Marketing & communication
Marketing mix: 4 P’s
Price
Crucial component to run your business:
• It decides your ideal market
• Amount of money coming into your business
• Set the right price from the start
• The most flexible 'P'
factors influencing pricing
intern and extern
Internal factors: marketing objectives
Before determining the price:
• Target audience
• positioning
• product quality
PRICE: to achieve certain objectives
• Low price:
o To scare away competition
o To attract customers / prospects
o Create interest / enthusiasm for a product
• Price set as competitor: to stabilize the market
• Price competition= the lowest level of competition
Internal factors: marketingmix strategy
Price: part of the marketingmix = key element to position a product
Always linked to:
• design (= product)
• distribution (= place)
• promotion
Possible strategy:
• Define a marketing offer that is worth a high price
Price ⟺ value
→ People pay a lot for service (key-on-the-door concept)
Ex: CHANEL = strong image & exclusive reputation → Consumer = willing to pay more
• The lowest price → Online competition makes it very hard!
Which supermarkets are:
1
, • Mid-segment: albert heijn, Carrefour, okay
• High-end: Delhaize, bioplanet
Internal factors: costs
→ bottom for the asking price
Price has to cover the costs of:
• Production, distribution & sales
• Profit margin for the effort & risk
Fixed costs: overhead costs → Don’t fluctuate with production/sales
Variable costs: move with production level
Total costs: fixed + variable costs
Internal factors: organizational considerations
Small companies:
• Prices set by management, not by marketing
• Under the influence of sales managers, accountants, …
Large companies:
• Prices set by division- or product line managers
external factors: nature of the market and demand
→ Limit to set prices
Price / demand: different from market-to-market
Markets:
• Free competition
• Monopolistic competition
external factors: competition
Consumer will:
• Evaluate price & value of a Canon – to other (comparable) products
• Competing brands: Nikon, Minolta, Olympus, …
• Canon will set the price of their offer ± on the same level as its competition
• Make sure your brand/shop has good USP's
external factors: other
• Economy:
→ Inflation, interest rates, … → Affect the price- / value perception of the consumer
• Resellers (retailers / wholesalers / …): → Their reaction to prices
• Government
pricing strategies
1. Premium pricing: businesses set costs higher than their competitors.
→ “image” pricing / “prestige” pricing → Create a high value perception
2
,→ Ideal if unique products: no mass production
“skim the cream off the top” → targeting those customers who are willing to pay more.
Pro and con:
- Limited customer base:
+ create a high value perception
2. Pricing for market penetration (same market same product):
→ to attract buyers by offering lower prices on goods and services.
→ But! Offering lower prices
→ draw attention away from competition
While many new companies use this technique to draw attention away from their competition,
penetration pricing does tend to result in an initial loss of income for the business. → Over time,
however, the increase in awareness can drive profits and help small businesses to stand out from the
crowd.
→ In the long run, after sufficiently penetrating a market, companies often wind up raising their
prices to better reflect the state of their position within the market.
Pro and con:
- Can lead to initial loss of income for the business
+ increase in awareness can drive profits
+ can help small business to stand out from the crowd
3. Economy pricing:
→ used most commonly: (food) suppliers / retailers
→ aims to attract price-conscious consumers
→ minimize marketing- & production cost
the technique can be dangerous for small businesses: Because small businesses lack the sales
volume of larger companies, they may struggle to generate a sufficient profit when prices are too
low.
Pro and con:
+ effective for large companies
- dangerous for small businesses: lack of sales volume
What’s the difference between economy pricing and pricing for market penetration?
• Economy Pricing → Used by a wide range of businesses including generic food suppliers and
discount retailers, economy pricing aims to attract the most price-conscious of consumers.
• Pricing for Market Penetration → to raise market share. Penetration strategies aim to attract
buyers by offering lower prices on goods and services.
