Using the marketing mix: pricing LO: To understand the difference between the various pricing strategies and pricing tactics.

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Presentation transcript:

Using the marketing mix: pricing LO: To understand the difference between the various pricing strategies and pricing tactics.

What does price tell us about a product?

Price skimmingPenetration pricingPrice leadership and price takingPredator (or destroyer) pricing

Price skimming Initially a high price is set to yield a high profit margin. Used to target early adopters – people who want to be the among the first to purchase a new product.

Penetration Pricing Predator (destroyer) pricing Low prices are set to break into a market. Low prices are set to drive a firm out of the market. Aims to reduce the number of competitors in the market.

Price Leadership and Price Taking A large company (price leader) sets a market price that smaller firms (price takers) tend to follow. In the petrol industry, price leadership is shared amongst a few major firms.

Loss leadersPsychological pricing

Loss leaders A tactic in which a firm sets a low price for its product(s) in order to encourage consumers to buy other products that provide profit for the firm.

Psychological Pricing A tactic intended to give the impression of value (e.g. selling a good for £9.99 rather than £10).

To what extent is price the most important element of the marketing mix? Plan an essay – with the key elements: ◦Introduction with definition ◦Arguments for ◦Arguments against ◦Evaluative points