Price and Place - Marketing Mix (BBC Bitesize Revision GCSE)

HideShow resource information

Business Studies

Price

A business must take many factors into account before deciding on the price of a product.

Pricing strategies

Remember there is a big difference between costs and price. Costs are the expenses of a firm. Price is the amount customers are charged for items.

Firms think very carefully about the price to charge for their products. There are a number of factors to take into account when reaching a pricing decision:

A sign showing clothes prices in a shop window - jacket £30, tee shirt £12, jeans £20 and shoes £38 (http://www.bbc.co.uk/schools/gcsebitesize/business/images/prices.jpg)

  • Customers. Price affects sales. Lowering the price of a product increases customer demand. However, too low a price may lead customers to think you are selling a low quality ‘budget product’.
  • Competitors. A business takes into account the price charged by rival organisations, particularly in competitive markets. Competitive pricing occurs when a firm decides its own price based on that charged by rivals. Setting a price above that charged by the market leader can only work if your product has better features and appearance.
  • Costs. A business can make a profit only if the price charged eventually covers the costs of making an item. One way to try to ensure a profit is to use cost plus pricing. For example, adding a 50% mark up to a sandwich that costs £2 to make…

Comments

No comments have yet been made

Similar Business Studies resources:

See all Business Studies resources »See all Marketing mix resources »