Semi-Finals Flashcards
(29 cards)
It is one of the most important elements of the marketing mix, as it is the only mix, which generates a turnover for the organization.
Pricing
They are the variable cost for the organization.
The remaining 3p’s
It costs to produce and design a product; it costs to distribute a product and costs to promote it.
Pricing
It must support these elements of the mix.
Price
It is difficult and must reflect supply and demand relationship.
Pricing
Pricing a product too high or too low could mean a ___ for the organization.
loss of sales
Pricing should take into account the following factors:
Fixed and variable costs Competition Company objectives Proposed positioning strategies. Target group and willingness to pay.
DIFFERENT KINDS OF PRICING SCHEMES
Penetration Pricing Optional Pricing Skimming Pricing Competition Pricing Product Line Pricing Bundle Pricing Psychological Pricing Premium Pricing Cost-Based Pricing Cost-Plus Pricing
Here the organization sets a low price to increase sales and market share. Once market share has been captured the firm may well then increase their price.
Penetration Pricing
Example: A television satellite company sets a low price to get subscribers then increases the price as their customer base increases.
Penetration Pricing
The organization sets an initial high price and then slowly lowers the price to make the product available to a wider market. The objective is to skim profits of the market layer by layer.
Skimming Pricing
Example: A games console company reduces the price of their console over 5 years, charging a premium at launch and lowest price near the end of its life cycle.
Skimming Pricing
Setting a price in comparison with competitors. Really a firm has three options and these are to price lower, price the same or price higher.
Competition pricing
Example: Some firms offer a price matching service to match what their competitors are offering.
Competition Pricing
Pricing different products within the same product range at different price points.
Product Line Pricing
Example: An example would be a DVD manufacturer offering different DVD recorders with different features at different prices eg A HD and non HD version. The greater the features and the benefit obtained the greater the consumer will pay. This form of price discrimination assists the company in maximizing turnover and profits.
Product Line Pricing
The organization bundles a group of products at a reduced price. Common methods are buy one and get one free promotions or BOGOF’s as they are now known. Within the UK some firms are now moving into the realms of buy one get two free can we call this BOGTF.
Bundle Pricing
Example This strategy is very popular with supermarkets who often offer BOGOF strategies.
Bundle Pricing
The seller here will consider the psychology of price and the positioning of price within the market place.
Psychological pricing
Example: The seller will therefore charge Php99 instead Php100 or Php199 instead of P200. The reason why this methods work, is because buyers will still say they purchased their product under Php200.
Psychological Pricing
The price set is high to reflect the exclusiveness of the product.
Premium pricing
Example: Example of products using this strategy would be hermes, first class airline services, Porsche etc.
Premium Pricing
The organization sells optional extras along with the product to maximize its turnover.
Optional pricing
Example: This strategy is used commonly within the car industry as i found out when purchasing my car.
Optional Pricing
