How does pricing affect the marketing mix

This will allow the company to introduce the product step by step to different layers of the market. Electronic and tech gadgets often start at a very high price which is subsequently lowered with the lowest point reached right before a new model is launched. When trying to go head to head with competitors offering similar benefits, a company may decide to: a. Here, different products in the same range may be set at different prices.

Television sets are priced differently depending on whether they are HD or not, whether they have wifi features of not and whether they are 3D or not. A group of products may be bundled together and sold at a reduced price. Often a company will make small changes to prices to make a customer think the item is priced lower than it is.

This is often seen in prices ending in For example, an item market will be perceived as closer in price to than A high price is set to establish an exclusive product of high quality. Designer cars and premium brand stores are a good example of this type of pricing.

Car sellers may offer car insurance for the first year for example. Simply, a company may determine the exact cost of producing and selling an objective, add a markup that may be desirable for profits and price accordingly. This method may be used in a changing industry where even costs of production are unpredictable.

This is why there is no fixed methodology to aid a company in its pricing endeavors. However, the following steps can act as a general guideline:. A detailed market analysis acts as a logical starting point for pricing decisions. A business follows up a market analysis with a division and definition of the market into segments each with its distinct requirements and needs. After this, a decision needs to be made regarding the desired segments to be targeted.

The product and brand positioning is then based on these identified segments. Once the segments and positioning is somewhat in place, the marketing mix planning comes into effect. Here the product, distribution, and promotional elements are decisions to focus upon and to finalize. Another market analysis needs to be conducted at this point. In this one, there needs to be specific information gathered about how the price affects the quantity of the product demanded.

A company can now get an accurate assessment of the total fixed and variable costs associated with the product. These are a necessary inputs for pricing decisions as the final price needs to at least cover these costs. Another vital element that feeds into pricing is the environment. As detailed above, there are several objectives that a company can have from its pricing strategy. This is the point in the process that those objectives need to be discussed and agreed upon.

Using all the information collected and analyzed till this point, a company is now in a good position to set the best price for its products. A pricing method and structure can be formulated along with any possible sales promotions or discounts. These steps are no necessarily all followed in this sequence. Some steps might be skipped or bundled together, while others performed at different stages in different order depending on several factors, like product or business model.

There are several basic factors that affect pricing for almost all companies and industries. These can be categorized as internal factors and external factors. These are those elements that are under the control of the organization. For example, production process changes may require significant cost, time and process redesign. Discussing and planning promotion helps further define a marketing plan and marketing mix strategy. Customising marketing mix elements creates a unique marketing model for each product.

The marketing mix consists of a number of factors under the control of a brand that influences customers to buy products. Twitter is a popular social media platform. Identifying places where a brand focuses energy and resources is among the elements of a marketing plan. For, it may be more successful and profitable for one brand to focus energies on Twitter while a competitor uses another platform or decides to neglect social media altogether to meet its marketing goals.

Marketing mix variables should be defined per product; a strategy for selling smartphones is independent from one associated with canned fruit. However, methods, marketing channels, and messages may overlap. Similarly, a retail mix should differ from a marketing plan for wholesale goods. A product mix analysis helps differentiate and customise individual marketing plans for each product. Some companies refer to sales history while others analyse the performance of competitors before developing a marketing plan and promotional strategies.

Typically, shops use one of the following three methods of integrating their pricing and marketing information:. Although pricing is the 1 factor impacting online marketing results, it is still rarely used as input for marketing management. The online marketing department will probably be satisfied with the performance in the periods of aggressive pricing strategy, but wonder why conversion rates dropped during the margin-focused periods.

If you manage your pricing and marketing strategies separately, you can still use the pricing data as fixed input for the marketing department. In the above examples of margin-focused and aggressive pricing strategies, the historical data shows how this product reacts to price changes.

