The Price
Specification:
2.2 Using the Marketing Mix – Price • pricing decisions for growth • factors affecting pricing decisions |
Candidates should understand how pricing can be used to facilitate business growth. These include: price skimming, price penetration, competitive pricing, loss leader and cost-plus.
Candidates should be able to recognise the factors which might influence the pricing decision, eg the nature of the market, and the degree of competition. |
Types of Pricing Decision
Lesson Objectives:
- To understand the different types of pricing strategies available to a business (D-E)
- To analyse how different pricing strategies can affect business growth (B-C)
- To evaluate how choosing the right pricing strategy can lead to business growth (A*-A)
- To understand the different types of pricing strategies available to a business (D-E)
- To analyse how different pricing strategies can affect business growth (B-C)
- To evaluate how choosing the right pricing strategy can lead to business growth (A*-A)
Starter Activity:
What is this American supermarket doing to ensure you buy their products?
What can businesses do to ensure you buy their products?
Why do you think pricing strategies are so important when trying to get you to buy products?
What can businesses do to ensure you buy their products?
Why do you think pricing strategies are so important when trying to get you to buy products?
Price Skimming
This is when a high price is set for a product when it first enters a market - There is high demand and customers aren't price sensitive. The price is then reduced later to attract other customers. This strategy works well if a product is unique.
Penetration Pricing
A product is launched with a low price in order to get sales quickly and to gain market share. It is a way of trying to establish a product as a market leader. Customers may be sensitive to price and producing on a large scale gains a reputation and lowers costs.
Competitive Pricing
This is matching a competitors price and trying to compare yourself to others and show that you offer good value. This is usually where there are a few big dominant brands and price can be important on choosing a product.
Loss Leader
This is selling a product at a loss so that the customer will buy something else at a profit. E.g. razors and blades. Supermarkets also use this to get customers through the door with promotions in the hope that they buy other goods.
Cost Plus Pricing
This is where a business covers its costs. A business will work out the cost of producing a product and add a percentage onto it to ensure they make a profit. This doesn't always take demand into account.
This is when a high price is set for a product when it first enters a market - There is high demand and customers aren't price sensitive. The price is then reduced later to attract other customers. This strategy works well if a product is unique.
Penetration Pricing
A product is launched with a low price in order to get sales quickly and to gain market share. It is a way of trying to establish a product as a market leader. Customers may be sensitive to price and producing on a large scale gains a reputation and lowers costs.
Competitive Pricing
This is matching a competitors price and trying to compare yourself to others and show that you offer good value. This is usually where there are a few big dominant brands and price can be important on choosing a product.
Loss Leader
This is selling a product at a loss so that the customer will buy something else at a profit. E.g. razors and blades. Supermarkets also use this to get customers through the door with promotions in the hope that they buy other goods.
Cost Plus Pricing
This is where a business covers its costs. A business will work out the cost of producing a product and add a percentage onto it to ensure they make a profit. This doesn't always take demand into account.
pricing_strategies_worksheet.doc | |
File Size: | 32 kb |
File Type: | doc |
design_and_price_your_product.doc | |
File Size: | 32 kb |
File Type: | doc |
Factors Influencing The Price
Lesson Objectives:
- To understand the different factors that can affect the pricing of a product (D-E)
- To analyse the effects of these factors on the growth of a business (B-C)
- To evaluate how looking at various factors when pricing your products can lead to business growth (A*-A)
- To understand the different factors that can affect the pricing of a product (D-E)
- To analyse the effects of these factors on the growth of a business (B-C)
- To evaluate how looking at various factors when pricing your products can lead to business growth (A*-A)
Starter Activity:
pricing_wordsearch.doc | |
File Size: | 135 kb |
File Type: | doc |
We have looked at the various different pricing strategies a business can use, now we must look at the different factors that can influence how a business prices its products.
influences_on_price_worksheet.ppt | |
File Size: | 58 kb |
File Type: | ppt |
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Why do you think the correct price for a product is so important? What are the implications of getting it wrong?
S+C: Do you think that if the rest of your marketing mix is good enough, the price of your product is not important? (9 marks)
S+C: Do you think that if the rest of your marketing mix is good enough, the price of your product is not important? (9 marks)