PRICING STRATEGY AS COMPETITIVE STRATEGY OF SELECTED MILK TEA SHOPS

Introduction

A pricing strategy is a model or method used to establish the best price for a product or service. It helps
you choose prices to maximize profits and shareholder value while considering consumer and market
demand

Pricing strategy refers to method companies use to price their products or services. Almost all
companies, large or small, base the price of their products and services on production, labor and
advertising expenses and then add on a certain percentage so they can make a profit. New businesses
are frequently confronted with unique obstacles. To get a small business off the ground, several tactics
have been employed in the past, such as discovering product strengths, altering pricing, or acquiring
another business. Entrepreneurs can attain success by understanding and skillfully implementing these
techniques.

Milk tea can refer to a wide range of teas and tea-based beverages from around the world. Milk tea is, at
its most basic level, a tea with milk in it, yet how these delectable beverages are prepared varies from
country to country and area to region. To lessen astringency and create a mellow, balanced cup of tea,
milk (and sometimes a sweetener like sugar or honey) is frequently added to robust black teas.

Milk tea became a huge sensation thanks to its wonderful and unique spin on a supposedly traditional
drink. Milk tea's appeal among teenagers can also be related to the fact that it is a convenient beverage.
It's just as satisfying to eat it in a café as it is to eat it on the run.

Milk tea is a bizarre food craze. Milk tea popularity is at an all-time high 11 years after it first came on
our shores. The number of milk tea aficionados continues to rise as more milk tea shops open their
doors, each with a comprehensive selection to ensure that everyone may find their ideal cup.

Why is it vital to know the pricing strategy of selected milktea shops?

Literature Review

Milk Tea

Maurice O’Sullivan Foods 2021 stated that Milk tea is a famous drink that has been heavily consumed
since 2011. This study aimed to determine the combination of milk tea attributes that were most
preferred using a Conjoint Analysis Approach. Specifically, this study utilized different attributes such as
the size of tapioca pearls, sugar level, price range, brands, type of milk tea, cream cheese inclusion, and
the amount of ice. Conjoint analysis with the orthogonal design was utilized to evaluate the preference
of milk tea among consumers. The results showed that pearl size was the attribute most considered by
consumers (29.137%), followed by sugar level (17.373%), the amount of ice (17.190%), the type of drink
(13.421%), price (11.207%), and the least considered were cream cheese inclusion (9.525%) and the
brands (2.147%). The findings of this study will be beneficial to milk tea firms about consumer
preferences regarding the various attributes of milk tea. Finally, the result of this study could be
applicable to different beverage-focused studies worldwide.

Lindsey Goodwin 2021 stated that The term "milk tea" refers to any tea drink with milk added. It can be
as simple as a splash of milk in a hot cup of tea, or it can be a complex recipe including various
ingredients, like the popular bubble tea. Adding milk mellows and smooths out the flavors of tea,
particularly some of the bitter notes found in black tea. Milk tea is enjoyed throughout the world as both
a hot and cold beverage.

The Milk Tea Alliance is a term used to describe an online democratic solidarity movement made up of
netizens from Thailand, Hong Kong, Taiwan and Myanmar.The concept originally arose in response to
the increased presence of Chinese trolls and nationalist commentators on social media, but has now
been described to advocate for improved democracy in their own respective countries. Milk tea was
seen as a symbol of anti-Chinese solidarity as it is believed that tea is historically consumed with milk in
these countries while in China it is not. Australia has also been suggested to be a member of the Milk
Tea Alliance, however the relation to milk tea is tenuous with the milk product Aptamil standing in for
an actual variety of milk tea in imagery.

Pallabi Munsi, writing in OZY, described the Milk Tea Alliance taking on 50 Cent Party and Little Pink as
"Asia's volunteer army rising against China's internet trolls."The "Milk Tea Alliance" moniker emerged in
2020 after Chinese nationalist Internet commentators criticised the Thai actor Bright for "liking" an
image on Twitter which referred to Hong Kong as a "country", and called for a boycott of his TV
programme. Some Twitter users in Taiwan, Hong Kong, and the Philippines joined Thai users in what The
Telegraph called "a rare moment of regional solidarity".Following the 2020 China–India skirmishes India
has also been included in some formulations of the Alliance with masala chai being their representative
variety of milk tea.

Dini K. 2021 stated that he grew up drinking tea, especially milk tea. As a result, He always been picky
about their teas. While hot tea was a staple for a kid, the adult prefers iced tea variations, like this
bubble milk tea.This delicious drink originates from Taiwan (much like dalgona coffee). The name
possibly comes from the bubbles that are created by frothing the milk tea, or from the chewy tapioca
pearls that are like “bubbles” in the tea. This drink is also known as Hong Kong style boba milk
tea.Whatever the origins of the name, the drink is now a favorite everywhere! There are many different
versions of bubble tea. Earl grey tea, matcha tea, other green teas, oolong tea, jasmine tea and even tea
bags with fruit flavors. Some of these are mixed with milk to make milk tea, and others are served
plain.Taiwanese milk tea is made with black tea. The strong tannin flavor in black tea is an important
factor here.
Chinese breakfast tea (Chinese black tea) is the usual choice for this bubble milk tea, likely due to its
Taiwanese origins.

WHAT IS THE STATUS OF MILK TEA IN THE COUNTRY

Driftus stated that In 2008, It has been a decade since milk tea was introduced in the country. the first
milk tea store opened in San Juan City, and since then, Filipinos were drawn towards this tasty drink. ...
With its delicious and different take on a supposedly typical drink, milk tea became a real hit. The
popularity of milk tea among youngsters can also be attributed to it being a convenient drink.

