5/2 Peer Review
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GROCERYDELIVERYSERVICEby4.3.docxGROCERY DELIVERY SERVICE (Pricing, Promotion & Distribution)
Jothi Prakash Manneni Chengalraya
Indiana Wesleyan University
James Dobben
01st December 2021
Analysis of Current Pricing Models in the Market
The main source of revenue for all the competitors in this Grocery delivery services segment is from membership fees, markup prices and delivery charges. The membership prices of the current competitors are as below ( Brian Martucci , Grocery Delivery Services):
· Amazon - $119/year.
· Door Dash - $96/year.
· InstaCart - $99/year (Sachin Sharma, July 6, 2020).
· FreshDirect - $129/year (Sally Kaplan, FreshDirect).
· Shipt - $99/year.
The peak time pricings implemented by companies will compel the customers to buy a membership.
Competitors get their fair share of the revenue from Markup Prices; it plays crucial role in their revenue. Companies like Amazon has flexibility to alter their markup prices flexibly because of their customer loyalty and their expanded operation area. Whereas smaller companies have to position their prices according to circumstances and the Stores they deliver from.
The minimum cost for free delivery is another influencing factor. The current delivery fee for non-members is ( Brian Martucci , Grocery Delivery Services):
· Amazon - $ 5.99 for orders below $ 35.
· Door Dash - $ 5.99 + service charge ranging from $ 5 - $ 8.
· InstaCart - $ 3.99 for orders below $ 35 (Sachin Sharma, July 6, 2020).
· FreshDirect - $ 5.99 general free (Sally Kaplan, FreshDirect).
· Shipt - $ 5 for orders below $ 35.
Normally companies follow value pricing to attract customers. Companies provide discounts on offer days and Bulk orders. Waving off the delivery fee for subscription orders etc. are some of the pricing strategies they use to expand their customer base.
Companies also offer credit services by themselves and through third-party vendors, this provokes the customer to make a purchase they don’t have a budget for. It also helps to implement “pay-monthly” services which would render useful to the customers ( Chris Scott , June 20, 2019).
Recommended Pricing Strategy for JGJ Inc.
Since JGJ Inc is going to enter a saturated market, it should have a segment disrupting pricing at least during the initial stages. This helps to draw the customers attention towards the company by offering lower prices. Penetration Pricings like these also come with their own share of risks since they inflict an income loss to the company. In the case of the membership price, the company could offer an annual membership below $100 for the initial rollouts but they can increase prices in the coming years to showcase the position of the company in the market.
JGJ Inc. can also go with value/economy pricing to target a huge segment of the current customers. Where they can decrease the pricing on essential commodities and generic items whereas pulling the pricing up a notch for premium products. People won’t bother to pay a slight increase in the premium segment if they are attracted and attached to the general. This can be implemented outside the product segment by reducing the minimum price for free delivery or giving them perks in case of completion a said number of purchases or a specified price quota per month. Observing the current pricings, the minimum price needs to be brought down to $ 30.
Once the company has penetrated into the market and acquired a well-established customer base the prices could be normalized while retaining the existing customers since they’ll be attached to the ‘emotion’ that is the company.
Analysis of Current Promotional Models in the Market
Normally amazon does not sell product; they sell their convenience and process. Same way, since all the other competitors would also be having the same products on their shelves and their main selling point would be their service rather than their products.
The major outreach for all big companies is social media and television ads (These are a thing of the past but sometimes specific ads on the television could be profitable too). The user validation is another major tool used by the company; word of mouth is the best way of reaching your end target customer. User reviews and ratings that unique to the company play major role in increasing its reach.
All the current competitors have their own individual sale days in a year or every six months with eye-catching deals and price cuts in their products. This helps to capture a new segment of potential users. This rapid increase in traffic is converted to consistent buyers over time.
The companies use digital channels exclusively providing the customers with the best experience possible. They pitch their ease of use as their Unique Selling Proposition (USP). The method they opt to rectify their pitfalls and shortcomings will play a major role and this will greatly affect the in gaining customer’s trust. The customer’s concerns and complaints on their respective channels are dealt with quickly and efficiently.
Invite links, Affiliate Links, Gift coupons etc., are used to make the customers invite other potential customers to the platform by themselves. This also gives the customer a slight benefit in terms of offers and discounts.
