Pricing Strategy

The latest content to be added to mktg101.co.uk is a page about pricing, which can be found here: www.mktg101.co.uk/price.

Here is part of our explanation of pricing:

Price is defined as the amount of money charged for a product or service, and is one on the key elements of the marketing mix alongside product, place, and promotion. However, price is unique in that it is the only element of the marketing mix which generates revenue, where as the other elements incur costs. Price is not to be confused with value, which is the amount of money which is considered to be a fair equivalent for a product or service. In the modern marketing environment companies often have many competitors, therefore there a large emphasis placed on ensuring that a companies pricing strategy is right. The pricing matrix (below) suggests four basic pricing strategies:

Premium Pricing

This is where the product is of high quality, but a high price is charged in return. This pricing approach is often used if a product has a good unique selling point (USP) and therefore a competitive advantage. Premium pricing also tends to attract status conscious consumers who believe that high price indicates excellent quality, and is a sign of wealth, e.g Rolex, Rolls Royce, luxury cruises, etc.

Economy Pricing

Products are manufactured and lower quality and marketed cheaply, and in-turn sold at low prices. Products in this category are often ‘no-frills’ with minimal features and basic packaging. For example, many supermarkets sell their own brand products at a cheaper price than other well-known brands.

Penetration Pricing

The purpose of penetration pricing is to charge a low initial price to attract customers and build market share. This strategy is often used during new product releases in order to gain reputation and achieve economies of scale before allowing competition to build. Once significant market presence has been secured, the product price is often gradually increased to a more competitive rate.

Price Skimming

Price skimming involves charging a relatively high price for a short space of time in the attempt to ‘skim’ off customers who value the product highly and are willing to pay a greater price to get a product sooner. This often occurs when companies have a competitive advantage with products that are new, improved, and innovative. Price skimming benefits from high short-term profits and a image of high quality. However, once the ‘high end’ of the market is saturated and new competition enters the market, the price of the product is gradually reduced to attract customers who have less demand for the product. An example of price skimming is the sale of DVD players in the 1990’s. Prices were originally high due to the new technology, but this technology soon became common-place resulting in increased competition and falling prices.

To read more about factors which affect the pricing decision, as well as many other marketing topic guides, please visit our website at www.mktg101.co.uk

What is Marketing?

New content has been added to mktg101.co.uk discussing the topic - What is Marketing?

Marketing is defined by the Chartered Institute of Marketing (CIM) as “the management process responsible for identifying, anticipating, and satisfying customer requirements profitably.” Modern companies and organisations are becoming increasingly aware of the importance of marketing in order to achieve both growth and profitability, with a large emphasis being placed on satisfying customer needs and wants.

It is human nature to have needs and wants. For example, when we are hungry there is a need to buy food, and there may be a want to buy a particular type of food, e.g. a cheeseburger. Companies are able to address these needs and wants by providing a marketing offer – a product or service which is offered in order to satisfy a customers needs. Following this offer, a process of exchange may occur between a company and a customer. This is a situation whereby the customer obtains a product or service to fulfil their needs by offering something in return (usually money).

It is the function of marketing to develop and facilitate the exchange process by both creating and satisfying customer needs and wants. This is achieved via a number of marketing practises. For example, sellers must discover who their key customers are, find out their needs, then design products or services to match these needs. This requires processes such as market research, product development, promotion, pricing, and distribution. These processes are controlled by marketing management, with the overall aim of marketing effort to identify the customer, entice the customer, satisfy the customer, and retain the customer.

The mktg101.co.uk definition of marketing is “identifying, encouraging, and satisfying customer needs and wants through an exchange process which offers value to both the seller and the customer.”

mktg101.co.uk goes online!

mktg101.co.uk has just gone online for the very first time! The purpose of mktg101.co.uk is to provide beginner or amateur marketers with easy-to-follow information surrounding the key topics of marketing. The site is perfect for marketing students (or anyone with an interest in marketing) to brush up their knowledge on the many marketing principles and theories. 

Over the next couple of months, LOTS of content will be added to mktg101.co.uk, so be sure to keep checking back for the latest marketing topic guides and updates. Marketing theory will also be posted to blogger, and you can also keep updated with the sites progress via facebook and twitter by using the following links:

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