With this information, the marketing team can change bids to match new price levels, which will increase your ROIs. For example, if the price ratio which is your price vs. Other stores will have a policy of setting most of their prices ending in 99 cents or pence. Price is relatively less than the cost price.

Many times customers lack an understanding of the cost of materials and other costs that go into the making of a product. But those customers can understand what that product does for them in the way of providing value. It is on this basis that customers make decisions about the purchase of a product. Service providers may present you with a fee list as opposed to a price tag if you ask for the price of their services.

You pay a price to fly, ride the bus and take the train. The price in these industries is expressed as a fare. Pricing and the Marketing Mix : Pricing might not be as glamorous as promotion, but it is the most important decision a marketer can make.

The other elements of the marketing mix product, place and promotion may seem to be more glamorous than price, and thus get more attention, but determining the price of a product or service is actually one of the most important management decisions. So, as you can see, it is important that a company sets the right price. Value is the worth of goods, and relative value is attractiveness measured in terms of utility of one good relative to another.

Value is the worth of goods and services as determined by markets. Thus, an important part of economics is the study of policies and activities for the generation and transfer of value within markets in the form of goods and services. Often a measure for the worth of goods and services is units of currency such as the US Dollar.

But, unlike the units of measurements in Physics such as seconds for time, there exists no absolute basis for standardizing the units for value. One of the most complicated and most often misunderstood parts of economy is the concept of value. One of the big problems is the large number of different types of values that seem to exist, such as exchange value, surplus value, and use value. But then remember that it took economists more than a hundred years to figure it out: something is worth whatever you think it is worth.

This statement needs some explanation. Take as an example two companies that are thinking of buying a new copying machine.

One company does not think they will use a copying machine that much, but the other knows it will copy a lot of papers. This second company will be prepared to pay more for a copying machine than the first one. They find a greater utility in the object. The companies also have a choice of models.

The first company knows that many of the papers will need to be copied on both sides. The second company knows that very few of the papers it copies will need double- sided copying. So in some cases, placement may also refer to the act of including a product on television shows, in films, or on web pages in order to seek attention for the product. This increased placement of more and more firms on digital platforms has led to a rise in e-commerce sector.

Recommended blog - Service Marketing. Promotion in the marketing mix refers to the communication that aims at promoting a product, activity, or a brand among the target customers; in order to drive sales, and involves both buyer and seller.

However, promotion can also aim at building the reputation of the organization rather than just increasing sales. We refer to this type of promotion as public relations.

Promotion is an essential component of the marketing mix because without communicating about a product, a company can not attract customers. It is also used to influence customers to buy a product or choose a particular brand.

Promotional activities can involve spreading awareness about a product or the brand or also an activity. There are different tools that are leveraged for the purpose of promotion. One or more than one tool of IMC is used at a time to promote a product. For example, if a company is advertising for a product, it must ensure that the advertisement is backed by a report in the newspaper that talks about the product.

The 4 Marketing P's once mixed properly generate coordination, offer a proper pitch to the product, becoming a powerful force together as opposed to individually. With the focus primarily being on the needs and requirements of the consumers as well as ensuring their satisfaction, the product earns the loyalty and trust of the consumer through these 4Ps.

The features, place, and pricing of the product are settled with the objective of satisfying the customer's expectations, while the product's promotional aspects help in better positioning the product. As a result, a link is established between the consumer and the organization. Our 4Ps play an integral role in guiding our decisions. For instance, if a product is based in a remote location, the promotion of the product will be carried out accordingly.

Accordingly, the pricing of the product and its quality will be determined. The more enhanced the customer satisfaction and the better the market scale, the more product sales would be boosted through the 4Ps. As the market has evolved over the years, the concepts also needed an upgrade. The concept of the 4 Ps has been in use since the s, but it seemed to miss some key elements. The term People in marketing refers to the employees working for a company. They play an important role in the success of an organization as they are the ones who deliver the services to clients.

It is important to manage this resource and People Analytics helps a lot in managing people.