Price

The marketing mix Price is just one part of the marketing mix, which is also known as the 4Ps: Product Price Place Promotion

Price The price of a product will depend on: The cost to make it The amount of profit desired The price competitors charge The objectives of the business The price customers are willing to pay  Is there a high demand?  Is demand sensitive to changes in price?  Perception of the value of the product

Price leaders and takers Price leader – businesses that dominate the market can often dictate the price charged for a product. Other businesses follow this lead. Price taker – businesses have to charge the market price. This is often the case where there are many small firms competing against each other.

Pricing strategies and tactics SkimmingLaunching with a high price when there is little competition, then reducing the price later. Often used with technology. PenetrationA low price is charged initially to penetrate the market and build brand loyalty. The price is then increased e.g. introductory offers on magazines. CompetitiveA similar price is charged to that of competitors’ products. Loss leaderProducts may be sold at a price lower than the cost to produce it. Often used by supermarkets to encourage people into the store where it is hoped they will buy other products.

Pricing strategies and tactics PsychologicalA price is set which customers perceive as lower than it is e.g. £39.99 instead of £40. DifferentialDifferent prices are charged for the same product e.g. bus fares for children are cheaper than adult prices. Cost-plus pricing An additional ‘mark-up’ is added to the cost of producing a good or service. Strategic pricing Price is set to position an exclusive product or brand to make it more desirable for consumers, generate demand or demonstrate value.