1. Price

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

3. 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

4. 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.

5. Pricing strategies and tactics
Skimming
Launching with a high price when there is little competition, then reducing the price later. Often used with technology.
Penetration
A low price is charged initially to penetrate the market and build brand loyalty. The price is then increased e.g. introductory offers on magazines.
Competitive
A similar price is charged to that of competitors’ products.
Loss leader
Products 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.

6. Pricing strategies and tactics
Psychological
A price is set which customers perceive as lower than it is e.g. £39.99 instead of £40.
Differential
Different 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.