ENTREP REVIEWER

PRICE
-​ Price is the amount of money or goods for which a thing is bought or sold.
-​ The price of a product may be seen as a financial expression of the value of that
product.
-​ Price is also the marketing variable that can be changed most quickly, perhaps in
response to a competitor price change.

Role of PRICE in the MIX:

To make a product or service affordable to target consumers.

One of the most important elements of the marketing mix, as it

is the only element of the marketing mix, which generates a
turnover for the organization

How much a consumer pays for in a product/service (based on

its VALUE)

It is also a very important component of a marketing plan as it

determines your firm’s profit and survival.

Adjusting the price of the product has a big impact on the entire
marketing strategy as well as greatly affecting the sales and
demand of the product.

Value
-​ The extent to which a good or service is perceived by its customer to meet their needs or
wants, measured by a customer’s willingness to pay for it.
-​ Depends more on the customer’s perception of the worth of the product than on its
intrinsic value.

Price (Things to consider)

Pricing always helps shape the perception of your product in consumers eyes. Always
remember that a low price usually means an inferior good in the consumers eyes as they
compare your good to a competitor.

Consequently, prices too high will make the costs outweigh the benefits in customers eyes, and
they will therefore value their money over your product. Be sure to examine competitors pricing
and price accordingly.

Pricing Factors
Pricing should take the following factors into account:
▪ Fixed and variable costs
▪ Competition
▪ Company objectives
▪ Proposed positioning strategies
▪ Target group and willingness to pay

PRICE ALSO DEPENDS ON CUSTOMER DEMAND

Customer Demand
Customer Demand – Customers are sensitive to the price
level of a product or service.

▪ A product or service is said to have elastic demand if

an increase in price lowers its demand or vice versa.
▪ Not being affected by this is known as inelastic
demand.

Inelastic
▪ Gasoline
▪ Traditional Textbooks
▪ Specialty Coffee Drinks
▪ Concert Tickets
▪ Medical Procedures

Elastic
▪ Gas from particular station
▪ New textbook distribution channels
▪ Black Coffee
▪ Airline Tickets
▪ Soft Drinks

Traditional Pricing Strategies

Pricing Strats
1. PRICE SKIMMING or SKIMMING PRICING

▪ Price skimming sees a company charge a higher price because it has a substantial
competitive advantage. However, the advantage tends not to be sustainable. The high price
attracts new competitors into the market, and the price inevitably falls due to increased supply.
▪ Assumes that certain customers will pay a higher price because they view it as a prestige item.
▪ Most practical when there is little threat of short-term competition or when startup costs must
be recovered rapidly; also, because of the high cost of introducing a new product.
▪ Works well for products that create excitement amongst “early adopters”
▪ Best used in introduction or early growth stage of a product life cycle
▪ Electronic items provide many great examples

2. PENETRATION PRICING
▪ Penetration pricing is a pricing strategy in which the price of a product is initially set low to
rapidly reach a wide fraction of the market and initiate word of mouth
▪ This pricing is typically used when the market is saturated or there are already many variants
of the same product present in the market
▪ The strategy works on the assumption that customers will switch to the new product because
of the lower price.
▪ Penetration pricing is most commonly associated with marketing objectives of enlarging
market share and exploiting economies of scale or experience.

3. ECONOMY PRICING
▪ Economy pricing is useful for companies who are keeping their overhead low.
- For example, generic grocery store brands of products usually have a lower price than the
name-brand items, due to the lack of advertising or out-of-store promotion.
▪ Because these companies save on those aspects of the product, they are able to keep their
pricing low.
▪ Companies who use economy pricing count on the fact that their lower price compared to the
product next to them on the shelf will increase the number of sales.
▪ Economy pricing does particularly well during times of economic recession.

4. PREMIUM PRICING
▪ Premium pricing is used for products or services that are clearly of a higher luxury value than
anything else on the market.
▪ Premium pricing is reserved for 5-star hotels, first-class airline tickets, and other products that
give the customer the perception of being of the highest quality.
▪ While premium pricing isn’t useful for commodity goods, it does make your product or service
seem more desirable and more buzz-worthy than the less expensive, similar products on the
market.

