Introduction
The Peloton Bike is an innovate stationary bicycle that allows the user to take part in exercise classes streamlined remotely from Peloton’s studios. Below is a marketing plan that the company should adopt in order to penetrate the Chinese market (Wu & Xue, 2017).
Price Determination
In order adequately determine the price of peloton bikes in the Chinese market, the cost of the following logistical factors have to be put into consideration: –
Shipping and Transport Costs
The cost of shipping a 20foot container of products from the US to China is $277 and $377 for a 40-foot container. The port charges for dry cargo in china is free as long as it is collected 7 days after it has been offloaded from the ship (Ruan, Hang, & Wang, 2016). A trucking company to transport the containers from the port to the warehouse should be commissioned. The cost is $400 per truck-load of two containers. The company is responsible for transportation and loading/offloading charges as well as transporting the containers to the railway station enroute to the targeted cities. Transportation to various cities can be made through containerized rail transport which is not only faster and efficient but also less costly than via road (Zhang, Zhang, Duan, & Bryde, 2019).
Insurance Costs
All shipped containers are insured by the shipping company against any loss or damage through negligence and/or accidents. The company should insure its products against various risk factors once they have arrived in china (Ma, Zhang, & Wang, 2016). Insurance costs for an inbound container by rail is $140 per unit to any city in China while the insurance for the products will vary according to how many risks the company is insuring against.
Customs Duty
Standard customs duty (VAT) for all imports into china is 17% of the CIF (cost of the product from the factory plus shipping and freight charges) value of the product. In addition, an import duty of 9% of the product is also applied on all imports into the country (Ma, Zhang, & Wang, 2016).
Wholesale and Retail Markups and Discounts
In order to set competitive prices for both wholesale and retail market, the company should do a price survey of similar products which are already in the market and use the findings to set the prices. For instance, the retail price of similar bikes is around $1,195 per unit even though most of them don’t have the online interactive feature (Ruan, Hang, & Wang, 2016). The same concept should be applied when setting the wholesale price as well.
Discounts can be offered for buyers of two and above units and introductory offer prices of $1,100 given to the first 500 customers in each city.
Company’s Gross Margins
After all accumulated costs of manufacturing, shipping, duty, insurance, transport and other logistical costs have been factored in, the gross cost of each bike unit is roughly $650. When this is subtracted from the unit cost ($1,190), the gross margin is $340 (Wu & Xue, 2017). Tis amount is not inclusive of such costs like promotions, salaries and other recurrent expenses.
Retail Price
The retail price should be set around prices of similar products. The company can then market the product as a superior one in terms of capacity and enjoyment but costing the same as similar products. An introductory retail price can be set at $1,190 (Ruan, Hang, & Wang, 2016). This price will be low enough to entice the new market and high enough to cover the company’s operating overheads and still enable it to make a profit.
References
Ma, L., Zhang, X., & Wang, G. (2016). Identifying the reasons why users in China recommend bike apps. International Journal of Market Research, 59(14), 767-786.
Ruan, Y., Hang, C., & Wang, M. (2016). Government׳ s role in disruptive innovation and industry emergence: The case of the electric bike in China. Technovation, 34(12), 785-796.
Wu, F., & Xue, Y. (2017). Innovations of bike sharing industry in China. Mobike’s station-less bike sharing system, 34(23), 121-134.
Zhang, L., Zhang, J., Duan, Z., & Bryde, D. (2019). Sustainable bike-sharing systems: characteristics and commonalities across cases in urban China. Journal of Cleaner Production, 97(23), 124-133.