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4.5 The four Ps - product, price, promotion & place (Introduction -…
4.5 The four Ps - product, price, promotion & place
Introduction - price
- Price is the amount paid by consumers for a product. Price is vital component of the marketing mix as it impacts on the consumer demand for the product.
Pricing level will also:
- determine the degree of value added by the business to bought-in components
- influence the revenue & profit made by a business due to the impact on demand
- reflect the marketing objectives of the business & help establish the psychological image & identity of a product
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Pricing strategies
Cost-based pricing
cost-plus pricing
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- This method often used by retailers
- The size of the mark-up usually depends upon a combination of the strength of demand for the product, the number of competitors and the age & stage of life of the product (also depends on traditional practice in industry sometimes)
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Price leadership
- Usually exists when a company is the dominant firm in the market - i.e. has highest market share.
- This bussiness benefits from economies of scale & has the lowest unit costs in the industry.
- When a dominant company aggresively lowers prices specifically because it knows the smaller companies in the industry cannot sustain a lower price, this is called predatory pricing
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