Business A-level Paper 3
1.3 Marketing mix and strategy
1.3.3 Pricing strategies
Pricing - Medium-to long-term plan for getting a product’s price
strategies - Short-term changes in price may occasionally be prompted by
external events
Types of Price skimming
pricing - Launching a brand-new product at a high price whilst it is still
strategy unique
- High prices create a desirable image
- Early adopters will be will be willing to pay the high price in return
for its exclusivity
- High prices generate rapid profits helping quickly recover the costs
of innovation
- May deter some customers with price seen as ‘rip-off’
- Early buyers may be frustrated once the price starts to fall
- Image may suffer once prices fall
Price penetration
- Launching a brand-new product at a very low price to entice
customers to try it
- Low prices encourage lower-risk product sampling
- Low prices boost sale volumes, cutting production costs
- High volumes may persuade retailers to buy the product, boosting
distribution
- Encourages customers to develop a habit of purchasing the product
- May be associated with a cheap image
- Upmarket retailers are unlikely to be willing to stock the product
- Likely to create price sensitivity amongst customers – higher PED
Cost-plus
- Adding a desired percentage onto total costs per unit
- Desired, what every business wants
- Most appropriate when the firm is a market leader with little to no
worries about competition
- Price charged = unit cost + % mark-up
- Should guarantee a profit is made on each unit sold
- Ignoring the market may mean an unrealistic price is set
Predatory
- Setting price low enough to force a competitor out of business
- Often only used on a local basis where competitors are smaller,
local firms
- Once a rival has been forced to close, prices can increase,
increasing margins
- Illegal if it is proven to be specifically designed to drive rivals out of
business
Competitive
- Charging a price at the market average or at a discount to the
average price in the market
- Ensures price will not put customers off buying the product
- Little control over the price they charge and thus the revenue they
generate
, Business A-level Paper 3
Psychological
- Prices are set below major psychological levels, such as £9.99
instead of £10
- Can help nudge customers into making a purchase as they believe
they are not spending the full amount
- May have little impact on planned purchases
- May mildly annoy customers
Determining - Level of product differentiation
the most - PED
appropriate - Level of competition
pricing - Strength of a brand
strategy - Stage in the product life cycle
- Costs and the need to make a profit
Changes in - Online sales
pricing to o May be more sensitive than on the high street as it is easier to
reflect social compare prices
trends o Pricing levels may be lower as ‘brick and mortar’ stores have
rents to cover
- Price comparison sites
o Encourage firms to price competitively
1.4 Managing people
1.4.2 Recruitment, selection and training
Recruitment Need to recruit may be triggered by
- Existing staff leaving
- Growth of the business
- New activities needing new skills
Recruitment process
- Designed to attract potential applicants
- Selection stage reduces the number of applicants to conclude
who’s best
- Decision on whether to recruit internally or externally is dependent
on
o Cost of the recruitment method
o Size of the recruitment budget
o Location and characteristics of likely candidates
Internal recruitment
- Filling a job vacancy with someone who already works for the
business
- Quicker and cheaper than external recruitment
- Chance of promotion may boost morale
- Skills and attitudes of the individual are already known to the
business
- Limits the number of applicants
- Fails to bring in new ideas from outside the business
- Creates a vacancy elsewhere in the business
External recruitment
- Filling a job vacancy with someone who does not currently work for
the business
- Wider range of applicants
1.3 Marketing mix and strategy
1.3.3 Pricing strategies
Pricing - Medium-to long-term plan for getting a product’s price
strategies - Short-term changes in price may occasionally be prompted by
external events
Types of Price skimming
pricing - Launching a brand-new product at a high price whilst it is still
strategy unique
- High prices create a desirable image
- Early adopters will be will be willing to pay the high price in return
for its exclusivity
- High prices generate rapid profits helping quickly recover the costs
of innovation
- May deter some customers with price seen as ‘rip-off’
- Early buyers may be frustrated once the price starts to fall
- Image may suffer once prices fall
Price penetration
- Launching a brand-new product at a very low price to entice
customers to try it
- Low prices encourage lower-risk product sampling
- Low prices boost sale volumes, cutting production costs
- High volumes may persuade retailers to buy the product, boosting
distribution
- Encourages customers to develop a habit of purchasing the product
- May be associated with a cheap image
- Upmarket retailers are unlikely to be willing to stock the product
- Likely to create price sensitivity amongst customers – higher PED
Cost-plus
- Adding a desired percentage onto total costs per unit
- Desired, what every business wants
- Most appropriate when the firm is a market leader with little to no
worries about competition
- Price charged = unit cost + % mark-up
- Should guarantee a profit is made on each unit sold
- Ignoring the market may mean an unrealistic price is set
Predatory
- Setting price low enough to force a competitor out of business
- Often only used on a local basis where competitors are smaller,
local firms
- Once a rival has been forced to close, prices can increase,
increasing margins
- Illegal if it is proven to be specifically designed to drive rivals out of
business
Competitive
- Charging a price at the market average or at a discount to the
average price in the market
- Ensures price will not put customers off buying the product
- Little control over the price they charge and thus the revenue they
generate
, Business A-level Paper 3
Psychological
- Prices are set below major psychological levels, such as £9.99
instead of £10
- Can help nudge customers into making a purchase as they believe
they are not spending the full amount
- May have little impact on planned purchases
- May mildly annoy customers
Determining - Level of product differentiation
the most - PED
appropriate - Level of competition
pricing - Strength of a brand
strategy - Stage in the product life cycle
- Costs and the need to make a profit
Changes in - Online sales
pricing to o May be more sensitive than on the high street as it is easier to
reflect social compare prices
trends o Pricing levels may be lower as ‘brick and mortar’ stores have
rents to cover
- Price comparison sites
o Encourage firms to price competitively
1.4 Managing people
1.4.2 Recruitment, selection and training
Recruitment Need to recruit may be triggered by
- Existing staff leaving
- Growth of the business
- New activities needing new skills
Recruitment process
- Designed to attract potential applicants
- Selection stage reduces the number of applicants to conclude
who’s best
- Decision on whether to recruit internally or externally is dependent
on
o Cost of the recruitment method
o Size of the recruitment budget
o Location and characteristics of likely candidates
Internal recruitment
- Filling a job vacancy with someone who already works for the
business
- Quicker and cheaper than external recruitment
- Chance of promotion may boost morale
- Skills and attitudes of the individual are already known to the
business
- Limits the number of applicants
- Fails to bring in new ideas from outside the business
- Creates a vacancy elsewhere in the business
External recruitment
- Filling a job vacancy with someone who does not currently work for
the business
- Wider range of applicants
