ProductThe products, that I’m going to introduce on a market are custom-made cakes for special events such as: Weddings, birthdays, christenings, anniversaries and the variety of other celebrations. It is very specific niche market product and is much different to producing cakes on a big scale. My products are tangible products, because you can actually touch them, smell or eat them. However, the benefits of my products, that my customers will receive are intangible, because they cannot be measured. The type of production method, that is going to be used to make my cakes is going to be a job-production method, because all of my cakes will be different to each other and unique as they will be made according to specific individual needs of my customers. My product is going to be reliable and will be used by my customers for a certain purpose. It will also comply with all hygienic certificates and quality control methods, which ensure the high quality of the cakes produced, and that they’re safe to be consumed by my customers. It is going to be innovative in terms of the new design used in my cakes, in order to keep up with continuously changing trends on the market such as: changes in fashion, general changes in customers’ tastes, especially for various flavours used in cakes. Quality is going to be another, very important issue for “Victorio cakes’. Before the product is actually introduced on the market, there will be created a Total Quality Management Control scheme for my cakes, which will make sure that the quality of my products is checked throughout the whole production process. This also means, that I will be making sure the ingredients I buy for my products will always be fresh, and the method that will be used to make them will be satisfying all International and British Food standards. Packaging, a big part of which is likely to be decoration of my cakes, is very important for the cakes that my business will be producing, because the look of the cake, according to my research given below, is one of the main factors which affects customers’ choice on whether to purchase my cakes or not. The life cycle of my product should also be paid a particular attention, because in my case it is going to be in the first stage of the product life cycle- Development.At this stage, I will be doing my market research in order to find about my main competitors, the prices they charge and the variety of products (cakes) they currently have on the market. At this stage I will be looking at all different designs used by my competitors, in order to create my own, unique design for “Victorio Cakes”. My initial costs at this stage are also likely to be relatively high, because the sales and demand are likely to be relatively low.
In the long term my product is going to go into the second stage “Introduction” at which it will be actually introduced on the market, and I will start promoting and advertising it, in order to increase the popularity of “Victorio Cakes” and increase the demand for my cakes. As soon as people find out about “Victorio Cakes” and start to buy some from me, I expect my sales to start rising due to a higher demand, and I also expect my production costs to start decreasing.
Below is the analysis of the market research, which I carried out to find the group of my potential customers, their gender, whether or not they would like to buy a custom-made cake or whether they have done it before and who they bought it from, what kind of occasions they would like to order my cakes for, what size, flavour and shape they would like to order, how long would they be willing to wait for the cake to be made and many other details used by me to decide where to locate my business, what price to charge and what promotional offers to introduce in order to increase sales of “Victorio Cakes”.
From this table it can be identified, that the largest proportion (52%) of the people I’ve asked in my questionnaire who would like to buy custom-made “Victorio Cakes” were people between 16 and 19 years old. I expect that this group of people tends to have more parties and special events than the older group of people between 20 and 25 years old. However, the group of people between 20 and 25 happened to be 16%, of all the people I’ve asked. Another 12% were people below 16 years old, which is also a very important group of my potential customers. The fourth largest group of people who would be interested in buying my cakes, were people between 26 and 30 years old, who happened to be 7% of all people I surveyed. 6% of my respondents were people between 31 and 40 years old, 3% between 41 and 50, 2% between 51 and 60 and the same percentage of respondents were over 60. This, therefore, suggests that as the age of my respondents increases, they’re less people who would like to buy my cakes. This may also mean, that my potential customers might also be people of a younger age rather than older. In addition to this, I will assume that as people become older, they might be less tend to buy custom-made cakes, because due to a certain number of factors:
Therefore, from the information, given on my diagram it can be concluded, that I should pay attention to what all people said, however, I will pay an extra attention to these three groups of the people I’ve asked as they may well be my potential customers in the future, and if they’re their opinion will be of most importance, because they form up the largest group of my potential customers- 80%. This also suggests that I will target my promotional strategy at people those people younger than 16, 16-25 and 20 to 25, in order to make it more effective.
