Marketing Mix(Price)

• definition of Price


  the amount producers are willing to sell, or consumers are willing to buy the product for
• different methods of pricing

  - Market skimming

  - Penetration pricing

  - Competitive pricing

  - cost plus pricing

  - Promotional pricing
• the other name for promotional pricing

  Loss leader pricing
• definition of Market skimming

  setting a high price for a new product that is unique or very different from other products on the market
• advantages of Market skimming

  - Profit earned is very high

  - Helps recover/compensate research and development costs
• disadvantages of Market skimming

  It may backfire if competitors produce similar products at a lower price
• definition of Penetration pricing

  Setting a very low price to attract customers to buy a new product
• Advantages of Penetration Pricing

  - Attracts customers more quickly

  - Can increase market share quickly
• Disadvantages of Penetration pricing

  - Low revenue due to lower prices

  - Cannot recover development costs quickly
• definition of Competitive pricing

  setting a price similar to that of competitors' products which are already available in the market
• Advantages of competitive pricing

  - Business can compete on other matters such as service and quality
• Disadvantages of competitive pricing

  - Still need to find ways of competing to attract sales.
• definition of Cost plus pricing

  setting price by adding a fixed amount to the cost of making the product
• Advantages of cost plus pricing

  - Quick and easy to work out the price

  - Makes sure that the price covers all of the costs
• Disadvantages of cost plus pricing

  - Price might be set higher than competitors or more than customers are willing to pay, which reduces sales and profits
• Definition of Promotional pricing

  setting the price of a few products at below cost to attract customers into the shop in the hope that they will buy other products as well
• Advantages of promotional pricing

  - Helps to sell off unwanted stock before it becomes out of date

  - A good way of increasing short term sales and market share
• Disadvantages of promotional pricing

  - Revenue on each item is lower so profits may also be lower