Dissertation Topic: “What Is the Best Strategy to Set Prices in the Online Market in China for Food and Drinks?”   

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Table of Contents

Abstract 4

1.0 Introduction. 6

1.1 Background to the Study. 6

1.1.1 Penetrating Pricing. 7

1.1.2 Value Pricing. 8

1.1.3 Bundle Pricing. 9

1.1.4 Psychological Pricing. 10

1.2 Objectives of the Study. 11

1.3       Research Questions. 11

2.0 Literature Review.. 12

2.1 Pricing And Marketing Strategies. 12

2.2 Pricing Based On the Prevailing Conditions. 18

3.0 Research Design. 22

3.1 Justification of Research Design. 28

3.2 Ethical Issues. 30

3.2.1 Privacy. 30

3.2.2 Anonymity. 31

3.2.3 Informed Consent 31

4.0 Research Results and Findings. 31

4.1 Results. 31

4.2 Findings. 34

a) Research Findings on Credit Ranking. 35
b) Research Findings on Consumer Ranking. 37
c) Availability. 41
d) Location. 44

5.0 Conclusion and Recommendations. 46

5.1 Conclusion. 46

5.2 Recommendations. 50

References. 52

 

 

Abstract

Pricing is a critical factor that influences the purchasing decisions of consumers. This dissertation is centered on this reality, and it seeks to identify various factors that set the prices of drinks and food in the Chinese online market. To this end, this dissertation asserts that online vendors in China should have a comprehensive understanding of the various pricing strategies before selecting the most profitable and effective strategy. Pricing strategies are important tools that enable companies to find ultimate success on how to maximize profits and sales. This study highlights penetrating pricing, bundle pricing, psychological pricing and value added pricing as some of the commonly used pricing strategies. Before setting prices, vendors have to consider the prices that the competitors have set for their products. In addition, the research established that consumer willingness to pay for a certain product was pivotal in setting online prices for drinks and food in China. Ultimately, the best strategy to sell drinks and foods in the Chinese online market is through a mixture of strategies that should be reviewed regularly.

In order to achieve the desired objective, this study employed a mixture of quantitative and qualitative research design. The study invoked the use of a five scale likert questionnaire in order to gather numerical data on the set of factors used to set online prices on food and drinks in China’s market. Online interviews conducted through computer assisted telephone interviewing (CATI) was used   to gather descriptive data. By employing the CATI system, the researcher was able to remove data entry process in the study because answers are directly recorded on the PC. The study’s population comprised of 280 respondents. In this study, the researcher employed multistage sampling technique. As a result, multistage sampling enabled the researcher to arrive at a sample size that can be managed. In this wisdom, the researcher used purposive sampling to select www.taobao.com – an online selling platform that attracts over 90 percent of online consumers in China. On data analysis, the researcher used SPSS (statistical Package for Social Sciences) to analyze data.

In addition, the researcher presented the findings using tables and charts.  The study established that there were four elements that play a critical role in determining the price to be set for drinks and food in China’s online market. These four factors include the availability, location, credit rankings and consumer ratings. This study mainly recommends that firms engaged in online food and drinks industry in China should adopt a number of pricing strategies that can be revised on regular basis to match market needs.

 

 

 

 

 

 

 

 

 

 

 

 

1.0 Introduction

1.1 Background to the Study

China is one of the rapidly expanding and lucrative markets in the globe. The booming Chinese market is underpinned by the steady rise of household income. In economically developed cities such as Shanghai and Beijing, the mean disposable income is over 26,000 Yuan (Kimpel and Friedrich, 2015, p.54). Improved standards of living have shifted the focus of many Chinese shoppers from satisfying basic demands to pursuing advanced quality of life, establishing substantial opportunities in the exotic Chinese foods and drinks.  The Chinese luxury food and drinks market has huge potentials, but it is not fully developed. More foreign food and drinks have arrived in the Chinese market, but they still face the hurdle of breaking into the industry. It is worth noting that an increasing percentage of Chinese consumers are starting to care about the quality and safety of their food and drinks and as a result, they are willing to incur additional costs to ensure the quality of the product is at its best.  The Chinese food and drinks market is expected to surpass the $ 1.6 billion this year (Zhao, Zhao and Deng, 2015, p. 271). Consequently, the promising future, high profit margins and more added value for brands are luring all the food and drinks entrepreneurs in China.

Price is one integral component of the marketing mix that creates sales revenue. The price of a product is a critical determinant of the sales volume. Theoretically, Repetti, Roe and Gregory (2015, p. 710), consumer perception on the value of the product on sale is the real determinant of price. The opinion of the consumer about pricing is crucial as it reveals the value that they ascribe to the product. In online markets, consumer perceptions are expressed through consumer rankings, or reviews. Higher ratings of a product is due to the positive consumer perception and consumers will be more willing to purchase the product even at a higher price because it is perceived to be of higher quality.

One of the objectives of a pricing strategy is to gain market share. In order to gain significant market share in the Chinese online market for food and drinks it is critical for the vendor to lower the prices of the products. The objective here is to maximize the number of online subscribers accessing the products, even though the profit margins remain significantly lower on each consumer (Coulter and Krishnamoorthy, 2014, p. 265). Another objective of pricing is to survive in the market.  Survival is a worthy objective. Sometimes enterprises reduce prices in order to generate substantial revenue to survive for a short period. However, this tactic is not ideal for long term survival of the venture (Kimpel and Friedrich, 2015, p.59). There are several strategies that can be used to determine the prices in the online market in China for foods and drinks.

A significant number of people, across the globe, will visit a food and drinks joint at least once in their lifetime.  However, other than paying for the products, what do consumers consider in terms of the price of the product on the menu?  What influences how much a consumer pays for a drink or food? Food and drinks restaurant employ several pricing strategies, but the most used strategies in online market include penetrating pricing, bundle pricing, psychological pricing and value pricing.

1.1.1 Penetrating Pricing

This is a marketing tactic in which an enterprise offers new merchandise at a significantly lower price than its rivals (Florin, et al., 2009, p. 781). This strategy is appropriate for the food and drinks industry in China since it allows the vendor to gain a large customer base and market share. This strategy if often used when a company is offering a new product in order to encourage consumers to try it out. Penetration strategy can be used to set prices in the Chinese online food and drinks industry in two ways. First, the vendors can offer their new merchandise through their online stores at prices significantly lower than the completion with the hope the consumers will make repeat sales after the initial purchase. In this strategy, the vendor is willing to cut the profit margin as long as there is a general rise in the number of consumers visiting their site. Second, penetration pricing works well when the consumer is penetrating new geographical markets. The entrepreneur assumes that by underselling, the business will be able to outdo the competition and after gaining significant number of loyal customers, the business can begin to increase the prices slowly (Florin, et al., 2009, p. 781).

In addition, penetration pricing can be used by online food and drinks wholesale distributors to break into new markets. For example, a carbonated drinks manufacturer may wish to expand its consumer base; consequently, it offers extremely reduced wholesale prices to food and drinks restaurants to carry its merchandise for a specific length of time. The restaurant can sale the carbonated drinks at a considerable profit margin during this period and use this time to evaluate whether the soft drinks are a good value for their consumers (Ansari and Siddarth, 1996, p. 86). After the discount time is over, the wholesaler can now negotiate for higher wholesale prices with its retailer who is now loyal. Penetration pricing is suitable for setting online prices for food and drinks in China because it takes the advantage of word of mouth advertising, enabling satisfied consumers to spread the word about the suitability of the product prior to the increase of the price.

1.1.2 Value Pricing

Value pricing is the acme of pricing strategy. To customers, price is a numerical value assigned to the worth of a given product (Liu, Zhang and Tang, 2015, p. 397). For instance, a customer can get coffee from online store A at ¥ 5, or go to online store B and buy one for ¥ 10.  If the customer only cares about taking coffee, online store A wins, but since the consumer cares about quality brand, online store B wins. The willingness of the consumer to pay is contingent upon the value that the consumer place into the merchandise he/she need and want, which is influenced by multiple varying aspects of the customer’s situation and psyche. Value pricing, essentially, cuts through the bureaucratic procedure of this situation to influence the actual willingness of a target consumer to pay for specific merchandise.  Regrettably, most pricing methodologies and strategies forget about the consumer. Instead, vendors justify pricing policy by simply adopting prevailing market prices or depending on internal reasons. It is worth noting that consumers are not interested in the price of a commodity that a particular shop offers in relation to its competitors, they are in interested in the value they get from that product.

