price is the only part of the marketing mix that does not generate costs. This is a topic that many people are looking for. bluevelvetrestaurant.com is a channel providing useful information about learning, life, digital marketing and online courses …. it will help you have an overview and solid multi-faceted knowledge . Today, bluevelvetrestaurant.com would like to introduce to you IGCSE Business Studies _Chapter 13 Marketing Mix “Price”. Following along are instructions in the video below:
” s about price as you know we have four parts of marketing mix the product. Product. That was explained in chapter. Twelve price and chapter.
Thirteen and lace and the will be in chapters. 14. And 15. So today.
We will explain the main pricing methods that businesses might use and we will talk about the role of pricing and the out usually we set the prices and i explain the difference between price elastic and the price and elastic demand. So this job. Chapter mainly is about pricing methods. So you have to be aware that pricing methods will be different depending on the stage of the product life cycle and of course depends on the market and many other things okay so let s start as you know we have to prepare marketing mix to take a marketing decision so today we ll talk about prices as i said so when i say price i am talking mainly about a month that the customer pays for the goods.
So it s really important for me as a business to set the suitable price for my products. Because sometimes. If my price is low the customers will think that i have a poor quality. And if i set a high price some customers won t buy because it s really expensive so it s not about setting price its setting.
It s about setting a suitable price okay roll off of the price is simple so deciding the price is important because i have many rivals and you know that i should choose a suitable price. Which is suitable to other rivals in the market. If their price is high or their prices. No so remember that also quality plays are all so if the product is of high quality surprise should be high if i sell a product which is similar to my competitors.
And there is competition. I have to decide also on a price. Which is similar to my competitors. So now we can talk about the strategies.
Remember pricing strategies as i said are different and they will be used in different stages of product lifecycle and in different situations. So let s start with the first one which is the most common. It s called ghost plus pricing strategy. It s a just setting profit markup above the cost of the product.
So if i know the course of the product. I know the course of manufacturing. I just add a profit markup. So it s just setting or adding a fixed amount to the cost of making or buying a product.
So we have an example here of a battery. If i have a battery and its cost is 1 simply i can put a profit let s say one 50 50. It s up to me. And then i just add this profit margin to the cost okay so as you can see it s easy to apply this method.
But remember i can set that the margin that i want because of the price is high simply i lose sales penetration pricing. It s used to enter new markets usually when when i have penetration pricing. I simply use it to access new markets for the first time for example with the new products. So usually the price will be lower more than my competitors and of course.
I ll use it to attract customers and the loyalty. So what i use this method of pricing. I ll ensure sales are made because simply my prices are lower than competitors. But still no profit will be there.
Because my prices are no crisis. Skimming strategy or prices. Skimming method. So when you set a high price for your product.
Why do you do this. Because your price is every product is unique so i won t use this. If my product is not unique or or has a lot of competitors. So it will help me to establish a good product quality.
But the disadvantage of course. Some customers might not buy because the price is high usually this method is used by famous companies like apple for example like samsung like google they use this because they produce unique products competitive pricing. It s clear that it s it s a price that should be similar to your competitors. So of course you do this because you have a lot of competitors in the market when the market is highly competitive.
We will use prices similar to our competitors. So here we can say that we are getting sales as our competitors. We are not over pricing or under pricing. But when we want to set this price we have to find out what competitors offer and this will cost some time and money promotional pricing.
It s a strategy used by businesses to sell for a low price. Let s say for a period of time short period of time so here we can talk about different situations. Sometimes you go to supermarket. And you see some products are sold a very low price.
The target is to attract you as a customer to buy other products sometimes they do buy one get one free methods. And this method also will as used by businesses for a short period of time just to build loyalty sometimes you see discounts on products also this is called promotional pricing. Remember this won t be forever. It will be only for a short period of time usually when the product is and maturity stage.
Where the sales are stable and saturation stage of course so advantages as i said i can help people make interest in the business and of course. I can get rid of many stocks like many businesses do and the disadvantage of course. My sales revenue will be lower the psychological pricing is suggest a way of pricing. Where i draw the attention of customers or i get their attention.
I play on the perceptions of my customers sometimes i sell a product with a very high price. Because some people they care about getting a high price product. Because they they they feel like they have a status sometimes i use this. Method than you you all see this like using 299.
Instead of 300 or 99. Instead of 100. This is just telling customers that the product is cheap. I m giving them a cheaper impression ok.
These just simple examples about psychological pricing. Dynamic pricing is used also by by businesses. The word dynamics means using different prices for same products. How is that done simply when you travel you see that you pay for first class different price than economic class.