OTHER TYPES OF PRICING STRATEGIES

1. Follow-the-Leader Pricing
• Uses a particular competitor as a model in setting prices.
• A small business competing with a larger firm is seldom in a position to consider itself the price
leader.
• Even if different brands have different characteristics, customers often do not perceive such
differences to pay a premium. Thus, small businesses selling commodities (with MSRP) are
better holding down cost to be able to price at the same level

2. Variable Pricing
• Prices have two levels: a standard list price, and a price concession for customers who either
have knowledge and bargaining strength, or those that purchase large quantities.
• In some fields of business, firms make two-part pricing decisions, but will only advertise one
uniform price.
• E.g. Divisoria

3. Product Line Pricing

• Establishes distinct price categories at which similar items of retail merchandise are offered for
sale.
• Example: Men’s Suits at $250, $400, and $800.
• The amount of inventory stocked at different quality levels depends on the demand and
income levels of customers.
• Advantage of simplifying the selection process for the customer and reducing minimum
inventory needed.

4. Product Bundle Pricing

• Here sellers combine several products in the same package. This also serves to move old
stock.
• Blu-ray and videogames are often sold using the bundle approach once they reach the end of
their product life cycle.
• You might also see product bundle pricing with the sale of items at auction, where an attractive
item may be included in a lot with a box of less interesting things so that you must bid for the
entire lot.
• It’s a good way of moving slow selling products, and in a way is another form of promotional
pricing.

5. Psychological Pricing
• It is a pricing tactic, which is based on the idea that certain prices have a psychological impact
on the consumer.
• It basically uses the consumer’s emotional response in order to encourage sales. Odd pricing
conventions make products or services appear attractive and significantly cheaper than they
actually are.
• Customers have an innate inclination to respond to certain types of pricing. Instead of
appealing the rational side of consumers, the psychological pricing appeals to their emotional
side.

PROMOTION
Refers to raising customer awareness of a product or brand, generating sales, and creating
brand loyalty.

Role of PROMOTION in the MIX: To build and improve consumer demand.

ADVERTISING: To effectively inform, persuade, and remind the target consumers

SALES PROMOTIONS: To convince customers to buy

immediately

PUBLIC RELATIONS: To offer a positive image of the

company and the brand, as well as promote an
advocacy

PERSONAL SELLING: To get the customers to buy

PROMOTION
●THE COMMUNICATIONS STRATEGY ADOPTED BY AN ENTERPRISE TO ELICIT
THE PATRONAGE, LOYALTY, AND SUPPORT NOT ONLY FROM ITS CUSTOMERS
BUT ALSO FROM ITS OTHER SIGNIFICANT STAKEHOLDERS
●INVOLVES DISSEMINATING INFORMATION ABOUT A PRODUCT, PRODUCT LINE,
BRAND, OR COMPANY.
●TO GENERATE SALES AND PROFITS, THE BENEFITS OF PRODUCTS HAVE TO
BE COMMUNICATED TO CUSTOMERS. IN MARKETING THIS IS COMMONLY KNOWN
AS “PROMOTIONS”.

OBJECTIVES FOR PROMOTION

●BUILD AWARENESS.
●CREATE INTEREST.
●PROVIDE INFORMATION.
●STIMULATE DEMAND.
●REINFORCE THE BRAND.

PROMOTION MIX
●SPECIFIC COMBINATION OF PROMOTIONAL METHODS SUCH AS
PRINT OR BROADCAST ADVERTISING, DIRECT MARKETING,
PERSONAL SELLING, POINT OF SALE DISPLAY,
MERCHANDISING, ETC., USED FOR ONE PRODUCT OR A FAMILY
OF PRODUCTS.

FACTORS THAT GUIDE ENTREPRENURS WHEN

DEVELOPING A PROMOTIONS MIX
●NATURE OF THE PRODUCT MARKET.
●OVERALL MARKETING STRATEGY.
●BUYER READINESS STAGE.
●PRODUCT LIFE CYCLE STAGE.

ADVERTISING
KOTLER AND ARMSTRONG:
"ADVERTISING IS ANY PAID FORM OF NON-PERSONAL PRESENTATION AND
PROMOTION OF IDEAS, GOODS AND SERVICES THROUGH MASS MEDIA SUCH AS
NEWSPAPERS, MAGAZINES, TELEVISION OR RADIO BY AN IDENTIFIED SPONSOR".