Value pricing demands significant amount of research. However, unlike competitor based and cost plus pricing, it is difficult to fabricate a figure that accurately reflects how customers feel. Additionally, unlike pricing achieved through market norms, value based pricing technique focuses on distinguishing qualities that isolate the merchandise in question from other similar products on the market.   A successful value based pricing require the vendor to carry out an analysis of rivals products, because the data will enable the vendor to identify the other option that is open to consumers. This data is critical for arriving at an informed decision about profit maximizing price.

1.1.3 Bundle Pricing

Bundle pricing is a strategy in which vendors sell a set or package of products for a reduced price than they would bill if the consumer bought the items separately (Ansari and Siddarth, 1996, p. 87). Value drinks and food at restaurants are common examples of bundle products in the food and drinks industry.  Pursuing a bundle pricing in China’s online food and drinks segment allows a business venture to increase its profit margins by giving consumers a discount.

Bundle pricing is anchored on the concept of customer surplus. Every consumer has a price that she/he is willing to part with for a particular product. If the online prices for food and drinks in China are set at lower than what the consumer is willing to pay, the consumer will buy as he/ she sees the price a good bargain. The variation between what the consumer was willing to pay and what the consumer pays is referred to as consumer surplus in economics. The main objective of bundle pricing is to capture the consumers’ surplus (Ansari and Siddarth, 1996, p. 89). Bundling pricing is suitable especially when the vendor is unable to gather data on which product consumers prefer. By bundling the product, the vendor is able to sale both products at a cost that the consumer is willing to pay and subsequently, raise revenue from each consumer. Bundle pricing allow online consumers to quickly order No. 5 or No. 9, instead of separately order fries, a drink and maybe a sandwich.

1.1.4 Psychological Pricing

This is the practice of setting the price of a product using odd numbers, in the belief that the consumers will treat these prices lower than they really are (Demirdjian and Senguder, 2004, p. 353). This pricing strategy is anchored on the belief that consumers process the price of a product from the left to the right digit, as a result, they ignore the last digits. For example, an online vendor in China can set the price of sandwich at ¥ 49, rather than ¥ 50. The use of psychological pricing has become commonplace in today’s business environment. Consequently, by setting prices a fraction higher than those charged by rivals might result in an increased decline in unit sales volumes, as such, an online vendor for foods and drinks in China has to use psychological pricing so as to remain competitive (Liu, Zhang and Tang, 2015, p. 397).

1.2 Objectives of the Study

To investigate the various factors that set prices for in the online market in China for food and drinks
To examine the most suitable pricing factor for the food and drinks industry in the online market in China

To find out how different pricing strategies affect sales volume online market in China for food and drinks

To establish the extent to which different pricing strategies used in the Chinese online market for food and drinks attract traffic to various websites in the industry

1.3  Research Questions

What are the various factors that set prices for in the online market in China for food and drinks?
Which is the most suitable pricing factor for the food and drinks industry in the online market in China?

How different pricing strategies affect sales volume online market in China for food and drinks?

To what extent does different pricing strategies used in the Chinese online market for food and drinks attract traffic to various websites in the industry?

2.0 Literature Review

The price of a commodity or service is one of the fundamental prerequisites for any decision related to purchasing. The concept of consumer behavior is centered around this fact, as price is a key factor in the process of attracting clients. There are many strategies that are used in setting the price of products and services in the marketing and business fields. A pricing strategy that is highly effective is capable of retaining loyal customers as well as increasing and widening the profit margins (Haynes 2014, p. 172). Additionally, a pricing strategy reflects a number of important business aspects such as the market conditions, input costs, profit margins and even the segmentation of markets (Haynes 2014, p. 27). There are various strategies that businesses and corporations implement as their pricing strategies and the optimum approach depends on a combination of various factors.

The online market is one of the most promising and fertile areas to carry out business transactions (Haynes and Wright 2013, p. 109). The majority of business entrepreneurs in China have realized this fact and they are slowly adopting ways of tapping into this rich industry. The food and drink sector is one of the areas where a lot of revenue may be achieved if the optimum strategy is implemented when setting up the prices. This dissertation provides a detailed introduction to pricing strategy in online markets in China for their food and drink commodities.

2.1 Pricing And Marketing Strategies

The process of selling products and services through online platforms requires a combination of various strategies in pricing and marketing. The procedure that is employed when setting a price for any item is dependent on several consumer and psychological factors (Haynes 2013, p. 157). It is also important to note that the price that is set for any product holds the potential of determining whether it sells successfully or not. The process of selling goods or services through online markets and other platforms in the internet is commonly referred to as e-commerce. The latter is a short-form of electronic commerce and it enables businesses and companies to sell and distribute their products, services or both through online means (Haynes 2013, p. 157).  The best strategy to set prices for foods and drinks in China in the online market depends on a number of factors. To begin with, the online market has been shown to allow most firms in China to establish favorably their presence in the respective industry. In addition, online markets in China are beneficial because they are able to enhance the position of a business as they offer cheap and efficient channels for distribution (Haynes and Wright 2013, p. 109).    Consequently, there are various strategies that can be employed to arrive at the most cost-friendly price of food and drinks in the Chinese online market. In order for this to happen, the Chinese entrepreneurs should have a comprehensive understanding of the various pricing strategies before they can choose the most effective and profitable one for them (Haynes 2013, p. 157). Pricing strategies are important tools that enable companies to find ultimate success on how to maximize profits and sales. Online sellers of Chinese food and drinks can opt or choose to use one or more pricing strategies depending on the consumers that they are at targeting. Premium pricing is one of the popular pricing strategies that are used in selling commodities in the online market. This strategy is preferred by most businesspersons as it establishes a price that is much higher than that of the competitors. This means that the food and drinks that Chinese businesspersons are trading can be given a higher price than those sold in other countries (Haynes 2013, p. 154).

In particular, the premium strategy of pricing is effective when the products and services in question are unique or if they are the first of their kind to be introduced into the market. The result is that this gives the commodities extra and a highly distinct advantage against the competition (Haynes and Wright 2013, p. 112). In the case of China, it has its own exotic foods and drinks that are unique to the country. Therefore, adopting a premium strategy in pricing can be effective because it would ensure that its commodities remain competitive and profitable at the same time (Clay et al 2002, p. 47). China produces a wide variety of juices, beverages, liquors and beers that are only produced and manufactured in China. Therefore, their sale through an online market would be fruitful as long as an effective strategy in pricing is implemented such as the premium pricing strategy. Alternatively, food and drinks in China can be sold in online markets with a penetration pricing approach is used to set the price of these commodities.

A penetration pricing approach can be used to capture the online market by implementing a low price so that the items are able to enter or penetrate the market. This strategy is mostly used when the market is saturated and many companies are dealing in the sale of similar items. Therefore, a new business venture is forced to penetrate the market by placing low prices on its items so as to stimulate competition and attract more customers (Haynes 2012, p. 99). In any case, probably the first thing that consumers do when they log into the online websites of a company is that they look at the prices that have been set for their goods or services. As such, employing a pricing strategy that is bound to attract more consumers. However, this strategy has its own setbacks as it initially creates a loss for the company because the price range is much lower than the actual cost of the goods themselves (Haynes 2012, p. 103).

In such a case, the dealers in food and drinks being sold by Chinese companies through an online platform would have to weigh out the benefits of selling their goods at a cheaper price that will initially create a loss for them. Despite this fact, this lowered price means more consumers will buy the foods and drinks and this will expand their territory in the online market. Another strategy that can be used to set prices for goods being sold online in the Chinese market revolves around competitive pricing (Haynes 2012, p. 103). The latter is a pricing strategy that is centered around paying attention to what the respective competitors charge for their own products or services. In this case, a Chinese business that endeavors to venture into the sale of foods and drinks must first find out and investigate the prices that their rival competitors have set on their products. This will give them a hint of the best price to place on their own items so that they can still find customers to buy their products.

