Marketing mix and the element PRICE

10/ 10 Key term test on the marketing mix and pricing

1. Selling price - the price a company sets to sell its goods and services at
2. Cost price - the cost of making or providing a product or service
3. Demand - the quantity that consumers are willing and able to buy at the current price level
4. Marketing mix  - a marketing tool of variables dictated by market research that need to be considered before a product or service is launched in the market.  
5. Value for money - a perception of value that consumers have of different quality products that indicates to them that the quality of a product is worth the selling price. 
6. Cost plus pricing -  a pricing strategy that is based on the cost plus the percentage of profit the business wishes to make on each product.
7. Quality products - products that are made to a quality standard and are either fit for purpose or made to a standard that meets or exceeds the expectations of the customer of a product at a particular price. 
8. Price range - a range of prices that the product could be perceived to be worth.  Competitors in the market may sell similar products at varying prices. 
9. Competitive pricing - a pricing strategy that is used to set prices in line with the competition.  Supermarkets use this when setting prices of their branded products and compete every week to tell consumers that their prices are cheaper or the same as other supermarkets.
10. Loss - when a business sets a price for a product or service below the cost price of making it or buying in the product or service.

Exam board expectations
Candidates need to have an understanding of the basic relationship between price and demand e.g. a price rise will probably affect the profits of a small business in a competitive market

In the news Ryan Air and Easy Jet continue to make a profit on the back of their low price model of air transport.  Easy Jet has been in operation since 1995 and in 2007 made over £200 million profit carrying over 37 million passengers.  Costs and prices are kept low through quick turn round times for planes and by cutting out frills and extra such as complimentary food and drink.  Charges are made for extras such as baggage on check in. 

Marketing Mix This is the balance of activities that go into selling a product or making a sale.  A successful product requires it to be made available to its customers at the right price and in the right place with appropriate and effective promotion.  Different businesses will adopt different mixes - some leading on product and some leading on price with some relying heavily on advertising.  For others it is convenience of availability such as 24hr banking over the internet.Most small businesses will have a limited budget for their marketing mix so will need to share it out with care 

Dividing the budget - 'value for money'

Price A key part of the mix is price.  It is important to understand the relationship between price and demand.  In  general the higher the price the less the product will be in demand.  Fewer people can afford it, and for many it will fall outside their acceptable price range or their idea of 'value for money'  They may also switch to cheaper substitutes if these are available.  Similarly if the price drops too low the customer may be suspicious of value.  If a jeweller dropped the price of a gold ring then the customer may assume that it is not really gold. 

Cost plus pricing. 
Did you know? Some pricing  strategies are more promotional.  A loss leader is where a product is priced so low it does not even cover its own costs.  Products such as milk and bread can often be used to get customers into the shop in the hope that they spend more on other products.

Group activity

Discussion

Web based activity

Summary 

• The marketing mix is the mixture of factors needed in order to sell a product
• It has four parts: product, price, promotion and place
• The four parts are often refereed to as the four P's
• Getting the right balance is more important then any one part
• The marketing mix will need to change over time and as other factors change
• Price is a key part of the mix
• Price should be set to cover costs
• Customers have an idea of 'value for money'; price must be set in this range  

Typical exam questions on the marketing mix elements and price

1. What is meant by the Four P's
2. What is the most important element of the marketing mix?
3. Why do small businesses have to be careful about marketing?
4. Why do different businesses have different marketing mixes?
5. What is meant by 'value for money'?
6. What is meant by a customers 'price range'?
7. What happens to the marketing mix over time?
8. What usually happens to demand if price goes up?
9. What is cost plus pricing?
10. What is competitive pricing?

Worksheet

Nine mark questions