Using the marketing mix:
pricing
LO: To understand the difference between the various pricing strategies
and pricing tactics.
What does price tell us about a product?
Pricing strategies:
Price skimming
Penetration pricing
Price leadership and price taking
Predator (or destroyer) pricing
Price skimming
• Initially a high price is set to yield a high profit margin.
• Used to target early adopters – people who want to be the
among the first to purchase a new product.
Penetration Pricing
Predator (destroyer) pricing
• Low prices are set to break into
a market.
• Low prices are set to drive a firm
out of the market.
• Aims to reduce the number of
competitors in the market.
Price Leadership and Price Taking
• A large company (price leader) sets a
takers) tend to follow.
market price that smaller firms (price
• In the petrol industry, price leadership is shared
firms.
amongst a few major
Loss leaders
Psychological pricing
Pricing tactics:
Loss leaders
• A tactic in which a firm sets a low price for its product(s) in order to encourage
consumers to buy other products that provide profit for the firm.
Psychological Pricing
• A tactic intended to give the impression
£9.99 rather than £10).
of value (e.g. selling a good for
To what extent is price the most important
element of the marketing mix? (20 marks)
• Plan an essay – with the key elements:
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•
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Introduction with demonstration of understanding
Arguments for with Point  Impact  knock on effect
Arguments against with Point  Impact  knock on effect
Evaluative points Point  Impact  knock on effect