Marketing Plan

(a) Pricing Method:
The pricing method used by the company is Cost-Plus Pricing, also known as Mark-up Pricing.

Explanation:
In cost-plus pricing, the selling price is determined by adding a fixed percentage (mark-up) to the total cost of producing a product.
It considers all production costs (both fixed and variable), and then adds a profit margin to ensure profitability.
The key issue here is that cost-plus pricing ignores market factors, such as competitor pricing, customer demand, and willingness to pay — which is what led to losses for Golden Ice Cream Ltd. when competitors entered the market.

(b) Advantages of Cost-Plus Pricing:

• Simplicity and Ease of Calculation:
  This method is straightforward to use. Once the cost of production is known, a fixed profit percentage is simply added to determine the price. It does not require complex market research or data analysis.
  Example: If the cost of one ice cream is Rs. 20 and a 25% margin is applied, the selling price is Rs. 25.
• Ensures Cost Recovery:
  By including all costs (raw materials, labour, overheads, etc.), the business ensures that every unit sold contributes to covering expenses and generating profit. This helps in avoiding losses, especially in predictable and stable markets.

Limitation to Note:
Cost-plus pricing ignores:

• Market conditions
• Competitor strategies
• Customer demand

Which makes it risky in dynamic or highly competitive markets — as seen in the case of Golden Ice Cream Ltd.