4P's of marketingmix__price-business.pptx

MARKETING MIX

1. MARKETING MIX: PRICE BUSINESS CHP: 19

2. Price is the amount paid by customers for a product. Determining an appropriate price for a product is a vital component of the marketing mix. Price can have a great impact on the consumer demand for a product . Price affects the value added to a product, revenue, profit, and brand image. Pricing decisions are critical for influencing demand and achieving business objectives. Price as a Key Part of the Marketing Mix:

3. Determinants of Pricing

4. Costs of production : Prices must cover production and marketing costs to ensure profitability. Competitive conditions : Monopolists have pricing freedom, while businesses in competitive markets must price similarly to competitors. Competitors' prices : Price differentiation is difficult unless the product is unique. Business objectives : Pricing depends on whether the goal is to capture market share (lower prices) or to establish a premium brand (higher prices). Price elasticity of demand : Pricing depends on how sensitive customers are to price changes. New vs. existing product : New products may use skimming (high price) or penetration (low price) strategies.

5. Types of pricing methods:

6. Cost-based pricing Companies will assess their costs of producing or supplying one unit, and then add profit to the calculated costs.

7. Mark-up pricing Adds a fixed percentage markup for profit to the cost of goods. The amount of markup usually depends on the strength of demand for the product, the number of competitors and the stage of the Product Life Cycle . Cost-plus pricing Adds a fixed margin to the total production cost to set the price. This method ensures all costs are met and is suitable for firms with high market shares. Contribution-cost (or marginal-cost) pricing Sets a price that covers variable costs with a contribution to fixed costs. method does not try to allocate the fixed costs to specific products. Instead, the business calculates a variable cost per unit of the product. It then adds an extra amount, which is known as a contribution towards fixed costs and profit. If enough units are sold, the total contribution will be enough to cover the fixed costs and to return a profit.

8. 4) Loss Leaders Sets some product prices below cost to attract customers to higher-margin products.

9. Competition based pricing Making pricing decisions based on prices set by competitors.

10. Price discrimination It involves charging different prices to different consumer groups for the same product Dynamic Pricing Changing prices, frequently, to respond to changes in demand. It is based on demand level and ability of consumers to pay

11. Pricing methods for new products

12. Penetration Pricing Firms use this strategy to enter the market with a low price, aiming to gain a large market share through mass marketing. As the product gains traction, prices can gradually increase to improve profit margins. Market skimming his strategy involves setting high initial prices to maximize short-term profits before competitors enter the market. It's often used by firms with exclusive or legally protected products (e.g., pharmaceuticals). Over time, prices may be reduced as competition increases, especially when rivals introduce similar products.

13. Price perception: Setting prices just below key levels (e.g., $999 instead of $1001) makes prices appear significantly lower to consumers, influencing their buying decisions. Perceived value: Prices are aligned with consumer expectations of quality and brand status. Too low a price for premium products can harm the product’s exclusive image, while too high a price can exceed consumer expectations of value, leading to reduced sales. For prestigious brands, higher prices can enhance perceived value. Psychological Pricing

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