P RICE Topic 3.1

T HE MARKETING MIX : PRICE Market price – where demand meets supply Increases when demand increases Increases when supply falls Only useful for a limited range of products Cost plus pricing Calculate the unit cost taking into account all fixed and variable costs and add on a mark-up for profit Competitive pricing Look at competitors price and match or slightly undercut it.

T HE MARKETING MIX : PRICE ( CONTINUED ) Loss leaders Selling at unit cost price or even below to tempt people to come into the shop and buy it and other more profitable items, used in supermarkets Penetration pricing Used when entering an established market with a new product. Initially sell at a very low price, then raise it when the product is established

T HE MARKETING MIX : PRICE ( CONTINUED ) Price skimming/creaming Used when making a technical product in a new market. The price is initially high to recoup the research and development cost, then lowered once sales increase. Price discrimination Used by companies who can sell the same product at different prices to different markets e.g. telephone charges peak and off peak Consumer led Producer has to sell at what the consumer deems to be an appropriate price