Marketing Mix - Price

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  • Marketing Mix - Pricing
    • Price Skimming
      • New/ innovative products sold at high prices then dropped considerably after year or so as tech is no longer new
        • Used as long-term strategy to keep brand exclusive
          • E.g. Apple or Ray-Ban
        • Potential customers can be put off by high price
    • Penetration Pricing
      • Launching a product at low price to gain customers/ market share then gradually increasing as it becomes popular
        • Customers expect low price to continue so may lose customers
        • Effective in price-sensitive markets
        • Works best when firm can from lower costs when producing large quantities
    • Dynamic Pricing
      • Responds to changes in demand
      • E.g. hotel rooms, air travel and rail tickets change as travel date gets nearer, seasonal and time/day
    • Predatory Pricing
      • Price is deliberately lowered to force another business out of the market
        • Illegal in EU and USA
    • Competitive Pricing
      • Companies monitor competitors' prices then set equal or lower price
        • Often used by supermarkets
        • E.g. Asda refund difference if they are more expensive than other supermarkets (price guarantee)
    • Psychological Pricing
      • Based on customer expectations
        • E.g. high price could mean high quality
      • Insignificant price change can have big psychological impact
        • E.g. £9.99 seems a lot better than £10
    • Loss leaders
      • Sold at or below cost price
      • May lose money but usual make profit indirectly
        • E.g. entice leaders into shop so they buy fully-priced items
    • Price Discrimination
      • Product sold at different prices depending on age of consumer
        • E.g. zoo ticket prices vary according to age
    • Affected by
      • All other P's in marketing mix
      • How price sensitive the market is
      • Price elasticity of demand
        • Availability of substitutes, type of product, age of product, loyalty to brand, and whether it's an expensive purchase
      • Stage of the product's life cycle
      • Company's objectives
      • Price of competitor products


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