Marketing aspects of gross cash flow high level formation on emerging service markets due to premium price positioning

First of all it is necessary to determine that in this paper the “gross cash flow” will be understood as the difference between cash receipts and payments of the company over a certain period.

At the same time it is expedient to highlight the main assumptions, underlying the current theoretical and practical approach.

First, it is important to consider that nowadays is a significant number of strategies on the issue of determining the optimal quality of goods and services. Here it is essential to specify that according to the branding theory two types of quality are distinguished. That is the quality of the producer which is determined by defined specifications, terms of production, and official national standards, and consumer quality that is the ability of a product or service to meet a client’s expectations. Undoubtedly in this work «the quality» should be understood as the client’s quality. Moreover the quality itself should be constantly high, both comparing to competitors and in absolute terms.

Second, the most important criteria for the possibility of using premium pricing is the implementation of an aggressive marketing policy. Permanent holding of advertising and PR-campaigns using traditional media and new media tools to promote active involvement at the point of sales. Development and implementation of loyalty programs, brand building, staff training comparing to the highest standards in the industry, and the application of guerrilla marketing techniques. At the same time an accurate differentiation — deviation from competitors, where one of the key factors can be non-standard high pricing, is needed.

Third, when selecting a price level it is necessary to apply a market approach assuming that the cost enables resort thereto. In setting a premium price, one should determine the average price of similar services in the market, as well as the sales volume relating to them, as well as whether competitors use maximizing profits at the expense of high turnover approach or a marginalized approach. Estimate the market size and the ability to open up new market segments, as well as to compete in the substitute products sector.

In the fourth place it is significant to determine the optimal cost level while forming the cost value allowing both to maintain quality at a high level and to keep the costs within the limits that would guarantee an appropriate level of gross cash flow.

Fifth, duplicating the idea is critical. After working through the mechanism on the example of an individual cluster. It would be effective to develop the concept as a network model that will allow on the one hand to copy already achieved ​​approaches and results, and on the other hand to save on scale. Another important positive aspect of the expansion will be the strengthening position of service brands.

In general, due to the control of the five variables listed above that is: quality, marketing policy, prices, costs, and scale. It is possible to maximize the level of gross cash flow by bringing it to the significantly higher market average, which will be discussed later in this paper.

Before understanding the exact level of quality acceptable by the consumer it is important to clarify the requirements of the consumer. First it should be understood what exactly the value of the product to the consumer is. What is meant by the abstract wishes of the consumer? Such as: «comfortable sofa», «tasty coffee» or «economical washing machine».

The next task at this stage will be a comparison of the general characteristics of the product with these requirements and their subsequent measurement. Thus «comfortable sofa» can be converted to the requirement of «a high-backed sofa», «sofa with soft seat», etc., and a wish of «good coffee» — in a «chocolate-flavored coffee», or «coffee with cream», etc. Thus the main objective, which is to define the product demanded by consumers, with the necessary parameters and the level of quality, most likely would be satisfied.

In the next phase every demand of the consumer should be analyzed and optimized in order to fulfill them later in the product completion. An important step is the selection of such quality parameters previously identified that will not only meet the requirements of the consumer but also ensure the competitiveness of the product in question.

The above activities’ result is the manufacturer’s ability to develop a product that will meet all the consumers’ requirements both in terms of assortment policy and perceived quality.

As to the possibility of the premium price formation. It should be noted that today in a highly concentrated and competitive market it is impossible not to use an aggressive marketing strategy. All measures to attract the target audience such as advertising, PR, custom event activities could be defined under an aggressive marketing strategy. The focus point of such a strategy should be: Uncommon, catchy, and partly shocking to break the usual stereotype, of images and ideas. However many companies using an aggressive marketing strategy is faced with a major problem. The lack of a tangible competitive advantage. This entails imitative embellishment of a product or service, and is often just consumer fraud. This is unacceptable, all the information of this unit must conform to reality otherwise the buyer will feel that he has been deceived.

The focus of differentiation may become the unusually high price for this segment. It is no secret that the qualitative goods or services are offered at industry-standard prices. For many consumers, prices is directly associated with quality. Many believe and that is often wrong and that high prices indicate excellent quality, innovative products and accessories for the buyer of a particular social caste. Not always the price include only financial costs, on the contrary, it can also enable and pay for this «illusion». The illusion of elitism and inaccessibility to certain categories of buyers. Such filling of belonging to a particular product exclusive class of goods among its competitors partly gives birth to such unconventionally high prices. Undoubtedly it would be wrong simply to raise the price with no changes.

Among other things the high price implies service at a better level that in the service sector, for example, it involves not only the presence of functional skilled staff, but also deep knowledge in their field of activity, as well as a sincere wish to help the customer with worthy and practical advice. This underline the need for some Russian companies to become aware of the need for additional training and to organize their own staff training programs, with the objective to increase the knowledge and improve the skills of their employees, for example, the company JSC «VimpelCom» opened its own «University» [2] lately.

A dangerous moment in the development of a brand is the copying of the proposed product or service from others. Thus, according to Jean-Noel Kapferer «Any innovation associated with the brand, inevitably accompanied by plagiarism. Any rapid success becomes the standard to which customers quickly become accustomed». [2, p.45] Strategies should be in place to retain their positions at the achieved levels, and to constantly improve their own results, because only then consumers will trust them and will return to a brand and will be ready to pay the non-standard high price.

Within the framework of this paper a survey of Moscow’s coffee shop prices during 2013 was performed by the author. The results are in the next two tables.

Table 1

Hot beverages price study at Moscow’s coffee-shops

Table 2

Study of single beverage prices at Moscow’s coffee shops

According to the surveys based on the author’s research it can be concluded that: All coffee shops offer same menu, and the same drink, «Americano», this drink has the constant ingredients — coffee and water. Cost of ingredients according to the results of the survey varies slightly.

Thus, we can conclude that the coffee shop chain «Coffeemania» generates a high level of gross cash flow in the coffee market as a result of sufficiently high price; while trying to keep the costs within the market average, which in its turn is driven by the Executives’ wish to differentiate their services, to be distinguished among other similar coffee shops, to attract more potential paying customers, and due to the high level of service and product quality in their establishments to make them regular visitors.

References:

1.                 Jean-Noel Kapferer. The new strategic brand management. Creating and Sustaining Brand Equity Long Term, М.: Vershina, 2007

2.                 http://job.beeline.ru/life/univer.wbp