Price in the Marketing Mix Flashcards
Factors that affect price
Demand and supply
Costs of production
Price set by competitors
Objectives of the business
The target market segment
The product’s stage in the life cycle
Pricing strategies
Skimming
Penetration
Prestige
Pre-emptive
Competitor based
Price discrimination
Skimming
High initial price
Common with new products that target early adopters
Later in the life cycle the price is lowered to access other market segments
Advantages of skimming
Recover high R&D costs quickly by maximising short term profits
Penetration pricing
Product introduced at a lower price than its competitors
Popular for new entrants to competitive markets
The price can be raised once the target market has been reached
Advantages of penetration pricing
Gain market share quickly
Build customer usage and loyalty
Price taker
The business has no option but to charge the ruling market price.
Price maker
The business has a strong enough position to be able to fix its own price.
Price leader
Market share is so strong that its price changes are copied by rivals.
Price follower
A business that just follows the price changing lead of the market leader.
Prestige pricing
A high price is charged to enhance or reinforce a luxury image
The high price is maintained throughout the life cycle
Pre-emptive pricing
Setting prices low to deter new entrants to the market
Suitable in markets where barriers to entry are low
Price discrimination
Prices are adjusted based on customer willingness to pay:
Age
Time based
Geographical
Pricing tactics
Predatory pricing
Loss leaders
Psychological pricing
Promotional pricing
Predatory pricing
Where a product or service is set at a very low price, intending to drive competitors out of the market
Used when competition threatens to reduce market share