This is because online markets are such that consumers are able to make quick comparisons between a number of companies that offer the same products (Haynes 2012, p. 99). Therefore, if the food and drinks businesses wish to succeed in online and e-commerce endeavors, they need to reduce their competition until they become fully established in the trade (Haynes 2012, p. 103). Additionally, the excellent approach to use in setting prices for foods and drinks to be sold online can be done through the use of odd numbers (Haynes 2012, p. 99).The latter is a common pricing strategy that can be used in setting the optimum price for goods that wish to trade in the online market. For instance, the use of odd numbers means that a drink can be sold for 197 Chinese Yuans instead of a figure such as 200 Chinese Yuans. This means that the perception of customers when buying such a product is that they will be seeing it as a saving opportunity. The lowering of prices by using odd numbers to sell food and drinks online means that more customers can be enticed into buying these commodities. Bundling is also another strategy that can be used to set the price for food and drinks being sold online in Chinese markets (Haynes 2012, p. 103).

Bundling is a process where goods and services are sold in combination through various online platforms. For instance, a businessperson would opt to sell juice, carbonated drinks and beer at a combined price of 145 Chinese Yuans. If this bundled price is compared with the cost of the individual items, it would be revealed that the consumer would save maybe 20 Chinese Yuans when they buy the item in bundles instead of buying them singly. The incorporation of this strategy means that the consumer will be able to know how much they are saving when they buy food and drinks in bundles as compared to buy each item individually  (Haynes 2012, p. 103).    Alternatively, the use of price skimming where the prices are constantly monitored and regulated can be effective in setting up a price for foods and drinks sold through online markets in China because it is one of the unique ways that a business can gain maximum revenue for its products. Additionally, the best strategy to employ in the sale of foods and drinks through online markets in China can be developed through the incorporation of various e-commerce tips such as e-selling and e-buying. It is fundamental to understand that pricing strategies are the key to unlocking the profitability of a business (Clay et al 2002, p. 47). Therefore, it is important for the food and drinks industry to understand the concept of pricing strategies before deciding on the most suitable one for the firm (Haynes 2012, p. 103).

The reality of selling commodities such as food and drinks online is that the lowest price does not necessarily mean that the item will be purchased in high volumes. Pricing wars can still occur even when the item in question has a lower price compared to the other competitive products. In this case, the food and drink business vendors who aspire to sell their products online should weigh the pricing strategies that revolve around lowering the cost or price of the item. This is important because they would be able to know whether the set price meets the profit margins of the firm (Clay et al 2002, p. 47). Pricing strategies are very sensitive and essential tools to any firm as they act as the powerhouse through which a company can realize its much needed profits. At the same time, the strategy that is used to arrive at a final price is the overall determinant of whether customers will buy the product or not. In this dissertation, it would be overly valuable for the stakeholders to evaluate all the pricing strategies that can be used to sell food and drinks online. This is because the strategy employed can determine if the business will grow or not. Hence, choosing an optimum strategy setting the price of food and drinks to be sold through online platforms in China can lead to significant productivity and performance benefits.

Additionally, the optimum pricing strategy that should be employed in this scenario is one that has a unique selling proposition such that it stands out from the other companies dealing in similar products. In this regard, the choice of one pricing strategy does not necessarily mean that it would be effective in selling the food and drinks online. The most viable recommendation would be to employ a combination of pricing strategies that can ensure maximum sales of these commodities through online markets in China.

Price setting is a core strategic decision that directly affects the sales volume and revenue made by any business organization or firm. There are numerous strategies that can be used to set the price for commodities and the ultimate strategy depends on what the company wishes to sell

(Haynes and Wright, 2013). In China, there are also different strategies that are used to sell foods and drinks. However, selling these products in the online market would require a different approach as compared to when the goods are sold through retail stores or malls (Yu et al, 2013).

Classic examples of pricing strategies that are employed to set prices for commodities in the Chinese online market include the cost-oriented and demand-oriented pricing. The latter process of setting prices for commodities such as food and drinks within the Chinese online market entails the use of a marginal analysis, the sensitivity of the price and value in setting a reference price (Yu et al, 2013). On the other hand, cost-oriented pricing makes use of markups and the break-even analysis. By definition, the price refers to the monetary value that is placed on a product, service or commodity (Yu et al, 2013). This price is often the result of a complex series of calculations, intense research and the intricate understanding of risk taking abilities. Therefore, a suitable pricing strategy is one that is capable of taking into account the various segments in the market, the ability of consumers to pay for the items, the prevailing conditions in the market, as well as the actions of the rival competitors in the industry (Haynes, 2014).

Furthermore, a suitable pricing strategy keenly considers the costs of input, the trade margins and the profitability of the firm before they decide on the best and optimum price for a good or service. In this case, the setting of prices for foods and drinks to be sold in the online Chinese market would have to be done by putting into consideration the target customers and how their prices would compare with their competitors (Ellickson et al, 2012). The stakeholders in the Chinese online market should remember that a low price acts like a magnet that increases the demand from customers. At the same time, a very low price in comparison to what is set by rival firms may send an implied message that the firm is selling poor quality products (Ellickson et al, 2012). As such, setting the best prices for products to be sold on online platforms can be tricky and complicated at the same time.

2.2 Pricing Based On the Prevailing Conditions

It would be advisable that the entrepreneurs selling food and drinks in the online market in China should set the prices based on the prevailing conditions. First, these Chinese businesses should take into serious account the prices that are already set and charged by the rival businesses, especially in the competitive and saturated online markets. Competitive pricing normally occurs when a firm decides to set its own price based on what the rival businesses in the industry have set (Haynes, 2012). On most occasions, the firms that set a much higher price for their goods or commodities are only able to enjoy lucrative sales if their products have a better appearance and features when compared to the rest. This means that the Chinese businesses can only make profits if they charge their foods and drinks in such a way that they cover the costs of manufacturing and production (Haynes, 2012).

One strategy for ensuring this happens is to combine the cost of production and the price itself. For instance, adding a 50% markup for a drink that costs 5 Chinese Yuans would mean that the actual cost of the drink would have to be set at 7 Chinese Yuans. This illustrates the fact that the process of setting prices for goods to be sold in Chinese online markets would require much more than the sales target and shares in the market (Haynes, 2012). In any business China included, it is very important to understand the needs and requirements of customers and what they would require from the drinks and food being sold. In a country such as China, the cultural aspects also have a direct influence on the prices that are placed on commodities (Dovleac, 2014).

In China, a study revealed that most consumers value products that are international brands as compared to regional ones. Therefore, this is an important aspect that should be considered in pricing the foods and drinks to sell in online markets. Setting the right price through an array of strategies would also be additionally valuable if they incorporated discounting (Dovleac, 2014). The latter is a process that allows consumers to buy goods for a much lesser cost if they purchase more than one item. Discounts are also offered on commodities that are of particular brands so as to increase their sales. The introduction of foods and drinks into the online market can begin on a high note if discounts are offered to clients who purchase these items online (Liu et al, 2015). The process of figuring out the optimal timing, frequency and depth of an item to give a discount can be a challenge for pricing executives and managers. For instance, a premium brand in the low calorie foods category that is sold in countries like Australia and Brazil is quite different when compared to China. The discounting strategies for these countries would be quite different when compared to what China has to offer (Jen et al, 2013).

