C18FM – FUNDAMENTALS OF MARKETING

Prep Task
Preparation Task
Price

PREP TASK:

Student Learning Objectives:

 Familiarise students with the bases of pricing theory and practice.

 Facilitate a critical, reflective understanding of pricing perspectives and strategy.
 Encourage a more critical appreciation of pricing within the marketing process.
 Encourage the use of a more formal, evidence based approach to the exposition of personal
knowledge.

Student Task:

Task a: (No need to submit answers to task a). You may like to search for additional information
to help formulate your ideas and potential insights. Whilst, this is not compulsory, it would be a
useful starting point and a valuable future resource for you .

Task b: (Submission required) Complete the ‘boxed’ questions overleaf to form a basis for
this understanding.

 Submit your answers before the start of the tutorial for this topic
with your name and student number clearly marked below.
 Weekly prep tasks must be submitted to qualify for credit
 You will receive standardised feedback for the boxes and the exam/essay style question.
 Keep these safe and use as a revision tool for the assessments.

This topic will form the basis of discussion in your next Tutorial.

Your Name : Tom Chambet

Matriculation Number : H00386411
Date Submitted : 11/11/21

Price PREP TASK

This prep task formalises your learning by asking a series of questions relating to the exam style
question below. Provide brief answers to these questions within the boxes.

‘Discuss pricing as a vehicle for effective marketing’

Now outline answers to the following questions within the boxes:

Provide at least one definition of ‘pricing’ … ?

Pricing is the method of determining the value a producer will get in the exchange of
goods and services. Simply, pricing method is used to set the price of producer’s
offerings relevant to both the producer and the customer.

Identify and describe 4 types of pricing objective and offer an example to illustrate each objective.
Sales objective: pricing products to maximize sales or to attain a desired level of
sales or market share.

Profit Objective: pricing products with a focus on a target level of profit growth or a
desired net profit margin.

Competitive effect objective: pricing that is intended to have an effect on the

marketing efforts of the competition.

Customer satisfaction objective: pricing to offer the maximum value to the customer,
it’s not always a lower price.

Draw demand curves for normal and luxury products and (briefly) explain why they are different

The difference between normal and luxury demand is that people buying luxury
products are not price sensitive, so they don’t really care if the price of the product
increases. As for price sensitive people, they will always look for the better product
but with a low price.
 C18FM – FUNDAMENTALS OF MARKETING

Define ‘price elasticity of demand’ and write down the formula for calculating this measure
The price elasticity of demand is the percentage change in unit sales that results
from a percentage change in price.

Define ‘fixed’ and ‘variable’ costs and provide an example of each

Fixed costs: costs of production that do not change with the number of units
produced. Example: machining tools

Variable costs: the costs of production that are tied to, and vary depending on, the
number of units produced. Example: Raw materials

Identify 4 types of pricing strategy and provide examples for each

Value-based: pricing goods or services that adjusts the price based on its perceived
value rather than on its historical price. The value-based pricing strategy is used to
increase revenue by increasing prices without a significant effect on volume.

Cost based: pricing method in which a certain percentage of the total cost is added to
the cost of the product to determine its selling price, the selling price is determined by
adding a profit percentage in addition to the cost of making the product.

Demand-based: it’s based on the customer’s demand and the perceived value of the
product. In this method the customer’s responsiveness to purchase the product at
different prices is compared and then an acceptable price is set. 

Competitor-based pricing: When you understand how the top competitors in your
market are pricing their products and how that pricing might impact customers’
expectations, you have a foundation upon which you can set prices for your product’s
or service’s rates.

How might psychology be used by consumers and marketers within pricing decision-making?

Marketing psychology may be used to convince you that what I am selling is better
and will suit your needs the best, unlike the other brands in competition with my
company.

Recall an occasion where you experienced deceptive pricing practice and explain how it made you feel

Once I paid an Uber driver 55 pounds for a 20 minutes’ travel. I’m never getting an
uber at night again.
Explore the value/usefulness of understanding Pricing:
(This question is a chance for you to collect some insights that will help you to provide a more
critical answer in your examination (e.g. think of useful and less useful elements, explain why you
think they are more or less useful, give examples…this then becomes a great crib sheet for your
revision. You do not have to write an essay here. Rather, simply offer some brief thoughts and
you can return to this after submission if you wish, as you will keep a copy for yourself).

Price is an important element of a company's marketing mix and strategy. When

setting a price in Marketing, a complex reasoning is followed taking into account
many parameters to use the best possible strategy to find an optimal price
corresponding to the quality of the product, its production and distribution cost, the
expectations of the consumers belonging to the target group and the level of margin
necessary for the company's long-term profitability.

But are the consumers searching for price or value?

When a consumer sees significant value they will tend to pay a higher price for
products and services. Customers must feel they are receiving value for their money
and time. It is essential to sell value, not just a discounted product automatically
associated with value. Value has a negative relationship with price because
sometimes, from the customer's point of view, price is not seen as a sacrifice. It’s not
always the price sacrifice, but can be the time and effort spent when buying a product
that are more important to the consumers.

Well done … now, I can offer you a BOGOFF deal on Prep feedbacks … interested ?