4 Ps Price Price Very important element of
- Slides: 7
4 P’s - Price
Price • Very important element of marketing mix as it determines profit earnt per unit, influences customers decision to buy or not and contibutes to products image.
Factors to consider • Disposable income of target market – the price must be affordable and take into account the average disposable income of its target market. • Product image – a price set must reflect the desired image. A luxury, premium or high end branded product should have a high price to suggest exclusivity, luxury or quality. • Competitors – the price should take into account that of its competitors and be in line with the firms chosen product positioning.
• Cost – the cost of producing, promoting and selling must be covered whilst yielding a profit for the business. If the cost changes the firm may have to increase price. • Demand – the higher the demand the higher price a firm can charge. A company with a monopoly can charge a higher price due to exclusivity.
Pricing strategies • Price skimming – charging a high price for new and innovative product to recoup R&D expenditure. Used for innovative, new products with a patent or without direct competition • Psychological pricing – pricing to reflect a lower cost e. g. € 3. 99 sounds cheaper than € 4 • Premium pricing – charging a high price to reflect a high quality image
Penetration Pricing – this is where a company uses a very low price to gain entry into a market with strong competition. Once a market share has been established and customer base built up the company usually increases its price Discriminatory Pricing – different prices are charged to different groupings for the same product in relation to age, economic grouping, time of booking etc.
Predatory pricing- This is where a company will greatly reduce prices in order to push competitors out. Price War – this is where competing firms continuously cut prices to retaliate against rival firms. Customer benefits greatly if this situation continues for a long period of time Mark up – this is where a percentage is added on to the cost of the product