Additionally, the pricing psychology also means that the price set for foods and drinks in China goes beyond the strategy itself. Therefore, a firm or company that wishes to sell these products through the online market in China would have to consider more factors like the cultures, traditions and behaviors of the Chinese population. In the Chinese culture, there is a lot of importance that is normally attached to certain numbers (Danziger et al, 2014). For example, the number eight is usually associated with good fortune and luck in China, whereas the number four usually signifies bad luck. Therefore, a strategy to set prices for food and drinks to sell to the Chinese population online would be more successful if the prices had more of number eight and less of the number four (Liu et al, 2015).
In addition, the pricing managers could employ these insights and cultural beliefs to ensure that the endings of the prices are set in such a way that the highest profitability is achieved (Coulter and Krishnamoorthy, 2014). At the same time, this process would also avoid and do away with the negative perceptions that Chinese customers would have when the prices have a lot of number four in them. This implies that setting the right and suitable price for selling food and drinks in online markets involves a cocktail of factors, processes and requirements (Liu et al, 2015).  A larger percentage of setting the ultimate price also deals with the value that customers will get from the products. Businesses are mainly about the provision and creation of value for products or services. Therefore, Chinese firms should provide a valuable food item or drink that their clients cannot provide or obtain on their own (Liu et al, 2015). This information should then be used to derive additional value to add onto the products.

This means that in order for the Chinese proprietors need to understand what the customers value before they set any price for their foods and drinks. It is common knowledge that the majority of food and drinks are sold in restaurants, supermarkets and retail store (Yu et al, 2013). As such, the Chinese businesspersons should first inquire the cost of foods and drinks in these areas before they set their own price for which they will sell their products. In addition, selling of foods and drinks online should put into consideration why some restaurants tend to have more clients and seem to always be packed. The reason for this might be due to the fact that they understand the value and the needs of customers (Haynes and Wright, 2013).

Likewise, the sale of foods and drinks online should be sold at a price that indicates that they value the needs of customers as well. Getting the right price for a commodity is much more than two parties agreeing to set a numerical cost at a given moment. Setting the right price is about the sustainability of a company or business in the long-term angle (Haynes, 2014).

Therefore, firms wishing to begin selling food and drinks through an online market should consider that the price they set for their commodities has a direct impact on their sustenance. The price that they set can determine whether they will still remain marketable or whether they will have to venture elsewhere. The use of a value based pricing strategy means that the firm is willing to set a price based on how much they value their customers (Ellickson et al, 2012).

Figuring out the value of the foods and drinks to the customers that one wishes to sell to online should be accompanied by a critical analysis of the product and value itself. For instance, if the cost of production is approximately 12 Chinese Yuans per drink and each unit is capable of providing at least 1100 Chinese Yuans of value to the customers, then it would be fair to charge at least 550 Chinese Yuans for the bulk items. This means that buying the drinks in bulk or buying a single item would be much cheaper (Ellickson et al, 2012). Ultimately, the process of deciding on the right price to sell foods and drinks in the Chinese online market would combine various factors, strategies and the in-depth understanding of what the customer’s value dearly.  

Conclusively, the price that is set and charged for products and services is one of the fundamental business decisions that any entrepreneurs can make. Setting a price that is either too high or low can directly limit the growth and productivity of a firm. In the worst case scenario, it is capable of causing serious problems with the flow of cash, sales revenue and volume. Therefore, it is important to have an appropriate strategy for setting up prices of goods. This dissertation provides a review of literature on the best approach to use when setting the price of foods and drinks to sell to online markets in China.

The top factors to ensure that the price is the best involves considering the entire cost of goods and an additional percentage. In addition, it should also consider the prices set by the rival and competitive businesses. These factors should then be compared to what the customer is willing and prepared to pay for it. Most businesses tend to choose only one strategy, which they employ in their daily operations. However, the most recommendable approach is one that incorporates more than one strategy in setting up the price. Ultimately, the best price to sell foods and drinks in China through online markets should be set through more than one strategy that should be reviewed on a regular basis.

3.0 Research Design

In this study, the researcher applied mixed research designs – quantitative and qualitative approaches. Quantitative methods are characterized by the gathering of data, which can be analyzed using numerical means, and the results are typically presented using graphs, tables and statistics (Creswell, 2013). For this study, web questionnaires were invoked as the primary tool for collecting data in relation to the factors that determine price in online market in China for food and drinking. As a result, questions acted as an integral component of collecting quantitative data using a five-scale likert scale questionnaire. The researcher invoked quantitative research method in order to test pre- determined hypotheses as well as yield generalizable outcomes. By applying statistical techniques, the outcomes of the quantitative analysis can refute or confirm hypotheses, (Neuman, 2005), about the strategies that are used to determine online market price in China for food and drinking.

According to Pickard (2012), quantitative research heavily relies on scientific measurement because the data collected is numerical and the gathering and analysis of information from representative populations is commonly applied. In simple terms, the accuracy and precision of quantitative analysis depends of the representativeness of the sample population.  A representative sample in a quantitative research is deemed suitable when the instruments used to collect data are well designed, carefully explained and appropriate to end users of the information (Cooper, Schindler & Sun, 2006). In this study, large sample sizes will be used for gathering quantitative data so as to collect a picture that is more representative. Nonetheless, in any analysis process, trade-offs between the diversity and representativeness of a sample and the timeliness and efficiency with which information can be gathered (Cooper, Schindler & Sun, 2006).

The merit of adopting quantitative research design in this study is that data, which gathered rigorously, using suitable techniques and critically analyzed, is often reliable (Creswell, 2013). Nonetheless, Creswell & Clark (2007) hold that quantitative research faces certain shortcomings in the sense that it fails to offer in depth explanation of the phenomenon under investigation. It is on this premise that this study also involved the use of qualitative research methods, which is descriptive. Data collected using quantitative techniques are usually believed to produce more accurate and objective information due to the fact that they are gathered using standardized approaches, can be replicated and, unlike qualitative data collection techniques, can be analyzed by applying sophisticated statistical instruments (Bryman, 2006). In connection with this wisdom, this study invoked both quantitative technique in order to judge the ultimate determinant of online market price in China, whereas it invoked qualitative methods to collect data that is formative in nature.

This study underscores the fact that both methods can or may not yield satisfactory data if used independently. Denzin and Lincoln (2009) assert that researchers who use quantitative techniques to carry out their study are increasingly becoming aware of the fact that the method can yield outcomes that may not be valid and accurate partly, because the sampled population may not understand the research question and partly, because people often recall faulty information about an event (Creswell, 2013). The researcher in this study, therefore, used qualitative methods in order to analyze and classify data that is descriptive in nature. Cantrell and Lupinacci (2007) hold that researchers are increasingly acknowledging that all information gathered – qualitative and quantitative – operates within the context of culture and to some extent; it is affected by the beliefs and perceptions of data collectors and investigators.

By applying a mixed research approach, which is carefully designed, the research yields a range of benefits to the study. In this study aimed at determining the set of factors that determine price in online market in China for food and drinks the use of both qualitative and quantitative technique strengthened the validity of the outcomes. Combining the two research approaches pays off though improved data collection instruments for all information-gathering techniques and sharpens the investigator’s understanding of the findings (Morse, et al 2008). This study, the researcher first began by employing a qualitative method – interviews consequently alerting the researcher on the key price determinant factors in China online market for food and drinks that require examination. By employing mixed data collection techniques the researcher is able to expand and modify the adoption of information gathering methods (Creswell, 2013). Particularly, this occurs when the researcher notices discrepancies and inconsistencies that alert the investigator on the need to re-evaluate data gathering and analysis procedures (Morse, et al 2008).

Further, the researcher adopted non-experimental research design in this study. Non-experimental design entails variables that the researcher studies them in their existing form without manipulation. Morse, et al (2008) argue that researchers opt to use non-experimental research design when the variables involved in the study cannot be manipulated for the reason that they are attribute variable like socioeconomic status, location, or personal traits (Cooper, Schindler & Sun, 2006). In order to determine the factors that influence price in China online market for food and drinks, the researcher adopted purposive sampling technique. In this regard, the researcher selected www.taobao.com – an online selling platform that attracts over 90 percent of online consumers in the country. From the selected website, the researcher used stratified sampling to select representative online buyers, which comprised of 300 respondents.

In order to determine the primary factors that set price in online market in China for food and drinks, the researcher gathered the data by administering online questionnaires to the selected sample population. The investigator administered the questionnaires to the online consumers on www.taobao.com. The researcher administered these questionnaires via the internet to consumers who have shown interest in the purchase of drinks and food.