From this diagram it can be clearly seen, that 69% of all my respondents said, that they had purchased a custom-made cake before, and 31% hadn’t. This suggests, that I need to take into the account, that 69% of my respondents already had some experience of ordering custom-made cakes and, therefore, initially might expect something of a better quality from my cakes. They do already know some of my competitors, who they can alternatively order the cakes from, so I will have to be very careful and make sure that my quality and design of my cakes and the customer service are up to a high standard which are also expected from my competitors. My products will be no worse, because otherwise I will lose my customers, as they can easily switch to my competitors.
From the diagram on the left it can be clearly seen from what particular competitors my respondents bought their custom-made cakes from. It shows, that 38% of my respondents buy their custom-made cakes from Wendy’s Cakes who is my main current competitor. The second most popular custom-made cake producer amongst my respondents was “Gerry’s Cakes” with 23%, and the third one was “Marks & Spencer” with a 19% share of my respondents. This information suggests, that “Gerry’s Cakes” and “Marks & Spencer” also have relatively strong positions in the popularity amongst my respondents. Although these figures have been obtained from 200 people, which is a relatively small sample, this information might be very similar to the real market share figures. Although the popularity of the previously mentioned three custom-made cake producers was relatively high, “Cake Bytz” maintained a very low position of 1% amongst my respondents, which suggests that it’s generally not as popular as other cake producers. However, again, this data was based on a sample of 200 people, which means there could have been a certain degree of inaccuracy. It is very interesting to see, that 19% of my respondents put other firms as their choice, which suggests that there might be some new custom-made cake producers already existing on the market or maybe new firms coming in the market, which become increasingly popular amongst my respondents, and I’ll carry out some further research to find out who they are. Therefore, the information, obtained from this diagram suggests, it can be seen that there are three main, most popular custom-made cake producers amongst my respondents and that there’s one- “Wendy’s Cakes’ who dominates with the largest share of 38%. This means, that I will take a closer look at the range of products produced by Wendy’s Cakes as well as other custom-made cake producers and their pricing and promotion strategies or techniques used, in order to help “Victorio Cakes” keep up with an increasing competition on the custom-made cake market.
From the diagram shown on the left it is evident that 57% of all my respondents would prefer to order to a 12 inch cake. Although this data has been obtained from my questionnaire sample of 200 people, this information suggests that I will set 12 inches as a standard size for all of my cakes. 32% of my respondents preferred to order 10 inch cakes, which I will also make one of the possible options of the sizes offered by “Victorio Cakes”. 9% of my respondents chose a 6 inch cake I will still offer as an option for my cakes, however, I will specialise more at producing much bigger cakes, because this way I will have to buy less tins of the 6 inch size, which might help to reduce some of my production costs. 2% of my respondents chose other sizes of cakes such as small, muffin size cakes, which I will actually start producing in the long term, in order to offer a wider variety of products to my customers and potentially increase the demand for the smaller cakes pproduced by “Victorio Cakes’.
The diagram, shown above, identifies the percentage of my respondents who would prefer to a certain type of shape of the cake, if they were to buy it. So, from the diagram it is evident, that the most popular shape amongst all my respondents happened to be a circular shape (36%), and the second most popular shape was rectangular (25%). 20% of my respondents chose other shapes of the cakes such as heart shape, a bear shape or anything else, which shows that quite a many of my respondents prefer a complete individuality. 19% of my respondents chose a square shape of the cake. Based on this information, I would like to conclude, that although there are all different tastes and opinions about the shapes of the cakes, the percentage popularity for each of the cake shapes are relatively similar, apart from the most popular circle shape. Therefore, I’m going to offer all different kinds of shapes of the cakes to my customers, but I will mainly concentrate on the several such as circular, rectangular, and square shapes. This suggests, that although I will be producing all types of the shapes, I will concentrate on producing circle and rectangle shapes of the cakes and the other ones upon a request, which still gives me a flexibility to make them, but I will be able to prepare circular and rectangular shape cakes in advance, if necessary.
