1. BUSS2 Marketing: using the marketing mix - pricing

2. The marketing mix - pricing Candidates should be able to: Describe pricing strategies (price skimming, price penetration, price leaders, price takers) Analyse pricing tactics (including loss leaders and psychological pricing) Evaluate influences on pricing decisions (including price elasticity of demand) Explain the significance, determinants and the problems of PED Use the price elasticity coefficient to show the effects of price changes on total revenue.

3. Definitions: pricing strategies What are pricing strategies? Long-term pricing plans which should help achieve the o___________ of the business. What do businesses need to consider when setting prices?

4. Mind map - research Draw a mind map or table which should include definitions, advantages and disadvantages of the main pricing strategies listed on your syllabus: price skimming price penetration price leaders price takers Which two are for existing products and which two are for new products?

5. Pricing tactics What are pricing tactics? Remember that price strategies are long term whereas pricing tactics are short term. There are two on the syllabus – loss leaders and psychological pricing

6. Loss leaders What is a loss leader? E.g. Advantages – Disadvantages –

7. Psychological pricing What is psychological pricing? E.g. Advantages – Disadvantages –

8. Influences on pricing What influences pricing? (i.e. why might a firm chose a certain price?)

9. Price elasticity of demand What is price elasticity of demand? The responsiveness of customer demand to a c________ in price In other words, what happens if prices fall by 5% - does demand increase by 2% or 5% or 6% etc.? The formula is:

10. Price elasticity of demand - example If Apple cut the price of its Ipods by 10% and demand rose by 5%, would this have been a good decision? This means that for every 1% decrease in price, demand So it was/wasn’t a good decision as revenue will decrease

11. PED – elastic and inelastic demand PED result Price change Demand changeImpact on revenue 0 to -1 e.g. -0.2 Inelastic Fall (but by a smaller proportion) Rise (but by a smaller proportion) Smaller than -1 e.g. -1.2 Elastic Fall (but by a larger proportion) Rise (but by a larger proportion)

12. What determines a product’s PED?

13. Problems with PED