The research employed both web questionnaires and email questionnaires. Internet research is appropriate to most online surveys and for sensitive and personal issues (Cooper, Schindler & Sun, 2006). In addition, participants in a study are often willing to provide responses that are more honest by email or a computer than on a paper questionnaire or a person (Creswell, 2013). Online questionnaires are often appropriate, especially when the study’s target population consists of almost entirely or entirely of online users.

The researcher emailed the participants questions in terms of an attachment, which participants filled and sent back. Email questionnaires are both very fast and economical. China has a good internet coverage and more Chinese citizens have access to the internet as a result the participants were able to provide email back their filled questionnaires without much difficulty. Moreover, due to the fact that the study invoked a huge number of respondents, emailed questionnaires allowed the researcher to send the questionnaires to the respondents easily. Online questionnaires eliminated the geographical barriers, and also the questionnaires were sent in Chinese language as well in order to take care of the needs of those respondents who do not understand English. In addition, the researcher made significant cost savings in terms of restricted use of paper and postage materials. This type of data collection technique has become increasingly popular among researcher due to two primary reasons: the rising ability of individuals across the globe to use computers and the rising computer penetration across the global divide. This technique may grow in significance as computer penetration increases.

This technique, however, experiences certain problems. Some participants respond several times to the questionnaire, or others pass their questionnaires to their friends to fill. In addition, many people do not like unsolicited email. Therefore, the researcher was compelled to send email questionnaires only to consumers who had been contacted earlier about the study. It is due to this reason that the researcher complimented email questionnaires with web questionnaires. The advantage of using web questionnaires is because it can be conducted by intranet or internet and are gaining substantial popularity (Cooper, Schindler & Sun, 2006). The researcher, in this line, sent a web page link that contains a questionnaire to the participants in order for them to answer.   The questionnaires were designed with a software that ensured that the instructions to skip were accurately adhered to (that is, the instruction to skip to question 2 if the participant answer ‘yes’ to question 1) (Cantrell & Lupinacci, 2007). These auto-generated skips ensures accuracy of the data collected as compared to paper questionnaire, and they have another benefit that the participants do not need to view a page that contains ‘irrelevant’ research questions. Web questionnaires are very fast (Cantrell & Lupinacci, 2007). In this regard, the researcher posted the questionnaire on www.taobao.com, a popular Chinese online market website and this enabled it to collect thousands of responses within a few minutes. Many of the respondents who were emailed invitation to take a web questionnaire did so within the first day and most did respond within a few days. Self-completion questionnaires can also be administered to groups. As such, the researcher requested those consumers who buy food online in China to fill in a different questionnaire, while those who purchased drinks online were provided a separate questionnaire to fill.

The investigator administered randomly the web and email questionnaires to the identified population. The researcher used a likert scale rating that aimed at establishing the impact of various factors in determining the price in online market for drinks and food in China. The participants rated each element on a scale of 1 – 5. In order to enhance the reliability of the study, the researcher tailored the study’s questions in a more logical manner. Further, in order to collect in depth attitudes regarding the factors that influence online market price for drinks and food in China, the investigator used telephone interviews where applicable.

Telephone interviews have become commonplace especially with improvements in computer technology. In this study, the researcher employed computer assisted telephone interviewing (CATI) system which provided clear guidelines for the participants, displaying interview schedules and enabling electronic recording of answers being provided (Cantrell & Lupinacci, 2007). By employing the CATI system, the researcher was able to remove data entry process in the study because answers are directly recorded on the PC. There are other advantages linked to telephone interviews: first, the investigator does not have to incur travel expenses thus eliminating the geographical challenges. In addition, the physical safety of the researcher is not a concern. Third, the researcher is able to monitor telephone interviews by listening unobtrusively into the interview, thereby ensuring that the interview is conducted correctly (Rolfe, 2006). However, telephone interviews suffer numerous challenges: it is difficult to ask the respondent sensitive question over the phone. In addition, it is difficult to pick up non-verbal reactions of the respondents (Neuman, 2005). On data analysis, the researcher used SPSS (statistical Package for Social Sciences) to analyze data. In addition, the researcher presented the findings using tables and charts.

3.1 Justification of Research Design

The researcher used a mixed research design – quantitative and qualitative – due to various reasons. First, the researcher preferred quantitative method because it allowed the study to gather information that is numerical or quantifiable in nature (Denzin & Lincoln, 2009). In addition, the investigator used qualitative methods in order to gather in depth feelings about the factors that determine online market price in China for food and drinks. In simple terms, qualitative techniques revolve around gaining a true picture of the social factors that influence online purchasing of food and drinks in China. Furthermore, qualitative methods permitted the researcher to go beyond numerical data (Bainbridge, 2007). Qualitative techniques are the method that centralize and put primary significant value on complete understanding why people engage in online purchase of food and drinks on the internet.  Non- experimental research design was employed in the study in order to gather information from the selected sample population in their natural and unregulated setting.

Additionally, the researcher used multistage sampling due to the wide number of respondents engaged in the study. As a result, multistage sampling enabled the researcher to arrive at a sample size that can be managed. In this wisdom, the researcher used purposive sampling selected www.taobao.com – an online selling platform that attracts over 90 percent of online consumers in the country. Similarly, the research used stratified sampling in order to ensure that all potential participants took part in the research.

The researcher used a five-scale likert scale questionnaire, which was disseminated online because most of the respondents shopped for food and drinks online so it was a familiar platform to them. The researcher, in addition, used a likert scale questionnaire for the respondents to rate their responses, therefore restricting them to providing data essential to the study (Bainbridge, 2007). Further, the researcher used online questionnaires, as they could be stored for future use in case the investigator requires similar information in the future. The researcher used telephone interviews with an aim of collecting in depth attitudes and beliefs of the participants, as a result complimenting the information gathered via questionnaires. The researcher used SPSS to analyze data because it analyzes data faster and computes percentages (Pickard, 2012). Tables and charts were employed in the study to present outcomes because tables provide room for quick comparison.

3.2 Ethical Issues

Using the internet to carry out research presents the researcher with several potential benefits. It is a cost effective technique of gathering a range of information and has benefits in that the investigator can easily access the respondents who are spread widely in terms of geography, or participants that cannot be accessed easily using other research techniques (Rolfe, 2006). The online questionnaires and interviews used in this research gave the respondents more flexibility, as they were able to participate in the study without incurring addition travel and time costs. However, internet research provided the researcher with several complex ethical issues that this study considered. Some of the ethical issues that this research keenly observed included:

3.2.1 Privacy

There is a blurred line when it comes to distinguishing between private and public space on the internet (Rolfe, 2006). Accessing the internet is public, but this does not necessarily mean that the individuals who create and use the internet view the materials that they post online as public and are can be used in research (Pickard, 2012). In line to this study, many consumers purchase drinks and food from www.taobao.com in China but this does not mean their purchases are readily available for research. Therefore, this research gave considerable protection to the privacy of the respondents contacted in the process this research. The researcher ensured that the data collection methods and the data collected did not infringe their rights.

3.2.2 Anonymity

Rolfe (2006) argues that while it is sometimes easier to anonymize data gathered through the internet, in other instances, it is difficult or useless to attempt to anonymize the information. In this study, the researcher gave the respondents the ability to decide to what extent they would like their data to remain anonymous (Pickard, 2012). Most respondents in this study were concerned about their online pseudonym and persona (Pickard, 2012). Therefore, the researcher instructed the respondents to avoid using pseudonyms that can make their identity known. In addition, the researcher ensured that the identities of the participants were completely disguised.

3.2.3 Informed Consent

Obtaining informed consent from the respondents in online research can prove to be an uphill task considering the fact that the investigator is unlikely to make face-to-face contact with the respondents. In some instances, the researcher can obtain the informed consent from the owner of the web page (Rolfe, 2006). In this study, the researcher obtained informed consent from the owner of www.taobao.com before conducting the research.