On this diagram, it is clearly shown, that the percentages preference given by my respondents to each of the flavour for the cakes are almost equal, apart from Vanilla flavour which had the least percentage preference by my respondents. 28% of all respondents chose a fruit cake, which is the most expensive cake to make for “Victorio Cakes” and which is likely to have the highest price, comparing to the other cakes which will be produced by “Victorio Cakes”. This means, that to a certain degree, I will be able to specialise at producing the most expensive, fruit cakes, which is likely to bring most profit to “Victorio Cakes”. 27% of all the respondents chose a chocolate flavour, which isn’t as expensive to make as fruit cakes, however it is quite popular. 25% of my respondents said chose a strawberry flavour and this gives an almost the same percentage of preference as for the chocolate and fruit cake flavours. Although, vanilla was left out with the 20% preference, I will still be offering it as one of my possible flavours for the cake. However, I will specialise at producing and offering Fruit, Chocolate and Strawberry flavours.
This diagram, based on my market research, shows what are the most important factors for my respondents when they buy a cake. For the majority or 48% of all respondents it is actually how the cake tastes. For the next 39% of my respondents, it is how the cake actually looks like, for the minor 7% of my respondents it is how much the cake costs, and for the least 6% it is some other factors. Therefore, this diagram suggests that I’m going to make sure that “Victorio Cakes” both look and taste good. However, due to the fact that for majority of my respondents the most important factor is the taste of the cake, I’m going to concentrate or specialise at making tasty, deep in flavour cakes. However, I will not forget about such important factors as how much the cake costs, in order to keep my products and “Victorio Cakes” itself competitive on the market. I will also do some research on what the other important factors when buying a custom-made cake are, and whether or not I will be able to take these factors into the account and help “Victorio Cakes” make ideal cakes, which will suit every customer.
On this diagram it is clearly shown how the preference about the best way to purchase “Victorio Cakes” has changed between all different respondents in accordance to their most preferred methods of purchasing products and maybe personal habits. 50% of my respondents said, that they would rather order a custom-made cake from “Victorio Cakes” on-line. To a certain extent this is good for my business, because this will encourage the orders to come through much quicker, than if the phone or direct contact was used. However, this also means, that I will have to create a website for “Victorio Cakes” on which I will not only be promoting and advertising my cakes, but also receiving orders from some the certain customers. Creating a website will also lead to an increase in my initial or set up costs, as well as fixed, because I will have to pay a monthly charge to the company which will be hosting “Victorio Cakes” website on-line, and also further equipment might be needed. 38% of all respondents said that they would rather buy “Victorio Cakes” products directly from Birmingham. This is actually quite good, because it will be much cheaper for my business, because I won’t have to go anywhere or spend extra money onto creating a website for “Victorio Cakes” or anything like that. This is also likely to be more efficient and will lead to a better understanding of how my customers will want their cake to be made, because there will be a direct contact with the customers, and there is likely to be an opportunity to discuss each order in details. 12% of my respondents did actually say, that they would prefer to order custom-made cakes from “Victorio Cakes” via telephone, which is also likely to be much cheaper for “Victorio Cakes” to do, than creating a webpage. However, there’s a higher chance that the information might be misinterpreted, or the sole trader might not be aware of what some particular needs of his potential customers are.
