Chapter 13 Marketing Mix– Price

Yr 10 Business Studies Textbook Pg 170. Chapter 13 Marketing Mix– Price.

5 main types of pricing methods:. Cost Plus – the cost of manufacturing plus a profit. it will cover costs and make sure profit will be made Competitive – priced just below the competitors’ prices to get more market share and increase sales Penetration – priced lower than competitors’ prices to enter new market (consumers will try out cheaper product and see if they like it) Price Skimming – a high price is set for a new product on the market. (used for new inventions or development of an old product) high profits to cover the research Promotional – priced very low for a short period of time to increase sales. when there is lots of stock, but no one is buying. don’t make much (if any) profit.

Cost Plus Pricing. Cost Plus Pricing is the cost of manufacturing the product plus a profit mark-up Total cost of making 2000 chocolates is $2000 The business wants to make 50% profit for every chocolate produced. The calculation to find 50% of the selling price .

Competitive Pricing. Competitive pricing is when the product is priced the same or just below the competitor’s price to attract more customers.

Penetration Pricing. Penetration pricing strategy is used when the price is set lower than the competitor’s prices in order to help enter a new market. Helps companies introduce their new products.

Price Skimming. Price skimming is when a high price is set for a new product on the market..

Promotional pricing. Promotional pricing is when a product is sold at a very low price for a short period of time..

Pricing Methods. Pricing Methods Benefits Limitations Cost Plus It is easy to apply Each product earns profit for the business You could lose sales if price is too high compared to competitors Company does not benefit if price is reduced Competitive Lots of sales because the price is reasonable Product is not under- or overpriced You must do research to see what competitors’ prices are. Time & Money Prices are low so not much profit Penetration Sales are guaranteed and the new product enters a market Product is sold at low price so profit will be low Price Skimming Establishes product as good quality Make quite a lot of profit Price is so high that may put off potential customers off Promotional renews consumer’s interest in business if sales are falling Gets rid of unwanted stock that won’t sell there will not be much/if any profit made – because sales revenue is lower.

10 Basic Psychology Disciplines | CSP Online. The impact of psychology on price decisions.

Price Elasticity. a measurement of how responsive the market is when there is a change in price of a product how much you can increase the price before sales fall enough that you make less money A product either has price-elastic demand or price inelastic demand..

Recap. penetration pricing to enter new markets dynamic pricing costplus pricing to cover costs and ensure a certiin profit is made charge different prices to customers for the prcdt-ct or er.'ice depnding on time or level of demand to maintain market share comFPtitive pricing price skimming to make high profit ard recoup research and development costs PRICING STRATEGIES to sales promotional pricing to affect consumers' prceptions of products psychological pricing com*itive pricing.

Exam style questions. X & Z have recently designed a new game for the Microsoft Xbox@, a games console. People in many different countries have been waiting for this new game and they are willing to pay a high price to be some of the first people to play the game. 'The business can get back some of the development costs of the new game by using price skimming,' says the Marketing Manager. X & Z have a product range of 20 games, some of which were developed several years ago. a) What is meant by 'price skimming'? [21 b) Identify two factors that affect the price of the new game for the Xbox@. [21 c) Identify and explain two reasons why X & Z might use price skimming for their new game. d) Identify and explain two other pricing strategies X & Z could use. [41 [61 e) Do you think that just using the price skimming strategy for all the games produced by X & Z is the best decision to take? Justify your answer. [61.