 

4.0 Research Results and Findings

4.1 Results

In this research, the response to the web questionnaires and online interviews was 80 percent. This indicates that a significant portion of the sampled population took part in the study. The first objective of this study was to understand the determinants of price in online market in China. Table 1 provides a summary of the participants in the study

Table 1: Participants in the research

Details
Percentage

 

 

Online customers who participated in the study

 

80 %

 

Online consumers who did not participate in the study

 

20 %

 

From table 1, it is clear that 80 percent of the total participants filled and returned web questionnaires and online interviews, while 20 percent of the respondents failed to return their questionnaires and interviews.

The researcher received 280 complete responses from the online users who saw the shared web questionnaire request. Among the 280 respondents, there were 130 male and 150 female.

 

Table 2: Number of male and female participants of the study

 

Answer choices
Frequency
Responses

 

Female

 

150

 

54 %

Male

 

130

 

46 %

 

Total

 

280

100 %

 

The age level is concentrated in the 25 to 34 age bracket comprising 70 percent of the total respondents, 18 percent of the participants were aged between 18 – 24 and 12 participants are from 35 – 50 years.

 

 

Table 3: Age distribution of the Participants

Answer choices
Frequency
Responses (percentage)

 

 

18 – 24

 

50

 

18 %

 

25 – 34

 

196

 

70 %

 

35 -50

 

34

 

12 %

 

51 or older

 

0

 

0 %

 

Total

 

280

 

100 %

 

Concerning the frequency of internet shoppers, 48 per cent of the participants purchase food and drinking products online less than once per month, 40 per cent buy products online three times per month and 12 per cent buy food and drinks from online stores 4 times a month.

 

Table 4: frequency of online purchase

Answer choices
Frequency
Responses

 

 

Less than once per month

 

134

 

48

 

Three times per month

 

112

 

40

 

Four times per month

 

34

 

12

 

Never

 

0

 

0

 

Total

 

280

 

100 %

 

Consequently, the demographic information of the participants is relatively limited, they mainly comprise respondents aged between 25 – 24 Chinese internet customers with moderate frequency of internet shopping activities. Consequently, the outcomes reflected mainly the preferences or attitudes towards internet vendor selection by the customers with the demographic background identified in this study.

From the study, 90 percent of the respondents argued that they preferred to shop at www.taobao.com.  The other forms of online platforms comprised of only 10 percent. This is highlighted in the pie chart below.

4.2 Findings

The research findings of this dissertation are based on the study that was conducted on the best strategies for selling food and drinks through online Chinese markets. According to the outcome of this study, it was revealed that the instruments used to execute this research were successful. The tools that were employed specifically for this research were the questionnaires, online interviews and the Likert scale. The research findings indicated that four elements had a very profound effect on how the online prices were set for food and drinks in China. These four elements include credit ranking, consumer raking, availability and location.

a)     Research Findings on Credit Ranking

The factor of credit ranking was one of the important findings in this study because it determined the prices that are set on the commodities such as food and drinks. Credit ranking refers to the evaluation of the credit status of a given company in terms of its ability to pay back a loan (Fulghieri et al, 2014). Additionally, credit ranking can be used to assess the value of a company in how much it is able to pay back its debtors and minimize its chances of defaulting on payment (Fabozzi and Vink, 2012). The findings of this study indicated that the companies that had a good credit rating were in a better position to attract a better price for the foods or drinks that they intended to sell. This fact is further supported by the assertion that companies that have a poor trend in paying back their debts tend to treat the customers poorly as well.

Therefore, most participants who took part in they revealed that they first did a background check on the company’s online to determine whether they would be able to satisfy their needs and preferences in terms of food or drinks. Moreover, the results also indicated that most of the participants confessed that they shopped for food and drinks at least less than once per month. This trend indicates that there was amiss in terms of the satisfaction of consumer preferences, needs and the suppliers of the respective commodities. As such, this study concluded that the reason for lack of this frequency could be attributed to the poor credit rankings of most companies dealing in fast moving consumer goods or FMCGs. This means that a company that wishes to introduce the sale of drinks and food in China through an online platform should first concentrate building its brand name as well as focus on building its credit ranking (Fulghieri et al, 2014).

This study also concluded that credit ranking of a company played an important role in determining whether a company would comfortably set competitive prices for their products. Credit rankings serve as the thermometer through which consumers and investors can be able to decide whether it is worth parting with their money in exchange for the products on sale. In the modern era of technology and the internet, it is now possible for an individual to obtain information via the World Wide Web before deciding on whether to buy an item or not (Fabozzi and Vink, 2012). This means that a person can easily determine the credit ratings of a firm and decide whether their results are worth investing or not. In this case, the companies that had an attractive credit rating were better placed to introduce their foods and drinks into the Chinese online market. This is because they were more confident that their company profile and credit rankings would sell the company in a positive light.

Credit rankings serve as a prospective entity that ensures that a company is able to meet its respective obligations (Fabozzi and Vink, 2012). Therefore, if a consumer searches for a company to buy food and drinks online and finds one with a poor credit ranking, they will be hesitant to buy anything from them. This explains why the results indicated a low frequency in terms of purchase for most of the participants who were sampled. Moreover, even for those who purchased food and drinks online, their rate of purchase was also quite low. As such, it could be asserted that the best strategy to set prices for foods and drinks to sell online in China would be arrived at by first considering the credit rankings of the firm. This ratings or rankings offer an intensive assessment of the firm that is objective and can prove the credit worthiness of the company (Fabozzi and Vink, 2012). This can help in reassuring consumers that it is worth to buy their products online as they will satisfy their immediate needs.

 

 

 

Table 5: Results according to credit rankings

Marketing factor
Credit Ranking
How it affects the business

Sales volume
High

Low

Positive

Negative

Reputation
Good

Bad

Positive

Negative

Consumer preferences
High

Satisfactory

Positive

Average

Return on investment
High

Low

Positive

Negative

Credit status
Good

Bad

Positive

Negative

 

b)     Research Findings on Consumer Ranking

The research on the best strategy to set prices for drinks and food in order to sell them through the online Chinese markets revealed that consumer rankings played a very fundamental role. Consumer rankings deals with the approach through which various consumers give their views about what they think about a given product (Anderson and Simester, 2014). The consumer rankings serve as personalized opinions or feedbacks that people give based on a given commodity or service (Ashby et al, 2015). The findings of this study showed that consumer rankings play a vital role in determining the price to be set for a commodity. For instance, if a company that has established itself in another country wishes to penetrate the online market in China, they have to ensure that consumers have ranked them highly.

This is because online access gives a stream of information that can be used to find answers about any given company (Ashby et al, 2015). This study concluded that most participants first searched for information about a company online in order to know what other people think about it. Moreover, the participants also investigated through the internet on the prices that these companies placed on the food and drinks that they sold in other countries. As such, the ratings of consumers on the best strategies were an important determinant in deciding the price that would be placed on the food and drinks. Selling of goods through online platforms is a bit tricky and complicated when compared to selling them in retail stores or supermarket outlets (Anderson and Simester, 2014).

When online markets are used as a channel of distribution, then it becomes very easy for customers to compare the prices of the products with the rival companies. This process is much harder when the same product is sold via retail stores and outlets (Kuo et al, 2014). Consumer ratings were an important factor in this study because they were able to show the significant difference that exists among companies with poor ratings with those that had impressive ratings. Consequently, it means that a company that wishes to introduce its products online, it must ensure that consumers are well treated so that its rankings are improved (Anderson and Simester, 2014).

Consumers usually provide the reviews about what they think about the prices for commodities as well as the company itself on social media platforms or on other blogs where other people are bound to see the information. It is a well-known fact that if a piece of treasured information is placed on the social page of a person, it is bound to spread through a rapid process (Ashby et al, 2015).  As such, if a person places a negative comment about the prices of commodities of a given company, it is bound to be read by millions of other people who are on the web at that moment. The consequence of such a process is that the companies who place exorbitant prices on their products will find it difficult to penetrate the online market in China (Ashby et al, 2015).  Therefore, it can be recommended that companies and firms should consider the consumer rankings of their companies and those of rival firms before they set the price of commodities.

