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the marketing mix: price (main methods (psychological pricing (is an…
the marketing mix: price
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main methods
cost-plus pricing
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involves estimating how many of the product will be produced, the calculating the total cost of producing this output and finally adding a percentage mark-up for profit
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justification: the business may have few competitors so a fixed profit mark up can be earned on each product sold
competitive pricing
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sales are likely to be high as your price is at a realistic level and the product is not under or over-priced
in order to decide what this price should be, you would have to research what price your competitors are charging, and this costs time and money
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justification: consumers will be unlikely to buy products at higher prices unless they think they are "better" than those sold by other businesses
penetration pricing
would possibly be used when trying to enter a new market, and the price would be set lower than the competitors' prices
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price skimming
product is usually a new invention, or a new development of an old product
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promotional pricing
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justification: although low profit will be made, it reduces inventory holding costs
psychological pricing
is an approach when particular attention is paid to the effect that the price of a product will have upon consumers' perceptions of the product
this might involve charging a very high price for a high-quality product so that high income customers wish to purchase it as a status symbol
could also involve charging a price for a product which is just below a whole number, e.g. 99c creates the impression of being cheaper than $1
supermarkets may charge low prices for products purchased on a regular basis and this will give customers the impression of being given good value for money
it ensures that sales are made by reinforcing consumers' perceptions of the product- this may be its brand image when the price is set high
little sales revenue is lost by putting the price just below the price the business wants to sell the product for
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dynamic pricing
charging different consumer groups different prices for the same product because they have different demand levels
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