It was and still is seen as normal that fair-trade products are sold at a higher retail price than non fair-trade products. Due to this higher retail price the sales rates of fair-trade companies, such as Day Chocolate, are not as high as those of non fair-trade companies who obtain their resources at debatable prices. Therefore, Day Chocolate decided to sell their products at the same retail price as their non fair-trade competitors. Consequently, they enabled buyers to have the feeling of being ethically responsible without having to pay more than usual. This convenience assists customers to exchange the products of established brands for those of an alternative fair-trade brand.
The strategy used by Day Chocolate is the penetration pricing strategy. Penetration pricing is a technique that uses a low price to attract new customers to eventually achieve a high turnover rate (Monroe 2003). However, it will only create revenue if customers are willing to substitute their regular products for fair-trade products, which is, luckily for Day Chocolate, a tendency that was initiated a few years ago due to consumers becoming more aware of environmentally and ethically responsible consuming. To conclude, the penetration pricing technique enabled Day Chocolate to establish themselves in the (fair-trade) chocolate market and, due to the rise of customer awareness, to achieve a high turnover rate.
A major problem that Day Chocolate faces is the fact that the demand for fair-trade products is highly elastic, because of inexpensive non fair-trade alternatives. According to Alfred Marshall: “the elasticity (or responsiveness) of demand in a market is great or small according as the amount demanded increases much or little for a given fall in price, and diminishes much or little for a given rise in price". Here, highly elastic demand means, that a slight increase in price could lead to a considerable loss in sales and vice versa. Therefore, Day Chocolate had to establish a bond with their customers to ensure that their customers will keep purchasing their products even if the price would rise. Knowing this, Day Chocolate started to participate in social networks such as Facebook and Twitter and the company even has its own Youtube channel. Nowadays there is no better way to establish and maintain relationships with customers than through the internet. By doing this, Day Chocolate created a unique bond not only between the company and its customers, but also between its suppliers and customers, so to overcome the problem of high elasticity of their fair-trade products.
Reflection:
I found the whole series of steps quite time-consuming, and not applicable to every assignment that we have to write. But there are some steps that, individually, can be very helpful to all future assigments.
Reflection:
I found the whole series of steps quite time-consuming, and not applicable to every assignment that we have to write. But there are some steps that, individually, can be very helpful to all future assigments.














