3.4.3 M AKING MARKETING DECISIONS : USING THE MARKETING MIX AQA Business 3 D ECISION MAKING TO IMPROVE MARKETING PERFORMANCE Recap: What is meant by the.

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3.4.3 M AKING MARKETING DECISIONS : USING THE MARKETING MIX AQA Business 3 D ECISION MAKING TO IMPROVE MARKETING PERFORMANCE Recap: What is meant by the term price elasticity of demand? Explain how PED will influence pricing decisions. Why is it important for price to be higher than costs? Is this always true?

3.4.3 M AKING MARKETING DECISIONS : USING THE MARKETING MIX  In this topic you will learn about  Pricing decisions

THE MARKETING MIX - P RICE  Price is the amount of money that the customer has to pay to receive the good or service  Firms use different pricing strategies to price their products, taking into account a number of factors such as market research, competitors’ prices and the state of the economy  Pricing decisions include:  Penetration pricing  Price skimming  Dynamic pricing Recap.

PENETRATION PRICING  Price penetration involves setting a low initial price for a new product in order to get a foothold in the market and gain market share  May be a suitable pricing strategy for a product in a mass market  A firm will release a new product at a low price with the aim of enticing people to buy  The aim is to gain an early customer base  Once the product has been launched and built up a customer base the firm may raise the price  Likely to be used with a price elastic product

P RICE SKIMMING  Price skimming involves setting a high initial price for a new product in order to recoup costs  When a firm releases a new product it often charges a high price targeting a segment of the market known as ‘early adopters’  These are customers who must have the product as soon as it is launched and are prepared to pay high prices to get it  Firms often base their initial promotional campaign around this idea, trying to create a ‘must have’ mentality amongst their target market  Once this market has been ‘skimmed off’ the company will lower price

D YNAMIC PRICING  Prices change frequently and quickly in response to changes in demand  At times of peak demand prices will go up and vice versa  Often used by businesses with set capacity e.g. an airline so as the plane reaches full capacity prices will start to rise  Dynamic pricing is made possible by technology that tracks demand and levels of interest

I N PAIRS  Identify 3 different products that use each of the following pricing decisions:  Price skimming  Price penetration  Dynamic pricing  In each example explain why you think the firm made this pricing decision? To what extent is price the only important aspect of the marketing mix for discount retailers?

3.4.3 M AKING MARKETING DECISIONS : USING THE MARKETING MIX  In this topic you have learnt about  Pricing decisions