year. Observations of the segments of cosmetics and bath products taken separately, point to the increase in consumption of the latter of 6.1% and 6.9% for the former[5]. The survey for the period ofJanuary to November 2007 reveals that the trend in the consumption of these products is reflecting in most of stores and boutiques throughout the country. The cumulative study for November 2007 states a 6.9% increase in the basket of cosmetic and bath product goods in contrast to 2006. [6]

From a qualitative perspective, it is also very interesting to note that argentines increasingly seek for andtrust in national design and manufacture, evidence of this is the last edition of the Buenos Aires Fashion Week (BAFWeek) held in February 2008 and which attracted more than 50.000 visitors[7].



Competitors

Argentinean Perfume Market is highly competitive, mainly due to a large variety of perfumes available, which includes local and international brands, popular and exclusive, cheap and...