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?

Pricing strategies: approaches adopted in order to achieve marketing objectives

Price skimming

Penetration pricing

Price leadership and price taking

Predator (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.

Pricing tactics: approaches adopted in the short term to suit particular situations

Loss leaders

Psychological 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