Pricing strategies are a range of pricing tools that can be
used to achieve long term aims of the business
Price skimming: entering a
market with a high price to
attract early adopters and
recap high developments
costs. e.g. designer clothes,
PlayStation, ipad etc.
Advantages: - high prices = 'must have'.. -
can recover higher research and
development costs... - early adopters'
usually but to be trendsetters
Disadvantages: -cutting prices at a later
stage can damage image - 'Ripped off?'
Penetration pricing: below market
pricing to establish product in
competitive market
Advantages: -low priced/ high
sales volume.. - production cost
per unit kept down as business
can bulk buy.. - price can be
increased at later date.
Disadvantages: - brand
image=cheap.. -up-market
outlets will not want stock
Predator pricing - a firm sets low prices
to driver other firms out of the market.
e.g. cut price airline firms have led to
smaller firms closing down.
aims to reduce
the number of
competitors in
the market
Pricing strategies for
existing products
Price leader: a product that has a
significant market share and can
influence price
sets own prices, others
follower, strong image,
dominant businesses
Price taker: a strategy where a firm sets its
prices on the same level as the dominant firm
no option to charge market price, no
differentiation in product, other forms of
marketing mix to show differences e.g.
promotion
Pricing tactics: short term pricing
plans designed to achieve a particular
objective such as increasing market
share or sales of a product range
Loss leaders term - product sold at
less than it costs to attract
customers to other products in range
Aim to capture customers to buy
other products at full price. e.g.
toothbrushes 99p, but need
toothpaste etc.
Psychological pricing: a tactic intended to
give the impression of value e.g. selling a
good for 9.99 rather than 10
the use of odd numbered pricing to increase 'value
for money' appeal for products, impression price
seems significantly lower.
Influences on
pricing decisions
the unit cost - loss leader is short term
- cash cows available to cover costs..
competitors prices, what are they
doing, price wars.. objectives,
maximise profits.. sensitivity of
demand to changes in price.. the rest
of the marketing mix.. the target
market.. the economic conditions...
PLACE
Place is making products available at the
right time, right place and right quantities
A distribution channel is the method
used by a business to get its products
to the consumer
Types of distribution; direct, modern, traditional and agent.
Direct; where no intermediaries are
used.
+ direct contact with consumers
allows effective feedback on
product and price. + can be used
to encourage consumers to buy
other product range... - can be
expensive to set up own direct
sales force. - frequent contact
with customers may be needed
In order to build relationships
Agent; Manufacturer >
Agent > Consumer
+ can explain complex
products to niche market. - can
charge high commission -> lose
control of price
Modern; Manufacturer >
Retailer > Consumer
+ large deliveries can be made
to each distribution dept. +
large retailers organise their
own distribution links -
manufacturers do not have to
deliver to individual stores... -
huge buying power puts
retailers such as Tesco in the
driving seat, they demand and
nearly always receive
substantial discounts from
suppliers.
+ the wholesaler carries the risk and cost of holding
stocks. + wholesaler will offer delivery and credit to
retailers further reducing overheads... - the
distribution process could be slowed down which is
less appropriate for perishable items. - may reduce
direct contact between the retailer and
mmanufacturer
PROMOTION
Promotion is making potential
and existing customers aware of
a product or service
Sales promotion
Direct selling
public relations
merchandising
advertising
branding
Factors affecting promotional mix; costs;
competitors; elasticity; product; market size; other
elements of marketing mix
aims of promotion; - to persuade customers to
buy your product. - to increase awareness
among a greater number of potential
customers (increase market share). - remind
customers about product. - improve brand
image of their product. - establish identity for
the business rather than a specific product
PRODUCT
A product is designed to meet the customer needs
and refers to the features, functions and any usp
involved. can be both tangible and intangible
the product development process:
creativity > defining the concept >
developing the concept > testing and
finding the concept > full product
launch > managing the product cycle
Boston Matrix: a method of
analysing the products in a firms
portfolio based on relative market
share and market growth
Cash cows; high market share -
low growth market... low
maintenance, little marketing
expenditure needed and
relatively high profits
Strategy; milk the cows and
support the stars - don't
invest
Rising Stars; high market share
and high market growth.. high
maintenance, brings new
customers to a business which
may become loyal to the brand.
Strategy; invest and
maintain sales
Dogs; low market share and
low growth
market...inevitable, can be
revived, most products will
eventually fall into this
category
Strategy; 1) sell it off, 2) milk it/
leave it, 3) kill it/discontinue...
balance is needed
problem children; low market share high
market growth... high maintenance, high
failure rate but potential for future success,
star of the future, without new products firm
could lose market share
Strategy; high levels of
investment, promotion and
development/possibly drop