Moreover, consumer ratings also revealed that some foods and drinks are more preferred by one gender when compared to another. The results indicated that more females than males participated in the study. This could be a reflection that the consumers of FMCGs such as food and drinks are mostly females than males. The online market in China can be described as a commercial zone where the existence of both the vendor and the consumer is mutual and necessary (Ashby et al, 2015). This interdependence of both parties provides the overarching nature of commerce that is dynamic, since the consumer purchases the product and the company supplies the commodities. Therefore, consumer rankings and reviews play an integral role because they allow consumers to furnish themselves and their fellow colleagues with the information about the prices of the commodities they intend to purchase (Anderson and Simester, 2014).

Figure 1: Pie-chart showing other factors that may affect the consumer rankings of food and drinks sold through online Chinese markets.

According to the above figure, there are also a number of factors that come into play when goods such as foods and drinks are sold through online Chinese markets. Consumer rankings and ratings can also be affected by the cost of the goods, as consumers would prefer the drinks that are cheaper when compared to the rest in the market. Moreover, if this low cost comes with the drink being able to quench one’s thirst, it also means that the drink is effective and there is an additional reason to purchase it online. At the same time, the consumers also look at the safety of the food and drinks in terms of one’s own health and that of the environment as well. Therefore, if the foods or drinks being sold online are not harmful to one’s health, it means they are safe for consumption and this will in turn increase the consumer ratings. This combination of factors largely affects consumer ratings of most firms and it will also dictate the shopping pattern that most consumers will adopt.

The findings of this study also showed that consumer reviews were largely circulated and they influenced the purchase decision for  most people. As the participants stated, most of them would purchase a product  based on the reviews and ratings of a company and its respective products. Therefore, companies whose food and drinks were rated poorly were less bought by consumers. On the other hand, companies that possessed appealing and attractive consumer ratings tended to enjoy higher sales for their food and drinks. This is because many people would order for the goods and buy them online (Anderson and Simester, 2014). Therefore, it can be concluded that the use of consumer ratings is another suitable and pertinent strategy that can be used to set the prices of food and drinks to be sold and vended in the online market in China.

Table 5: Results according to consumer rankings

Consumer segments
Percentage

Consumers who are influenced by consumer ratings
85%

Consumers who are not influenced by consumer ratings
5%

Consumers who purchase depending on their needs
3%

Miscellaneous
7%

 

c)     Availability

The concept of online marketing usually evokes the physical analogy that involves the trading of goods and services online (Zenk et al, 2014).  In this research, online sale of food and drinks is a process that is largely dependent on the availability of these items. The participants who took part in this study attested to this fact through the various tools that were used to collect information. This includes the web questionnaires, the interviews, as well as personal interactions. According to these  tools, the sampled individuals provided answers based on the availability of the products. This study revealed that customers usually shop online based on how available the commodities are for them. This means that the frequency of purchase as indicated in the results was also caused by the availability of the food or drinks. The irregular pattern in the purchase of food and drinks online could be attributed to the inconsistency in the accessibility of these items (Rummo et al, 2015).

Online shopping is largely dependent on the presence of the goods when the consumer searches for them over the internet. As such, the pricing strategy for the sale of drinks and food to be supplied via the online market in China should be such that the goods should be available as well (Rummo et al, 2015). It does not provide a positive picture when a company sets prices for its commodities yet they are not available. This beats logic when a customer searches for a given food item and misses it out in the net. This reduces their morale for shopping because the items that they need are never available. Online shopping and marketing requires to be treated through a delicate manner so that both the customer and the company can benefit (Rummo et al, 2015).

This information was well illustrated through the incorporation of questionnaires that were disseminated through various online platforms. The findings of this study showed that the majority of respondents usually conducts their shopping for food and drinks online using the various websites. Therefore, availability is one of the important factors that had a profound effect on how the prices of food and drinks were set. This meant that if the food and drinks were not available, then a tentative price would be set for them. On the other hand, if the food and drinks were available, then the appropriate price would be set for them.

The sampled individuals confessed that they prefer to see the goods they are buying before they can actually pay for them. The findings of this study also revealed that a lot of attitudes and beliefs of the participants were affected by how available the goods were made online. China’s economy is evolving at a rapid pace and the ability to conduct business online is one of the contributor’s to a rich and diverse market (Zenk et al, 2014).  Therefore, it is important for businesspersons to use the right combination of skills and expertise to tap into this market. In this case, it means making the food and drinks available to consumers whenever one establishes an online market portfolio for their respective company.

Availability of goods can be made possible through the various e-stores, web stores, online storefronts and even e-shops (Zenk et al, 2014).   Through these different ways of shopping, clients and consumers can be assured of having their favorite food or their favorite drink. The participants indicated that they preferred to visualize their food item or beverage placed in the online basket so that they are assured they will have it in their possession. Hence, it would be prudent and wise for the companies wishing to introduce their food and drink commodities in the market to consider making them available all the time (Zenk et al, 2014).   This also cultivates a sense of trust and loyalty from the customers when they know that they can always get their commodities on time (Rummo et al, 2015).

Moreover, clients always want to know that they can get an item anytime they want it. This means that even when there is a slight hitch, they can remain loyal to a given company because they are always assured of prompt delivery (Rummo et al, 2015). Hence, this study proved that availability is one of the critical considerations when setting the price of food and drinks to sell in the online market in China.

d)     Location

The final finding from this study is the location aspect, which largely depends on whether the food and drinks can be sold online. The locality factor is diverse and it affects the customer, the business and the company itself (Wang et al, 2015). On the side of the customer, location  is very important because it determines whether they can be able to have access to the internet. China is one of the countries that have tightened its ropes and rules when it comes to internet usage (Kuo et al, 2014). In fact, internet censorship in China has been known to limit the access for many people towards various websites. Therefore, this study concluded that it would be very necessary to first investigate the localities with adequate and reliable internet coverage before setting prices of the food and drinks online. In addition, this study also highlighted the fact that the location becomes important because if the goods are given prices online, then the people who are of internet reach become automatically locked out.

Additionally, the location of the business is also important because it determines whether they can be able to monitor the consumer behavior of their target market (Vanhonacker and  Pan, 2007). If the business has an international operation, then it is deemed necessary to have at least one active branch in the country in which it has established its operations. In this case, the businesses that deal in the sale of food and drinks require making their services available on the ground. Essentially, this means that it is crucial for firms to have at least an operating office in China, where their customers and clientele can consult with them on a personal level. Sometimes, customers wish to make inquiries on a personal or face-to-face basis as opposed to using the internet platform. Therefore, the participants in this study stated that the location of the business is a huge determinant in the process of setting prices for food and drinks.

Moreover, the location for this business should be one that is strategic and accessible altogether (Vanhonacker and  Pan, 2007). A company that is located out of reach of the customers usually sends the signal or message that they do not value their clients. On the contrary, a business that is located close to the majority of consumers is bound to have an effect on the price set on its commodities. Ultimately, the factor of location is an important one and it cannot be disregarded when setting the price for food and drinks to be sold through online markets in China.

Conclusively, there are infinite strategies that are used for the pricing of goods and services within the diverse business market. However, only a number of them are suitable when it comes to increasing the volume of sales for the respective companies. This research essay provides a detailed dissertation into the findings of a study that was conducted to investigate the most appropriate strategies for setting prices of food and drinks to sell within the online markets in China. The research findings revealed that there were four elements that play a critical role in determining the price to be set for drinks and food. These four factors include the availability, location, credit rankings and consumer ratings.

The credit and consumer ratings dictate the price to be set because they show how people think or view the company. Therefore, a company with a positive image is more likely to set competitive prices as compared to one without good credit rankings. Likewise, availability and location are two elements with the potential of influencing the price set for foods and drinks.  The combination of these four factors affects the price of the foods and drinks in a variety of ways. Therefore, the most suitable recommendation is that any business aspiring to venture into online business should first understand these factors before introducing their drinks and food into the Chinese market.

5.0 Conclusion and Recommendations

5.1 Conclusion

From this study it can be concluded that various set of prices can be used to set prices for online market in China for food and drinks. The study concluded that the production cost is among the key factors that influence the price of online drinks and food in China’s online market. Before setting prices, vendors have to consider the prices that the competitors have set for their products. In addition, the research established that consumer willingness to pay for a certain product was pivotal in setting online prices for drinks and food in China. Ultimately, the best strategy to sell drinks and foods in the Chinese online market is through a mixture of strategies that should be reviewed regularly.

