Let’s say that you’re buying a lawnmower for the first time and know nothing about garden equipment. Maybe you’re entering an entirely new market. What would you like, an ice cream at $0.75, $1.25 or $2.00? The choice is yours. Consumers might practice a decision avoidance approach when buying products in an unfamiliar setting, an example being when buying ice cream. It’s strange how consumers use price as an indicator of all sorts of factors, especially when they are in unfamiliar markets. For example Price Point Perspective (PPP) 0.99 Cents not 1 US Dollar. This approach is used when the marketer wants the consumer to respond on an emotional, rather than rational basis. However there are other important approaches to pricing, and we cover them throughout the entirety of this lesson. The diagram depicts four key pricing strategies namely premium pricing, penetration pricing, economy pricing, and price skimming which are the four main pricing policies/strategies. New products were developed and the market for watches gained a reputation for innovation. 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. Manufacturers of digital watches used a skimming approach in the 1970s. The high price attracts new competitors into the market, and the price inevitably falls due to increased supply. However, the advantage tends not to be sustainable. Price skimming sees a company charge a higher price because it has a substantial competitive advantage.
However it is not the same as a value pricing approach which we come to shortly.
During times of recession economy pricing sees more sales. The first few seats are sold at a very cheap price (almost a promotional price) and the middle majority are economy seats, with the highest price being paid for the last few seats on a flight (which would be a premium pricing strategy). Budget airlines are famous for keeping their overheads as low as possible and then giving the consumer a relatively lower price to fill an aircraft. Supermarkets often have economy brands for soups, spaghetti, etc. The costs of marketing and promoting a product are kept to a minimum.
#COST OR PRICE LEICA GEO OFFICE MOVIE#
Taking Sky TV for example, or any cable or satellite company, when there is a premium movie or sporting event prices are at their highest – so they move from a penetration approach to more of a skimming/premium pricing approach. Once there is a large number of subscribers prices gradually creep up.
#COST OR PRICE LEICA GEO OFFICE FREE#
These companies need to land grab large numbers of consumers to make it worth their while, so they offer free telephones or satellite dishes at discounted rates in order to get people to sign up for their services. This approach was used by France Telecom and Sky TV. Once this is achieved, the price is increased. The price charged for products and services is set artificially low in order to gain market share. However price is a versatile element of the mix as we will see. The argument is that the marketer should change product, place or promotion in some way before resorting to pricing reductions. Marketing companies should really focus on generating as high a margin as possible. In terms of the marketing mix some would say that pricing is the least attractive element.
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