Pricing Strategies

1. Penetration Pricing Strategy When a small business utilizes penetration pricing, it sets a low
price for its product or service in the hopes of increasing market share, which is defined as the
percentage of sales a company has in the market compared to total sales. The fundamental goal
of penetration pricing is to attract a large number of customers with low rates and then keep
them through various marketing methods. A tiny Internet software distributor,
Rick Suttle 2019 stated that for example, might establish a cheap pricing for its items and then
send monthly emails to consumers with new software product offers. A small business will work
hard to service these consumers and earn their loyalty.
2. Price Skimming Strategy is a pricing technique in which a corporation sets its prices high to fast
recoup costs for product development and advertising. The main goal of a price skimming
approach is to make a quick profit
According to the article "Pricing Strategy" on NetMBA.com, companies frequently utilize price
skimming when they lack the financial resources to create things in large quantities. Instead, the
corporation would use the cash infusions to fund new product development and marketing.
3. Product Life Cycle Pricing Every product has a lifespan, which is referred to as the product life
cycle. The introduction, growth, maturity, and decline stages of a product's life cycle are all
steadily progressed through. A small business will normally keep prices higher during the growth
stage, when sales are rising.
Rick Suttle 2019 stated that customers will likely pay a greater price if the company's product is
unique or of higher quality than competing products. In the early stages of its development, a
company may have a novel technology that is in high demand.

4. Competitive-Based Pricing
Customers will likely pay a greater price if the company's product is unique or of higher quality
than competing products. In the early stages of its development, a company may have a novel
technology that is in high demand.Suttle 2019 stated that When purchasing paper plates, foam
cups, or a picnic, individuals frequently shop for the lowest price when product differentiation is
minor. As a result, a small paper manufacturer may have to decrease its prices or risk losing
prospective sales.
5. Temporary Discount Pricing
 Small businesses may also utilize temporary discounts to boost sales. Coupons, cents-off deals,
seasonal price reductions, and even volume purchases are all examples of temporary discount
pricing tactics.
Suttle 2019 stated that for example,To minimize product inventory, a small garment
manufacturer may provide seasonal price reductions after the holidays. A buy-two-get-one-free
offer is one example of a volume discount.

Competitive Strategies

Taitea stated that Employees interact with customers to sample products and teach them about the teas
that they sell. Employees provide recommendations to customers who want to try different tastes. They
will gain a competitive advantage as a result of this experience.

Problem Statement

1.What kind of pricing strategies do the milk tea shops use?

1.1 Penetration Pricing Strategy

1.2 Price Skimming Strategy
1.3 Product Life Cycle Pricing
1.4 Competitive-Based Pricing
1.5 Temporary Discount Pricing

2.What are the reason(s) for choosing the pricing strategy?

2.1 to increase profit

2.2 to increase market share
2.3 to have better recognition among consumers.
2.4 to bring new costumers into store
2.5 to gain a competitive advantage.

3. How do you evaluate a pricing strategy?

3.1 checking your gross margin

3.2 (gross profit divided by sales).
3.3 High-value companies most often have high gross margins.

4. What are 3 C's of pricing?

4.1 your cost to offer the product to consumers,

4.2 competitors' products and pricing,
 4.3 perceived value that consumers place on your brand and product vis-a-vis the cost.

5.What is the pricing process?

5.1 demand
5.2 willingness and capacity to buy the product.

Purpose Statement

The purpose of this study is to collect data on pricing strategy as a competitive strategy used in milktea
cafes. The goal of this study is to figure out what price methods are used in milktea businesses as a
competitive tactic. The researchers want to know what those pricing strategies are.

Everything about how your product is received by the market is influenced by its price. As a result, it's
vital to comprehend the significance of price strategy. A pricing that is too low may not generate enough
interest or provide a sufficient profit margin. If you set the price too high, you risk losing the interest of
your customers. Pricing is significant because it establishes the value of your product for both you and
your customers. It's the measurable pricing point that tells customers if it's worth their time and money.
Your pricing methods may have an impact on your long-term profitability.

Theoretical Framework

HarvardSaif, N.M.A., 2018.

The most influential studies on standardization argue that world markets have been harmonized and the
customers from distant parts of the world increasingly demand and prefer similar products through low-
cost positioning, low prices and high-quality offerings (Jain 1989; Ohmae 1985). In the perspective of
standardization, for the firm pursuing a global marketing strategy, marketing processes and programs
have been standardized across different national boarders in regard to the product offering,
promotional mix, pricing strategy and distribution structures. However, as for studies that favours the
concept of adaptation in pursuing the global marketing strategy toward advancing firm performance
calls for the differentiated approach of marketing strategy.

The fundamental tenet of global marketing strategy for the model developed in this study is that the
international marketing process and program of the company should be either standardized or adapted
to markets depending on the customer requirements. There are two concepts to which marketing
strategy components such as product offering, pricing, promotional mix and channels of distribution
should be based on to achieve firm performance. The two concepts are standardization and adaptation
to which the global marketing strategy is streamlined toward the scope of performance regarding sales,
financial and customer. The foundation of the research model of this current study is based on the
theory that marketing strategy plays a critical role on firm’s performance in the global market that is
vastly supported by the study of Zou and Cavusgil (1996). Next, the research model is purposively
developed to explore whether marketing strategy should be based on standardization or adaptation to
attain firm performance across national boundaries.

Research Simulacrum

Profit
Maximization
Pricing Strategy
Increase
Customer
Retention

Figure 1: Research Simulacrum

The illustrated diagram above is how the researchers foresight how pricing strategy influences
profit maximization and the increase of customer retention. Excellent pricing strategy are labeled by the
researchers as the independent variable. With improved pricing strategy comes with direct and positive
impact on profit margin and improved customer experience. The researchers therefore labeled profit
maximization and increase customer retention as the dependent variable since it is changed by several
aspects by the independent variable.