The one common ruling factor in terms of promotion and overall development is the fact that all the platforms are extremely technology-driven at the core. Using the immense amount of usage data to understand consumer behavior and various in-depth insights. These results are used to devise Marketing strategies specific to people groups and locations.
Recommended Promotional Strategy for JGJ Inc.
From analyzing the current marketing strategies of the competitors JGJ Inc. must identify and cater to a specific market group in its initial stage like working people, Students etc., come under this category.
JGJ Inc. must conduct most of their marketing campaigns on social media. This would help them to reach out to many customers and cut down marketing costs.
They must have an Inviting, simple and sophisticated app. The ease-of-use factor can greatly influence the customer reach. People tend to use an application more than a website since its more feasible, so designing a good application will help a lot.
Based on initial consumer behavior analytics, discounts can be provided for popular products which are purchased by many customers. Pricing is lower than the competitors will amp up the traffic to the platform. If it is impossible to cut down the margins, JGJ Inc. can provide people with incentives to purchase more, in order to be eligible for an offer. Bundling up commonly purchased products is another possible solution, since it allows the company to increase the average cost of sale.
Since there are many ‘monthly-once’ grocery shoppers creating huge demands towards the peak selling period, knowing the period during which maximum orders are places will allow the company to create a sense of urgency your customers are subconsciously expecting.
Default monthly orders or subscription type products are a great source for a steady income for the company and maintaining its customer base. Lower prices for these subscription type models will attract customers to it (Isaiah Bollinger, June 5, 2014).
Analysis of Current Distribution Models in the Market
When it comes to distribution, big companies like Amazon have their own warehouses whereas small companies act more like a middleman where they procure products from a partner and deliver it to their end customer.
Having an own warehouse could have a major impact on the quality control and processing, and then end prices could also be fairly positioned in benefit of both the company and the customer. These centralized distribution centers help in faster delivery speeds, lower transportation costs.
Most of these companies target inner cities and metropolitan areas. Very few extend to less populated areas.
Companies also adopt various technologies that provide distribution such as automation in a warehouse to perform a specific functionality that may require tedious human resource. This helps to free up employee time and increase the speed and efficiency of the work. Inventory management also helps these humongous amounts of goods to be transported, stored and delivered to the end customer.
Recommended Distribution Strategy for JGJ Inc.
The major cities have lot of delivery services, the opportunity for JGJ Inc. lies in areas outside of inner cities, where people have very less delivery options available to them, and restaurants found it harder to grow their customer base.
JGJ Inc. must focus on local producers and limit the number of middlemen between the sources and the consumer. This will help the company to regulate pricing and also to maintain the quality of the products. Since JGJ Inc. is a new company instead of a warehouse styled distribution system they should opt for a Producer-Consumer bridging service.
They can have localized distribution centers to store extra produce when it comes to locally procured products. These centers can be maintained by the company directly or made to be franchised. The company should use E-commerce as their main distribution channel.
Integrating the app with cloud-based distribution services helps the customers to plan beforehand and make their orders. This also helps the company to maintain a steady supply of resources which in turn improves overall accessibility and flexibility (Lindsey Jenkins, Distribution Strategy).
References
1. Sachin Sharma, July 6, 2020, Instacart Pricing Model and Strategy, https://oyelabs.com/instacart-pricing-model/
2. Brian Martucci , Grocery Delivery Services – How They Work, Cost & Benefits,
https://www.moneycrashers.com/grocery-delivery-services-cost-benefits/
3. Sally Kaplan, FreshDirect, the online grocery store that makes food shopping incredibly easy, https://www.businessinsider.in/insider-picks/news/i-order-my-groceries-from-freshdirect-the-online-grocery-store-that-makes-food-shopping-incredibly-easy-heres-what-its-like/articleshow/77135197.cms
3. Chris Scott , June 20, 2019, How to choose a pricing strategy for your small business
https://quickbooks.intuit.com/r/pricing-strategy/6-different-pricing-strategies-which-is-right-for-your-business/
4. Isaiah Bollinger, June 5, 2014, 7 Promotion Strategies Every Business Should Be Using, https://trellis.co/blog/7-promotion-strategies-every-business-should-be-using
5. Lindsey Jenkins, Distribution Strategy: Choosing Among The Cutting Edge Distribution Strategies, https://www.selecthub.com/enterprise-resource-planning/cutting-edge-distribution-strategies/
