Unit 4 MARKETING

Unit 4.5: The 4P's (Price)

Price is one of the 4 Ps in the marketing mix, alongside Product, Place, and Promotion. Setting the right price is crucial, as it affects demand, positioning, and competitiveness in the market. Price also influences perceptions of value and can affect how a product is positioned within its market segment. It is essential for balancing business objectives, such as maximizing profits or gaining market share.

The 7 pricing strategies discussed:

  1. Price skimming
  2. Penetration pricing
  3. Premium pricing
  4. Loss leader
  5. Price discrimination
  6. Cost-plus pricing
  7. Price leadership

QUESTION 1: Which pricing strategy is which?

  • A technology company recently launched its latest smartphone aimed at the aspirational market, with the cost significantly higher than that of its previous models. Despite the high cost, consumers lined up to purchase the product, drawn by its exclusivity and advanced features. Over time, the price can be gently reduced to appeal to a broader market, ensuring early adopters pay a higher price for the newest technology.

  • A luxury brand known for its exclusive handbags sets prices far higher than competitors, cementing its position as a premium product. The high price is not due to production costs but designed to signal the status and quality of owning their products. This strategy targets customers who value exclusivity and are willing to pay for prestige.

  • A major coffee chain introduced a popular new product at a very low price to attract a large number of customers and gain market share quickly. The product can be advertised heavily, and the company focused on drawing in a wide audience before raising prices slightly once they had built a customer base

  • A global fast-food chain has tiered pricing, offering different prices for the same product in different locations. In affluent areas, customers are willing to pay more, while in less wealthy locations, the price is lower. This ensures that the company maximizes revenue by adjusting to the purchasing power of its varied customer base.

  • A well-known electronics retailer sets the price of its products slightly above the cost to ensure a steady margin on each item sold. While competitors may fluctuate their prices, this retailer sticks to a consistent markup, ensuring that costs are covered and a predictable profit is made on every sale.

  • A popular online retailer regularly sets its prices just below major competitors in the industry, positioning itself as the leader in affordability. This company is often the first to adjust prices downward, forcing others in the market to follow suit. This tactic ensures they remain a dominant player in the market.

  • A leading supermarket chain offers certain everyday items like milk, bread, and eggs at a price lower than cost to draw customers into their stores. The hope is that while shopping for these cheap items, customers will also purchase other, more expensive products, which allows the store to profit despite losing money on the discounted items.

QUESTION 2: Which pricing strategy do you suggest?

SmartSaver Electronics – An online electronics retailer concept that aims to undercut the competition by consistently pricing its products just below other retailers. By positioning itself as the most affordable option for tech-savvy, budget-conscious consumers, the company plans to become a price leader in the market once launched.

SnackStorm – An emerging snack brand that is preparing to launch a line of healthy snack bars. To break into the crowded market, the business intends to offer its products at a significantly lower price initially, aiming to attract a large customer base quickly before raising prices once the brand gains recognition.

TechPinnacle – A proposed startup focusing on developing high-end smart devices like phones, tablets, and smartwatches. The company plans to enter the market with exclusive, premium-priced products targeted at early adopters, with plans to lower prices over time to reach a broader audience.

LuxèLine – A luxury fashion startup that is in the early stages of designing exclusive, handcrafted clothing for high-end consumers. The company plans to price its items far above the average market rate to position itself as a premium brand, appealing to those who value status and quality over cost.

ZipRide – A proposed urban transportation service that plans to offer bike and scooter rentals via a mobile app. The company envisions adjusting prices based on the location and time of day, making the service accessible in lower-income areas and more expensive in high-demand, affluent zones during peak hours.

EcoNest – A furniture company in the design and funding stages that aims to build sustainable, eco-friendly furniture. The plan is to price its products slightly above cost to ensure profitability while staying true to its mission of ethical and environmental responsibility.

EveryDeal Supermart – A supermarket chain concept that is in the planning stages. The idea is to offer key everyday items at prices below cost to draw customers into the store, encouraging them to buy additional full-priced goods once they’re inside. This strategy will help drive overall revenue despite losses on a few key products.