WMG Full-Time Master’s Programmes

Strategic Marketing

The Marketing Mix

Price

Dave Harvey

November 2019
 Selecting the Price…
Influencing Factors: Selecting the Pricing Objective

Corporate Objectives
Determining Demand
& Resources
Portfolio Matrix
Life-Cycle Estimating Costs
Product Positioning
Suppliers Prices
Analysing Competitors Prices & Costs
Competition
Differential Benefits
Selecting a Pricing Method
Customer Attitudes
Legal Constraints
Selecting the Final Price

2
Price Elasticity…
Ease of Switching
Marketers need to know
Moderstely
how responsive, or
elastic demand, would Very Elastic
be to a change in price
for their product.
Easy
If the demand hardly
changes with a small Moderately
change in price the Elastic
demand is Inelastic

If the demand changes

considerably with a small
change demand is Elastic
Hard Inelastic
Note Cross-elasticity of
Demand! Seller’s Market Buyer’s Market

Supply/Demand Conditions
3
 Pricing Considerations…
Pricing Basis Pricing Objectives Pricing Strategies

Price Skimming

The Link between Price Discounts

Achieve Financial
Costs and Prices
Performance
Price Signaling
The Consumers’
Position the
Perception of Price Price Bundling
Product
The Demand Curve and Prices Price Leadership
Stimulate Demand
Competition and Price Discrimination
Influence Competition
Pricing
Premium Pricing

4
Pricing Strategies…
Economy pricing usually
represents the lowest price a
company can charge for goods
or services. The economy
pricing strategy can help
undercut current price levels of
current competitors by offering
a similar product with no frills
or fancy features. The costs of
marketing and promoting a
product are kept to a
minimum.
Price skimming is a product
pricing policy by which a firm
charges the highest initial price
that customers will pay. As the
demand of the first customers
is satisfied, the firm lowers the
price to attract another, more
price-sensitive segment.
Penetration pricing refers to
a marketing policy used by
businesses to attract
customers to a new product
or service. Penetration
pricing is the practice of
offering an artificially low
price for a new product or
service during its initial
offering in order to lure
customers away from
competitors.
Premium pricing is the
practice of setting a price
higher than the market
Examples of other tactics: price, in the expectation
Cost Plus Pricing
Mark Up/Margin Pricing
that customers will
Second Market Discounting purchase it due to the
Predatory Pricing perception that it must
“Grey Markets”
have unusually high quality
or reputation.
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Price - Quality Strategies…
Price
The company must set
its price in relation to High Medium Low
the value delivered and
perceived by the
customer e.g. Marriott Premium High Value Super Value
High
Strategy Strategy Strategy
Hotels

There can be Overcharging Medium Value Good Value

competition between
Quality Medium
Strategy Strategy Strategy
market segments - so
competitors can co-
exist as long as the
market consists groups Low Rip-Off False Economy Economy
Strategy Strategy Strategy
of buyers who have
different value seeking
requirements

6
Pricing Strategies & the PLC…
Guiding Principles:
Introductory Growth Maturity
Decline Stage
Value of product to Stage Stage Stage

customer not its cost of Plus-One

production Key
Competitive
Account
Different customer values Bid

mean prices should be Segment

Low Cost
Harvest
customised
Perceived
Total
Should anticipate Value Penetration
Market
competitors reactions and Value-in-
Sales
Use
their long run objectives Cost Plus

Should be integrated with Skimming

Floor
company’s broad strategic
positioning and goals
Time Market Based Pricing Internal Based Pricing

Price Consider
Price low to
competitively raising price Raise
win high market
to win as market price
Share OR
market share saturates
Price high in
recognition of
7 novelty &
prestige
Impact of the Internet on Pricing…

The internet is
more than a new
‘market space, it is
rapidly changing Buyers Sellers Both
the rules of the • Get instant price • Monitor customer • Negotiate prices
Marketing Mix comparisons behaviour and in online auctions
and probably has tailor prices and
the greatest • Name price and offers • Negotiate prices
impact on Price have it met in exchanges e.g.
• Give certain eBay
• Get products for customers access
free to special prices

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Price - Relevant Questions…
What pricing policies are appropriate?

What is the best recommended retail price?

Should price variations be established?

How do consumers perceive prices…cost, investment, status, value for money, value?

How effective are discounts and wholesale prices?

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Discussion
 Think of some examples of products or services
where price is used as a key indicator of quality
 Why do you think this is?

10 07/07/2024