Carvel Case Analysis

Options

In order to improve sales, one option Beijing Carvel has is to launch new products, namely, the ‘Little Love’ and ‘Piece of Cake’. As for ‘Little Love’, no direct competitor has a similar size product to compete with it. The target price of it is 68 RMB, since both 6 and 8 are the lucky number is China and 68 suits the numerical sequence of product’s price well. Its ‘purchase risk’ is comparatively low in the ice cream cake category since Beijing Carvel’s cake prices were reduced 10 to 20 percent to be more compatible, and its price is the lowest among since Beijing Carvel’s cake product category. The ingredients the ‘Little Love’ used is only 75% of a 8’’ Classic Cakes, but it sells at 87% of 8’’ Classic Cakes’ price which means it generate 12% more margins than 8’’ and 10” round Classic Cakes. It can be predicted as the best seller among the Classic Cakes. There are also problems behind this new product: even the target price is set as 68 RMB, the market response to this product remain uncertain and due to its distribution structure, the average cake prepare time is more than 24 hours, but Chinese customer normally prefer buy those products that they can actually see. If Beijing Carvel don’t increase the investment on distribution system, it may lose a large portion of potential customers. As for ‘Piece of Cake’, it’s also the only product in the market in terms of small size. The purchase risk is low and it offers a new experience that no competitor can give. If location is chosen properly, it can be the best way to reach out the target market including professionals, kids and expatriates. The potential risk is also lie in the distribution system, as this product been launched; the demand may soon exceeded the capacity of Wangfujing production facility or can’t be delivered in time. In both new product cases, if the perceive of market did go well, the drop in prices would not be beneficial overall if their sales do not increase.

Price adjustment is...