Price - PED YED XED, Pricing Strategies, Contribution/marginal Pricing Flashcards
what does price indicate
its value
its quality
price can be used to make a comparison with other goods and services
will determine the level of revenue that’ll be earnt
must also fit with the rest of the marketing mix thats implemented by the business - match its image i.e low price at a discount store image
stakeholders and price
finance dept = price that yields a high profit
marketing dept = price that’ll gain a good edge in the market
consumers = after value for money and a lower price
shareholders = return on their investment
factors affecting price charged
= business objectives = consumers, their income and tastes = cost of producing the good = level of demand within the market = level of competition within the market = rest of the marketing mix = scale of production = legislation = weather conditions = economic boom or recession environment = scale of production = nature of product or service = stage in product lifecycle
market forces and price
market forces normally determine the price of any good or service
consist of demand and supply
price rise ^^^ = demand X cant afford to pay for goods
suppliers are usually willing to supply more goods if prices are rising
actual price thats charged for a good/service = combination of the forces of DEMAND AND SUPPLY
DEMAND + SUPPLY INTERSECTS is the EQUILIBIRUM PRICE but still its not an easy or straightforward process to set the price
pricing strategies
Skimming Penetration Pricing Premium Pricing Pyschological Pricing Loss Leaders Compeition-based Pricing Predatory Pricing Market-based Pricing Promotional Pricing Cost Plus Contributional or Marginal Pricing
Skimming
business sets a high price for its goods an services in an attempt to gain profits quickly
used for short lifecycle products to gain max. benefits and profits while they can
starts with a high price which may have to be reduced
Penetration Pricing
strategy used to help establish a new product in the market and gain some market share
sets a low price at first to attract customers so once a reasonable market share has been gained, the price is increased.
after heavy advertising, loyal customers have been gained, customers attracted
Premium Pricing
high price is set for a product or service in an attempt to create an image and indicate a high level of quality
as competition increases, prices get reduced using promotional campaigns
Competition-based Pricing
where a business will set the price of its goods below those of its competitors with the intention of gaining additional sales and ‘beating’ its competitors
short term pricing policy to gain additional sales until competition respond
Loss Leaders
often used in order to grip customers into a particular retail outlet
heavily used by supermarkets to reduce the price of essentials (milk, sugar, bread to below cost)
careful cosndieration into where the products are placed in the shop so they have to pass lots of other products and hopefully impulse buy those
these sales cmpensate for losses made on the loss leaders
Pyschological Pricing
setting a price that sounds less than it really is to encourage them to purchase
£9.99
Predatory Pricing
anti-competitve pricing - CMA sees it this way
used when an established business responds to a new business entering the market by reducing its prices ( often to even have a loss ) low prices = new entrant will find it impossible to compete and try match the prices of the established business - incur a loss they cant afford
no cost savings for new entrants due to lack of EOS and harder to sustain those low prices like their competitors
established buisness can force out the new entrant from the market
Market-based Pricing
for products that are similar or even identical i.e. milk or oil
follow each other with price changes and fluctuations
Promotional Pricing
buy one get one free
3 for 2
10% off
loss leaders
can be used at any stage of the product life cycle and are useful to maintain a high level of sales
Cost-plus Pricing
way of actually setting the price to be charged to a consumer
cost refers to the expenses of producing the product - materials, labour, marketing
costs must be less than the selling price
£4 steak with a 300% mark up (3.00) = £12