This diagram identifies different periods of time that my respondents are prepared to wait for the cake to be made. From this diagram it can be clearly seen that the majority (57%) of my respondents are prepared to wait up to a week for their cake to be made, which gives me enough time to make sure, that the cake is ready, that everything my customers would like to have is included, decorations are done and that it’s made up to a high quality standard. 19% of my respondents said that they were willing to wait for up to 2 days, which doesn’t give me as much time to prepare a cake. However, by asking this question I wanted to find out the percentage or proportion of the respondents who would like a cake to be made urgently or in a very short period of time. 19% is quite reasonable, and therefore, I will prepare some cakes that will be already made and stored in the fridge so that decoration will only be needed which will save my time to make a cake. Although, 2 days gives me very little time to make a cake, these cakes will be sold much faster, which means more cash inflow in a short period of time into my business, which is good, because business like “Victorio Cakes” will need some operating cash to buy raw materials such as ingredients and decorations for cakes. 11% of my respondents said that they were willing to wait for less than 2 days. This also means that out of all my respondents there are a certain percentage of people who might potentially be able to pay an extra amount of money for the cakes to be made in less than 2 days. Although, this will cause some costs and difficulties for my business in terms of storing already made cake bases. This might also affect the quality of my cakes, because they will be stored in a fridge and might not be as fresh, as if they were made, decorated and delivered the next day. This also suggests, that due to the fact that 30% of my respondents are prepared to wait for 2 days or less, I will have to spend time making sure that short-term ordered cakes are made first to obtain some cash inflow, and there’s also some time spend on the preparation of those cakes, for which I’ll have a longer period of time to make. Another 11% of all respondents were willing to wait for up to 2 to 3 weeks for the cakes to be made, which gives me even more flexibility and time to make sure that these cakes are of the highest standard, exclusively made in accordance to individual needs of my customers. 2% of my respondents said that they were willing to wait for up to a month, which is a very small proportion of the respondents I’ve asked. Although these likely to be very expensive cake orders for such events as weddings which means they’re going to bring more profit into my business, it will actually take longer for the money/cash to come into my business, which doesn’t give as much flexibility as with a short-term cake orders.
Price In order to decide what price I’m going to charge I have first worked out what prices my competitors were charging for the similar products, worked out the average price charged by my competitors. Below are the diagrams and calculations, showing my results:
From this table it can be clearly seen, that the average price per 10 inch fruit wedding cake is relatively high. However, this data was based on the prices charged by my main four competitors excluding other companies on the market. There’s also a certain degree of inaccuracy, because some of the figures are anomalies as some prices charged by two of my competitors are considerably higher than those prices charged by the other two. This has therefore affected the overall outcome of the average price. In addition to this, I have also conducted my own primary research from which I’ve also found what prices my respondents were most likely to pay for my cakes. The results of my primary research are given below:
From the diagram given above, it is evident that the largest proportion of my respondents, that is 34%, is prepared to pay a price ranging from £61 to £70. This is a relatively high proportion of my respondents which may identify that my potential customers might also be able to pay a premium price of this type of cake. If we look at the second largest proportion of my respondents, 24% of them are prepared to pay from £51 to £60 per 10 inch fruit wedding cake. If we add the percentages of two groups up, we will obtain a result that 58% of all my respondents were prepared to pay the two highest price options for my cake. If we then look at the lowest price option that I had set, we will see that 21% of my customers are prepared to pay from £40 to £50 for my cake. 21% of my respondents chose ‘Other’ as a price option, but even if assume that those other 21% were not prepared to pay such a high price, we obtain a result that 79% of my respondents were prepared to pay a price from £40 and higher, which is likely to bring from £29,26 of profit per cake, because the cost of making one 11 inch fruit cake was calculated to be £10,74.