Why because the business is going to to to have different groups of people different target markets. That s why we use dynamic pricing. So dynamic pricing will be when the business charge. Different consumer groups.
Different prices for same products. Now. Which prior pricing strategy would you here for example. So.
If i have a watch that has very similar competitors or very similar watches sold in shops. It s not unique of course broadly. I ll use competitive pricing or maybe. I use penetration pricing you for mentioning new markets.
What about this one. This is a radio. Which is unique and developed and it cost a lot in manufacturing. So of course.
I ll use skimming pricing. Why because it s unique because what about this chocolate bar. It has been on the market for several years and the new brands are being brought out. Which is which are competing with it so broadly.
I use competitive pricing in this stage. This one a new brand of course. I have a lot of competitors for this a new brand it s a washing powder. So i can use a competitive pricing.
This is of course psychological pricing that we all see all the time ok. This is just a table here you can revise i suggest you go back to your book you will find all these in details now the last point in this chapter is about price elasticity of demand first a lot of you they don t know what is meant by demand when i say demand if you study economics of course you know this demanded so when you want something and you are willing and able to pay for something or buy a goods. So it s the want and willingness and able nosov consumers to buy a product or service. This is their demand.
So this is like a demand curve of course. It s you don t need to know this business studies. But of course you have to know this in economics. So the the the logic.
Says if the price of a product increase. The quantity demanded will reduce this is what the logic usually says right so of course you when the price of a product increase customers or less customers will be able to buy okay so what s the necessity of demand. So i have two examples here. I ll explain the concept using two examples if you look at cinema tickets.
And if you look at drinking water or fuel. Let s say so think about it the cinema tickets price increase by 10 probably you will not go to the cinema. Because it s not a necessity right you can just watch movies using netflix for example. So you you notice that the demand will fall in a greater amount so let s say the price increase by 10.
The demand will probably decrease by 20 or 25. Why because as i said. It s not a necessity so if price decrease by 10. You will go to the cinema.
More often than right so notice in cinema ticket. I say this product has a price elastic amount okay why price elastic demand. I i call the price. I call it price elastic demand or it has a high elasticity because if there is a change in the price.
The change in demand will be greater will be higher. However in drinking water that s totally the opposite so if you notice a fuel or water. If the price of the product increased the demand will maybe reduce. But not more than the change in the price.
So notice the fuel price might increase by 10 percent. But our demand maybe will reduce by 5 percent. But not more than this so notice now the difference between the two and i say price elastic when they ask you what is meant by price elasticity of demand you just say. It s it s how the demand is the changing with respect to the price.
The meaning of price elastic demand that s when that percentage of change and the man is higher than the change in the price. And the price inelastic demand. It s a wonder percentage change and demand is less than the percentage change in the price. So we can notice this so as i said it measures how much demand of the product changes.
When there is a change in the price. And as you know this what i explained like the percentage of change in demand with respect to the change in the price and cinema ticket situation and water situation so also you don t need to know this. But this is what we call it lastic demand when we have a lot of substitutes. The change in the quantity.
Demanded will be greater than the change in the price. However in the an elastic demand. It s totally the opposite. Not many substitutes so the change in the quantity.
Demanded is not as great as the change in the price. So it depends on the substitutes. If it s a necessity or not of course. The elasticity of demand would be different so simply here we can know how the change in the price will affect the revenue.
Remember the revenue is the amount that the business earns from the sale of its products. So simply if i m selling cinema tickets. I m selling pens pencils whatever products that have a lot of substitutes. If i increase the price and my product is elastic.
I have a price elastic demand. My revenue will reduce because less people will buy and the opposite is true. But if i sell a product. Which is like fuel for example and i increase the price so the price now increased.
But but the demand is inelastic so my revenue will increase so it depends on the product you re selling but something you have to know like businesses. Nowadays are are really really clever to make the products we buy instead of making them elastic they just make them inelastic. What do i mean like when you buy a mobile phone won t happen for example you notice that we don t need happen to to live. But we need we apple are clever so they converted our want to the need right so now even if the price of apple increase our demand to this product will not decrease that s why we say a successful business is the business.
That is able to make its a product. Different that takes over the competition and of course that convinces the customers to buy the product even if the price increase. So that s why some businesses are really clever to convert the want to need of course okay so that s it for chapter 13. I suggest you go back to your book.
If you want the soft copy of the book please just comment and put your email. I ll send you a soft copy of the book. I have the fourth edition. The soft copy so you can use it ok so thank you for listening and ” .
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