The price that charged for a product is one of the vital business decisions that vendors make. The growth of a firm largely depends on the firm’s pricing strategy (Liuyi, Xiaolong and Liang, 2011, p. 31). Consumers in the present day market are looking for high quality products that are affordable. This study concluded that a high price is capable of causing serious problems in terms of volume, sales revenue and flow of cash. Consequently, an appropriate strategy for determining pricing is suitable in order to drive the profitability of the online food and drinks venture in China. The pricing of commodities determine the overall sustainability of the business. The pricing strategy that a given firm adopts determines if it will break even or close shop. This dissertation has proposed various strategies that can be used to determine the online price of drinks and food in the China’s market. These strategies work best depending on the characteristics of the consumers. Some consumers are only interested in a product as a result; they prefer low priced food and drinks. However, the standards of living in China are on the rise and consumers are more willing to pay higher for better quality. Therefore, value based pricing is emerging as the most suitable alternative for many online vendors of food and drinks in the Chinese market.

The process of selling products through the internet requires a mixture of various pricing strategies. The process applied when setting prices for any commodity depends on various psychological and consumer aspects.  The best strategy to set prices for food and drinks in China’s online market depends on the quality of the product and the prevailing market competition. The Chinese online market is deemed favorable for different companies to venture freely (Kimpel and Friedrich 2015, p. 57). Given the visibility of China’s online market, vendors are able to enhance the visibility of their business as online platforms offer cheap and efficient channels of distribution. Notably, pricing influence many purchasing decisions. The idea of customer traits is created around this concept, as price is one of the spectrums that attract consumers. A highly effective pricing strategy is capable of retaining loyal consumers, increase and widens the firm’s profit margins. In addition, an effective pricing strategy has the potential to consider several crucial business factors such as input costs, market segmentation, profit margins and market conditions.

It is impossible to run a business online without having a suitable pricing strategy. Coulter and Krishnamoorthy (2014, p. 261) assert that although many appear simple on the surface, the pricing strategy that a company uses can easily mean the difference between success and going out of the market. This study concludes that the characteristics of the online visitors is one of the primary factors that an online enterprise dealing with food and drinks in China need to consider. Another important factor that the vendor should consider is the cost of raw materials. The price of the product must be above the overall cost of production.

From the findings it is obvious that credit ranking, consumer ranking, product availability and the location of the consumer and business.  From the findings, it can be concluded that the credit worthiness of a firm determines its offer better quality of food and drinks to consumers. This is because the company is able to access a large pull of credit from its financiers which enables it to boast its visibility in the Chinese online market. Consumer needs and preferences play a vital part in influencing consumer purchasing decision. Consumers are more attracted to company’s offering products and services that match their needs and preferences. Similarly, reputable firms have established brand image and this makes them attractive to online consumers.

The study concluded that credit ranking had a special role to play in influencing how a company sets prices for its products. Credit ranking acts as the thermometer through which investors and buyers are willing to invest and purchase products from the firm respectively. The study further concludes that the firms that had an attractive credit ranking were better positioned to introduce their food and drinks into China’s lucrative and competitive market. Credit ranking ensures that a firm meets its obligations (Kimpel and Friedrich 2015, p. 61). Trust to deliver is primary in the online market. If a consumer establishes that a firm is unable to pay its credit, then the ability of this firm to deliver online purchases is near impossible and this will send away consumers from the company’s website.  Consequently, credit ratings or offer an intensive assessment of the firm ability to deliver products to the end consumer. This plays a critical role towards reassuring consumers that it is worth to buy their products online as they will satisfy their immediate needs.

Further, this study concludes that consumer ranking played a critical role in setting prices for food and drinks in China’s online market. From the study, it was evident that consumers search for information about a vendor from the World Wide Web in order to acquire significant information about the company and its products on offer. In addition, consumer rating enabled consumers to compare what Chinese vendors offer and their pricing in comparison with other entrepreneur from other countries (Bharadwaj, et al., 2013, p. 472). The use of online platforms as a channel of distribution makes it easier for consumers to compare prices of the products with the competition. As such, consumer ratings are crucial factors as they reveal the general performance of a product in the market. The study reasons out that if a company wishes to introduce its products online; it must ensure that consumers are well treated so that its rankings are improved. Conversely, online reviews provide data regarding the pricing of a product and the general performance of a firm in online platforms where significant number of consumers visit. Consequently, negative reviews about a company’s product are likely to reach several millions of consumers and this can hurt the overall image of the company’s product. Therefore, this study asserts that firms should consider the consumer rankings of their companies and also review those of rival firms before they set the price of commodities.

Additionally, this study concludes that online sale of food and drinks largely depend on the availability of the products. The availability of food and drinks in online stores significantly influence the frequency of purchasing.  Inconsistency in availability of products led to irregular purchasing patterns of food and drinks. Online shopping depends on the availability of the products when the consumer searches for them over the internet. Consequently, the pricing strategy for the sale of drinks and food to be supplied via the online market in China should be made available (Bharadwaj, et al., 2013, p. 475). The availability of products ensures that consumers are able to access products anywhere, anytime. The study concluded that product availability is a factor that has substantial effect on prices for food and drinks.

Furthermore, this study concludes that the location of the consumer and the business have significant impact on the price of food and drinks sold online in China. Given the strict internet laws in China, the location of the consumer is a critical determinant of the prices for drinks and food sold online. Individuals who are outside the internet range are automatically locked out and they have to incur addition costs in order to access the product (Yu-Shu and Lih-Tsyr, 2009, p. 523). It is therefore, imperative for food and drink vendors to establish brick and mortar shops in China where consumers who are out of internet reach can access the products and services. In brief, credit ranking, consumer ratings, location and availability of the product dictate the prices to be set in China’s online food and drinks industry. A firm that enjoys a positive brand image is more likely to experience higher volume sales. Therefore, it is integral for vendors to examine the factors identified in this study before venturing in the online China’s market.

5.2 Recommendations

This study recommends the bundling up of various pricing strategies in order to realize competitive edge and profitability in China’s online food and drinks market. This will entail mixing various strategies with an aim of offsetting the demerit of one strategy with the other. Critically, this study has highlighted several pricing techniques that can be used to set prices in China. Some of the widely used strategies in online market include penetrating pricing, bundle pricing, psychological pricing and value pricing. A vendor can mix all this strategies in order to increase sales and profit margins. In particular, the vendor should penetrate the Chinese online market using the penetration pricing. This means that the food and drinks will be priced slightly lower than the competition in order to pull consumers to the product. This should be mixed with psychological pricing, where the prices are represented using odd numbers such as ¥29 for the price of fries.

Secondly, this study recommends that a firm interested in venturing into the Chinese online market should conduct significant market research. Market research will enable the vendor to identify the level of prevailing competition in the market and also consumer preferences and needs. This will allow the vendor to identify market gaps that are existing and come up with products that fills this gap and satisfy consumer needs (Liu, Au and Choi,  2014, p.351). By understanding the market characteristics and geographical distribution of consumers, will further allow the vendors to set brick and mortar shops near consumers, allowing immediate delivery of products. Today’s consumers are interest in efficient and on time delivery, therefore having a brick and mortar shop near consumers will allow them to make online purchases which will be delivered to them after a few minutes.

Third, this study recommends that firms should ensure that they improve their online visibility in order to attract a wide consumer base. Companies that wish to invest in the Chinese online market for drinks and food should have a clear plan regarding how to build its online visibility. This can be achieved through increased visibility on blogs, social networks and web pages (Baye, et al.,  2007, p. 203). Higher visibility will increase consumer ranking of the products on sale and this will influence the performance of the company in China’s food and drinks industry. Consumer reviews is a powerful tool that can be used by different consumers to set prices for their goods and services. in addition, it is important for a firm to see customer ratings of competing products and this will enable the firm to tap on the mistakes of the competitors to become leading firms in the industry.

 

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