Price is the value placed on what is exchanged by the buyer. Buyers’ interest in price stems from their expectations about usefulness of a product or the satisfaction they may derive from it.
Pricing is the one element of the marketing mix which results in income, rather than incurs costs but it can be very difficult to get it right. Price is often the only thing a marketer can change quickly to respond to changes in demands and to competitors actions. It is a key element of the marketing mix because it directly related to generation of revenue.
To set a good pricing, the understanding of the market is needed. The number of buyers and sellers operating in a market as well as the barriers which exist to prevent new firms from entering or leaving the market should be considerer.
2.0 External Influences.
Understanding the market
Perfect competition everything is fare, rarely exists.
Imperfect Competition You have a big disadvantage
Oligopoly Formado by key players in the market which own 90% of the market.
Monopoly There is one supplier to the market, no one else there, you don’t see monopolies in legal markets.
3.0 The pricing decision is influenced by:
a. Pricing objectives
b. Marketing mix variables
c. Legal Issues
e. Buyer’s perceptions
f. Channel member expectations
h. Organisational objectives
4.0 Price elasticity.
Price elasticity is a measure used in economics to show the responsiveness, or elasticity, of the quantity demanded of a good or service to a change in its price.
Elastic demand: means that an increase in price will result in a decrease in sales, whereas a decrease in price will give an increase to sales. When the outcome is greater than 1 demand is elastic.
Inelastic demand: means that increasing or decreasing price has little or no effect on sales, making a decrease a costly exercise. When the outcome is less than 1 demand is inelastic.
What influence the elasticity of the price is the Availability of substitutes, level of competition, economic factors (for example the recession), Customer loyalty, and the type of product (expectations of customer) i.e sofas you expect to be on sale.
5.0 Pricing Issues and Trends
Memberships and monthly renewals are increasingly common, monthly fees are more attractive to many consumers, despite the year (or more) contract they are actually agreeing to. (Phone contract)
Minimum pricing also known as regulation pricing, where an external body sets the price. Government control over the price charge in a market. Although legislation is in place yet to be upheld due to appeals, many already operating within the new rules. (Example, Alcohol has a legal minimum price.)
Price wars companies delivery compete with prices. (i.e Petrol.)
Price comparison websites which make consumers more aware of the going rate for products and services due to the online comparison sites. However recent headlines have called into question their accuracy and motives: “Price comparison websites accused of misleading customers…”
Price bundling combining related products and offering a bundle, this makes the customer feel they are getting a better deal. (i.e buy a PlayStation and get a free game with it.)
In-app purchase and the rise of freemium, is generally a digital trend which a product or service is given away “free” but costs can then occur, particularly prevalent in gaming apps.
6.0 Pricing Approaches and Objectives. 6.1 Approaches
What does your company need or want with the pricing. There are 4 types of pricing approaches:
Cost- Orientated: The cost of the good is the key driver in the development of the final selling price; it does not take into account the market. This applies to small and medium business.
Demand- Orientated: Setting prices according to how much customers are willing to pay, no account of the cost. For example: the different prices of a product in other countries.
Competitor- Orientated: Takes in