3
, 4. Psychology pricing:
→ encourage customers to respond on emotional level rather than logical level
→ Setting the price at €199 attracts more customers than at €200
→ consumers pay more attention to the first number on a price tag, than the last one
5. Competition based pricing:
→ based upon price of the competitor(s)
→ less attention for businesses’ costs or demand
→ more, less or equal to competitor(s)
6. Inverse pricing:
→ start from the need / demand
At the start → researched the market thoroughly
Opportunity: Rather cheap fashion accessory that indicated the time
Ex: SWATCH
SWATCH tried to keep the costs as low as possible:
• Designed a simple, fashionable watch
• Less options / parts
• Used high-tech material, that was cheaper
→ revolutionary automated mass production process
Watch → fashion → functionality
→ price according to what the consumer wanted to pay
4
Marketing mix: 4 P’s
Price
Crucial component to run your business:
• It decides your ideal market
• Amount of money coming into your business
• Set the right price from the start
• The most flexible 'P'
factors influencing pricing
intern and extern
Internal factors: marketing objectives
Before determining the price:
• Target audience
• positioning
• product quality
PRICE: to achieve certain objectives
• Low price:
o To scare away competition
o To attract customers / prospects
o Create interest / enthusiasm for a product
• Price set as competitor: to stabilize the market
• Price competition= the lowest level of competition
Internal factors: marketingmix strategy
Price: part of the marketingmix = key element to position a product
Always linked to:
• design (= product)
• distribution (= place)
• promotion
Possible strategy:
• Define a marketing offer that is worth a high price
Price ⟺ value
→ People pay a lot for service (key-on-the-door concept)
Ex: CHANEL = strong image & exclusive reputation → Consumer = willing to pay more
• The lowest price → Online competition makes it very hard!
Which supermarkets are:
1
, • Mid-segment: albert heijn, Carrefour, okay
• High-end: Delhaize, bioplanet
Internal factors: costs
→ bottom for the asking price
Price has to cover the costs of:
• Production, distribution & sales
• Profit margin for the effort & risk
Fixed costs: overhead costs → Don’t fluctuate with production/sales
Variable costs: move with production level
Total costs: fixed + variable costs
Internal factors: organizational considerations
Small companies:
• Prices set by management, not by marketing
• Under the influence of sales managers, accountants, …
Large companies:
• Prices set by division- or product line managers
external factors: nature of the market and demand
→ Limit to set prices
Price / demand: different from market-to-market
Markets:
• Free competition
• Monopolistic competition
external factors: competition
Consumer will:
• Evaluate price & value of a Canon – to other (comparable) products
• Competing brands: Nikon, Minolta, Olympus, …
• Canon will set the price of their offer ± on the same level as its competition
• Make sure your brand/shop has good USP's
external factors: other
• Economy:
→ Inflation, interest rates, … → Affect the price- / value perception of the consumer
• Resellers (retailers / wholesalers / …): → Their reaction to prices
• Government
pricing strategies
1. Premium pricing: businesses set costs higher than their competitors.
→ “image” pricing / “prestige” pricing → Create a high value perception
2
,→ Ideal if unique products: no mass production
“skim the cream off the top” → targeting those customers who are willing to pay more.
Pro and con:
- Limited customer base:
+ create a high value perception
2. Pricing for market penetration (same market same product):
→ to attract buyers by offering lower prices on goods and services.
→ But! Offering lower prices
→ draw attention away from competition
While many new companies use this technique to draw attention away from their competition,
penetration pricing does tend to result in an initial loss of income for the business. → Over time,
however, the increase in awareness can drive profits and help small businesses to stand out from the
crowd.
→ In the long run, after sufficiently penetrating a market, companies often wind up raising their
prices to better reflect the state of their position within the market.
Pro and con:
- Can lead to initial loss of income for the business
+ increase in awareness can drive profits
+ can help small business to stand out from the crowd
3. Economy pricing:
→ used most commonly: (food) suppliers / retailers
→ aims to attract price-conscious consumers
→ minimize marketing- & production cost
the technique can be dangerous for small businesses: Because small businesses lack the sales
volume of larger companies, they may struggle to generate a sufficient profit when prices are too
low.
Pro and con:
+ effective for large companies
- dangerous for small businesses: lack of sales volume
What’s the difference between economy pricing and pricing for market penetration?
• Economy Pricing → Used by a wide range of businesses including generic food suppliers and
discount retailers, economy pricing aims to attract the most price-conscious of consumers.
• Pricing for Market Penetration → to raise market share. Penetration strategies aim to attract
buyers by offering lower prices on goods and services.
3
, 4. Psychology pricing:
→ encourage customers to respond on emotional level rather than logical level
→ Setting the price at €199 attracts more customers than at €200
→ consumers pay more attention to the first number on a price tag, than the last one
5. Competition based pricing:
→ based upon price of the competitor(s)
→ less attention for businesses’ costs or demand
→ more, less or equal to competitor(s)
6. Inverse pricing:
→ start from the need / demand
At the start → researched the market thoroughly
Opportunity: Rather cheap fashion accessory that indicated the time
Ex: SWATCH
SWATCH tried to keep the costs as low as possible:
• Designed a simple, fashionable watch
• Less options / parts
• Used high-tech material, that was cheaper
→ revolutionary automated mass production process
Watch → fashion → functionality
→ price according to what the consumer wanted to pay
4
