Using the Marketing Mix: pricing
Pricing strategies
These should include:
1. Cost plus.
This involves working out the unit cost of producing an item and then adding a percentage 'mark up'.
The cost of the product + mark-up = selling price.
This should make calculating future profits quite straight forward.
But, some costs may not be easy to calculate.
The cost of the product + mark-up = selling price.
This should make calculating future profits quite straight forward.
But, some costs may not be easy to calculate.
2. Price skimming.
Suitable for products with a short life cycle.
A business may charge a high price until a patent runs out.
Click on the headline:
3. Penetration pricing.
Such pricing strategy is generally used by new entrants into a market.
4. Predatory pricing.
Pricing of products at such a low level that other firms cannot compete and are forced to leave the market.
An example of predatory pricing:
5. Competitive pricing.
This involves setting the price at the same level as one’s competitors.
Online grocery shopping and price comparison websites have encouraged competitive pricing.
6. Psychological pricing.
Influences on pricing decisions:
a) Number of USPs / amount of differentiation.
A highly differentiated product is likely to use price skimming.
b) Price elasticity of demand.
A highly price elastic product is likely to be competitively priced.
c) Level of competition in the business environment.
d) Strength of the brand.
What pricing strategy do Apple use?
e) Stage in the product life cycle.
A product at the introductory stage of the product life cycle - is likely to be using penetration pricing.
f) The need to cover costs and make a profit.
Cost plus pricing would be appropriate here.
a) Number of USPs / amount of differentiation.
A highly differentiated product is likely to use price skimming.
b) Price elasticity of demand.
A highly price elastic product is likely to be competitively priced.
c) Level of competition in the business environment.
d) Strength of the brand.
What pricing strategy do Apple use?
e) Stage in the product life cycle.
A product at the introductory stage of the product life cycle - is likely to be using penetration pricing.
f) The need to cover costs and make a profit.
Cost plus pricing would be appropriate here.
How does a manufacturer decide how much to charge for a product? Link here.
Changes in pricing to reflect social trends:
1. Online sales
The obvious point would be cheaper prices than bricks and mortar shops.
A more sohisticated view. Click on the graphic.
2. Price comparison websites
Changes in pricing to reflect social trends:
1. Online sales
The obvious point would be cheaper prices than bricks and mortar shops.
A more sohisticated view. Click on the graphic.
2. Price comparison websites