From this table it is evident, that the prices that my respondents were prepared to pay for a fruit wedding cake were, to a great extent, lower than those charged by my competitors which had more than halved the price, that my respondents were prepared to pay and the price charged by my competitors. This also suggests that the prices charged by my competitors are too high, because very few of my respondents were prepared to pay such a high price for a fruit wedding cake, even though it would be custom-made, which that these might prices might be too high for their potential customers as well. There are different pricing strategies that businesses use to sell their products most effectively, and I have chosen to use a ‘Skimming’ price strategy, because it allows to charge high prices at first, which should help to cover my initial costs, also find out how my customers will react to such prices and how it will affect their demand for my cakes. After “Victorio Cakes” business achieves economies of scales and covers its initial costs, I will decrease my prices to encourage more sales and increase demand for my cakes. Therefore I will set my initial price to be £55, which covers the cost per cake, which takes into the account most anomalies and should, in theory, encourage the demand from two groups of my customers- those who are prepared to pay a price between £51-60, and those who are prepared to pay from £61 to 70 per cake. After the period of development and introduction of the product in the market, my customers are likely to become less excited about it, and therefore, less likely to pay such a high price. Usually customers are prepared to pay a premium price, when a firm or a product is new to the market. ‘Skimming’ as a pricing strategy will be used by “Victorio Cakes” in the short term only. I will charge higher prices in the short term, mainly because my customers should be able to pay them and due to the initial high costs of setting up my business.
The analysis of my other price diagrams and price preferences from my respondents to the other sizes of cakes are given below:
From this diagram it can be clearly seen, that the largest percentage of my respondents (33%) in this price category were prepared to pay from £10 to £20, which was the lowest price option that I had set. This could be due to the small size of the cake, for which some of my respondents are not yet prepared to pay a higher price. It is strange, because the second largest percentage (29%) of my respondents were prepared to from £31 to £40 which was my third, most expensive price option. 25% of my respondents were also prepared to pay from £21 to £30 per 6 inch fruit wedding cake. If we add the percentages of the second and third, two largest groups of my respondents it, we will get a result of 54% of all respondents are prepared to pay a price from £21 and higher, up to £30 or £40. This, therefore, means that the largest percentage of my respondents were actually prepared to pay a much higher price for my cake than the first 33% of respondents. Therefore, for a 6 inch fruit wedding cake, based on my primary research, I’m going to set the price of £30, which will still cover my cost per cake and bring £19,26 of profit, because the cost of making one cake fruit cake approximately 11 inch size is £10.74. In theory, it should be even lower, because not as many ingredients will be needed, which should bring even more profit or save some of my ingredients to make other cakes. This means, that my product is still profitable when sold at this price, and should in theory encourage the highest percentage of my potential customers. However, this is going to be my short term price strategy for this particular type of cake, because as soon as it helps me to achieve economies of scale, I’m going to decrease its price down to £20 to encourage more sales from the lowest percentage of my potential customers who have not yet been prepared to pay a higher price. It should also be taken into the account, that I’ve based this pricing strategy on the results obtained from my respondents who might actually not be my potential customers in the real market conditions. The prices set had only been estimated, which presumably my potential customers should be prepared to pay, however, they might not be. From my diagram, it is also evident that 13% of my respondents had actually preferred to pay another price for my cake, which should be also considered, as they might or might not be able to pay a high price for my cake.
