J Salon Ltdthe team:Ng Jia Ying, Mustaqim, Yong Kun JieLew Si Ying & Nicole GohDAC 01

Agenda

About J Salon Ltd

J Shampoo

J Bundles

Factors affecting pricing

Pricing approach

Summary

About J Salon Ltd

• Established on 1 January 2012• J Salon Ltd owns both J Salon (313@Somerset) and J

Manufacturing (Tanah Merah Industrial Park)• J Manufacturing produces the best selling, J

Shampoo• J Salon provides high-end yet affordable hair service

bundles, rendered by trained professionals from U.K.• Plans to venture the business network overseas by 2017

J Shampoo

• J Shampoo, one of the top selling products in the company

• Formulated by a team of well-known local researchers• Mixture of aloe vera and honey extract that strengthens

hair roots while providing a glossy finish• Able to cater to common hair problems such as damaged

and greasy hair as well as eliminates dandruff

J Bundle

J Bundle ServicesBundle Cut + Wash + Treatment

• Consumers like to do treatments to pamper their hair• A popular and profitable bundle

Factors affecting pricing (product)

Competitors ConsumersProduct

Differentiation

Cost

Cost Data

Item Total for the year ($)Direct Materials Spring Water 2,870

Ammonium Lauryl Sulphate 4,438.80Citric Acid 84.60Sodium Benzoate 231.20Aloe Vera and Honey Extract 9,112Container 3,931.20

Direct Labour Workers’ Wages 40,320Mfg Overhead Maintenance and Repairs 1,940

Utilities 6,435Indirect Materials 610Property Taxes 3,000Depreciation - Factory Building 20,000Depreciation - Equipment 12,000Depreciation - Delivery Van 2,500Insurance 9,000Indirect Labour - Supervisory 21,120

TOTAL 137,592.80

Pricing Approach

Why Psychological Approach?

• Uses the perception of consumers to price products “cheaper”

• Conveys better value • Influenced mind-set of consumers allows price to be

marked at the lowest possible price but is still value for money

Pricing of product after

pricing approach

$ 49.90

Why not cost-plus approach?

High cost production

Ignores demand

Missed Profit Opportunities

Why not competitor-based approach?

Priced unfavourably

Ignore production costs

Eliminates competitive disadvantage

Price easily mimicked

Factors affecting pricing (service)

Competitors

Consumers

Cost

Cost Data

Item Total for the year ($)Direct Material J Shampoo 16,212

Treatment Lotion 229,632Direct Labour Worker’s Wages + Commission 83,804.30Mfg Overhead Indirect Materials 1,095

Utilities 6,609Maintenance and Repairs 2,743Indirect Labour – Supervisory Salary 33,600Hair Steamers 1,600Backwash Shampoo Units 1,000Furniture and Fittings 1,000Professional Equipment 1,100Rental 180,000Insurance 40,000Staff benefits 2,500

TOTAL 600,895.30

Pricing Approach

Service

Competitor-based

Cost-plus

Market-oriented

Why Cost-PlusApproach?

• Simplicity in calculations• Requires little information and revenues• Sets a higher price for our hair treatment services,

assuring profits• Majority prefers quality yet value for money hair

treatment services

Pricing of service (bundle)

after pricing approach

$ 188

Why not competitor-based approach?

• Not suitable for our higher-end hair treatment services provided

• Risky on long-term basis

Why not market-oriented pricing

• Hugely dependable on fluctuating market rate; very risky

• Have to consistently be updated on market rate and adjust to meet the needs

Pricing approach

Psychological approachCompetitor-based approachCost-plus approachMarket-oriented approach

Final pricing $ 49.90 $ 188 (bundle)

In summary…

Factors affecting pricingProduct Service

CompetitorsConsumersProduct DifferentiationCost

First pricing $ 50 $ 78 (bundle)

Thank You