THE FOUR P's OF THE MARKETING MIX



THE FOUR P's OF THE MARKETING MIX - PRICE

This heading refers to decisions about how much to charge for goods and services. It may be easy for you as a manager to neglect this aspect of the mix in favor of the more 'glamorous' promotion and product areas, but ultimately decisions over price affect the viability of a brand and the profitability of an organization. Pricing is also much more complex than you might think.

Firstly price needs to take into account consumer psychology. Although some consumers purchase solely on price, most use price as a way to judge quality. The more expensive something is (within reason) the better the quality is likely to be. Price can therefore be used as a form of communication - to communicate exclusivity for example.

Economists also know that price affects demand, but this relationship can vary. This is called price elasticity.

|Figure 5.3 Typical graph showing price elasticity |  |

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Reducing price usually increases demand and vice versa. So a manager can use price to 'manage' overall demand for a product or service. Many hotels, airlines and other leisure-related service vary price considerably according to demand, especially seasonal demand.

Finally, where goods and service are marketed through intermediaries, marketers need to consider the trade and retail prices

Premium Pricing.

Use a high price where there is a uniqueness about the product or service. This approach is used where a a substantial competitive advantage exists. Such high prices are charge for luxuries such as Cunard Cruises, Savoy Hotel rooms, and Concorde flights.

Penetration Pricing.

The price charged for products and services is set artificially low in order to gain market share. Once this is achieved, the price is increased. This approach was used by France Telecom and Sky TV.

Economy Pricing.

This is a no frills low price. The cost of marketing and manufacture are kept at a minimum. Supermarkets often have economy brands for soups, spaghetti, etc.

Price Skimming.

Charge a high price because you have a substantial competitive advantage. However, the advantage is not sustainable. The high price tends to attract new competitors into the market, and the price inevitably falls due to increased supply. Manufacturers of digital watches used a skimming approach in the 1970s. Once other manufacturers were tempted into the market and the watches were produced at a lower unit cost, other marketing strategies and pricing approaches are implemented.

Below are examples of marketing products/services that need pricing. Read the example and decide in which section the product should fall: economy, Penetration, Skimming and Premium

• Wal-Mart launches a new range of own-label soups. ___________________________

• Cunard launch two new cruise ships. __________________________________

• A cable TV provider moves into a new area and needs to achieve a market share. _____________________________________________________________________

• Holiday Inns try to fill hotels during winter weekends.

_______________________________________________________________________

• Burger King introduces a new range of value meals.

__________________________________________________________________________

• Nokia launch a new videophone.

__________________________________________________________________________

Exercise #2 Apply the 4 P's to the State Fair held annually in Raleigh, NC

Exercise #3 - Find and explain the definition of "gross Impression"

Exercise #4: Fans are sometimes confused who the real sponsor of an event is. Coca-Cola paid to be the official sponsor of a skating competition. However Pepsi paid to show an ad on the wall around the rink. Viewers can then see the ad as the skaters move across the ice.

Deliberate confusion of fans, etc. in marketing is called what type of marketing?

#5 Marketing-Information Management is gathering and using information about customers to improve business decision making. When Domino's first considered expanding operations into Japan, they used their marketing research to adapt the traditional Domino's pizza to Japanese tastes. Research and see if you can find out wt the differences would be.

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