Price
The marketing mix
Price is just one part of the marketing mix, which is
also known as the 4Ps:
 Product
 Price
 Place
 Promotion
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
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Is there a high demand?
Is demand sensitive to changes in price?
Perception of the value of the product
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.
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.
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.