From the pie chart on the left side, it can be clearly seen that the largest proportion of my respondents as on the previous price diagrams, were 30% who were prepared to pay from £91 up to £100 per 12 inch fruit wedding cake. This might actually identify the principle, that as the cake gets bigger, the proportion of the respondents who are prepared to pay the highest price option either increases or decreases slightly. There were 29% of the respondents, who were prepared to pay the highest price option per 6 inch cake, and there were 34% of the respondents who were prepared to pay the highest price option, and there were 34% of the respondents who were prepared to pay the highest price option for the biggest size option (12 inch), which identifys what I’ve just said. It is strange though, that there were only 13% of the respondents who were prepared to pay the second highest price option between £81 and £90, which means there was only a small minority of people in my questionnaire who were prepared to pay the highest price option, but the majority prefers to pay a lower price. 25% of my respondents were prepared to pay from £70 to £80 for my cake, which although is a relatively low proportion, if we add the percentages up, we will get 68% of all respondents who prepared to pay a price £70 or higher. If I consider my cost per cake, although it’s a cost per 11 inch cake, and it would be slightly higher for a 12 inch cake, it is £10,74 whereas my price was from £70 and higher. If we work out the margin that I will get from selling one 12 inch cake, it would be £70 - £10,74= £59,26 or higher. This is a very large proportion of the price. If I look at how the proportion of the margin, that I receive per cake increases in relation to an increase in size of the cake, it will be at least:
£19,26 for a 6 inch cake £29,26 for a 10 inch cake £59,26 for a 12 inch cake
This directly affects the profits that I receive, although some additional costs have to included and subtracted from this margin. It is possible to see, that as the size of the cake increases, costs increase slightly. However, the margin that and potential profit increases to a large extent, as the size of the cake increases. This also means, that in the long term I could decrease my prices dramatically by e.g. £10 for a 6 inch cake, £15 for a 10 inch cake and by £20 for a 12 inch cake. This will likely to boost my sales up, but I will still receive a relatively large proportion of that price, that may cover all costs and essentially become my profit. This long-term pricing strategy will allow me to charge the lowest prices on the custom-made cake market, without having to dump and sell my products below the cost of producing. In the end, I have decided that I’m going to charge £55 per standard 10 inch cake, because I want to have a high price to cover my costs as well as a high demand for my products. This price was based on both of my secondary and primary market research, and according to my predictions, this pricing strategy is likely to encourage more customers. Although my questionnaire was only based on the sample of 200 people, 100 males and 100 females, these figures and diagrams identify that my potential customers are prepared to pay a premium price for my products. Almost anyone in the UK is likely to buy or try a cake at some point in their live, but how special will the person feel if he or she gets a personal cake, maybe designed by his/her friends. If a person wants to buy a normal cake, he or she may choose to go to the supermarket like “TESCO” and buy a cake for £13.34. This will be a cheap, tasty, well made cake, but it will be an of the shelf cake. Those cakes that I’m going to introduce on the market are going to be custom made and this will be a big difference from what you can buy in the shop, for that I will expect my customers to pay a premium price.
Although my products will be positioned in a premium class and will not be cheap, the demand for them is likely to be relatively elastic, due to competitors and changing economic and political patterns on the custom-made market. Potential ability to charge such low prices as I will actually help my business survive or compete very strongly on this market.
|
From the pie chart on the right it is evident, that the most popular event for which my respondents would like to order a custom-made cake is birthday with a 47%, which is almost a half of all my respondents. This suggests that I will make my business specialise at producing birthday cakes only. The second most popular event amongst my respondents was Christmas (27%), which also suggests that to a certain extent I will concentrate on producing Christmas cakes. E.g. concentrating on producing two types of cakes such as birthday and Christmas cakes may not only help my “Victorio Cakes” to specialise, but increase its sales, become more efficient and decrease its costs of production, because I will only have to buy the ingredients needed to make these two types of cakes, and I won’t have to buy any other cake tins apart from those for birthdays and Christmas. The third most popular event, for which my respondents would order a custom-made cake was wedding (14%). Wedding cakes are more expensive to make, so my business may, for example, specialise at producing birthday and Christmas cakes, and make wedding cakes on request, although not specializing at making wedding cakes only. It is evident from the diagram that 10% of my respondents would order a custom-made cake for anniversary, which suggests that I will have to buy some cake tins for the anniversaries and create designs for the cakes which can be used for anniversaries. 2% of my respondents chose other events, such as a cake after to celebrate graduation from school or university. This might also be an interesting thing to consider, e.g. making cakes for schools or after graduation parties. From the information, provided on this diagram, I will conclude that there are various events which I should be aware of and be able to make certain cakes upon a request. However, there are certain types of events, for which custom-made cakes are more popular and demandable than for others, so I will have some cakes already prepared or have prepared designs for certain occasions, which should reduce my production costs and the time it takes my business to make cakes.