SALES PROMOTIONS
●AN ACTIVITY DESIGNED TO BOOST THE SALES OF A PRODUCT OR SERVICE.
●IT MAY INCLUDE AN ADVERTISING CAMPAIGN, INCREASED PR ACTIVITY, A
FREE-SAMPLE CAMPAIGN, OFFERING FREE GIFTS OR TRADING STAMPS, ARRANGING
DEMONSTRATIONS OR EXHIBITIONS, SETTING UP COMPETITIONS WITH ATTRACTIVE
PRIZES, TEMPORARY PRICE REDUCTIONS, DOOR-TO-DOOR CALLING,
TELEMARKETING, PERSONAL LETTERS ON OTHER METHODS.

SALES PROMOTIONS
●MORE THAN ANY OTHER ELEMENT OF THE PROMOTIONAL MIX, SALES PROMOTION
IS ABOUT “ACTION”. IT IS ABOUT STIMULATING CUSTOMERS TO BUY A PRODUCT. IT IS
NOT DESIGNED TO BE INFORMATIVE – A ROLE WHICH ADVERTISING IS MUCH BETTER
SUITED TO. SALES PROMOTIONS

●LOYALTY CARDS
○EX: SM ADVANTAGE & BDO REWARDS

●PRODUCT BUNDLES/PACKAGES
○GET 50% OFF ON YOUR 3RD PURCHASE
○GET 20% MORE

●PRICE REDUCTIONS/PROMO
○CEBU PACIFIC’S SEAT SALE / PISO FARE

PUBLIC RELATIONS

“THE PLANNED AND SUSTAINED EFFORT TO ESTABLISH AND MAINTAIN GOODWILL

AND MUTUAL UNDERSTANDING BETWEEN A ORGANIZATION AND ITS PUBLICS.”

●PUBLIC RELATIONS ACTIVITIES INCLUDE, PRESS RELEASES. COMPANY LITERATURE,

VIDEOS, WEBSITES AND ANNUAL REPORTS
PUBLIC RELATIONS

“THE PLANNED AND SUSTAINED EFFORT TO ESTABLISH AND

MAINTAIN GOODWILL AND MUTUAL UNDERSTANDING BETWEEN AN

ORGANIZATION AND ITS PUBLICS.”

●PUBLIC RELATIONS ACTIVITIES INCLUDE, PRESS RELEASES.

COMPANY LITERATURE, VIDEOS, WEBSITES AND ANNUAL

REPORTS.

PERSONAL SELLING- PERSONAL SELLING IS THE ORAL COMMUNICATION WITH

POTENTIAL BUYERS OF A PRODUCT WITH THE INTENTION OF MAKING A SALE.

PERSONAL SELLING MAY FOCUS INITIALLY ON DEVELOPING A RELATIONSHIP WITH

THE POTENTIAL BUYER, BUT WILL ALWAYs ULTIMATELY END WITH AN ATTEMPT TO
CLOSE THE SALE.

EXAMPLES:

YAKULT CARTS ON THE STREET

SELECTA ICE CREAM ON THE STREET

REAL ESTATE KIOSKS IN MALLS

PUBLICITY

●PUBLICITY REFERS TO NON-PERSONAL COMMUNICATIONS REGARDING AN

ORGANIZATION , PRODUCT , SERVICE , OR IDEA NOT DIRECTLY PAID FOR OR RUN
UNDER IDENTIFIED SPONSORSHIP.

●IT USUALLY COMES IN THE FORM OF NEWS STORY, EDITORIAL, OR ANNOUNCEMENT

ABOUT AN ORGANIZATION AND/OR ITS PRODUCTS AND SERVICES.

●TECHNIQUES USED TO GAIN PUBLICITY INCLUDE NEWS RELEASES , PRESS

CONFERENCES , FEATURE ARTICLES , PHOTOGRAPHS , FILMS , AND VIDEOTAPES

PUBLICITY SAMPLE (ADVERTORIAL)

NISSAN NAVARRA ON TOPGEAR.COM

DIRECT MARKETING

●DIRECT MARKETING IS CONCERNED WITH ESTABLISHING AN INDIVIDUAL

RELATIONSHIP BETWEEN THE BUSINESS OFFERING. A PRODUCT OR SERVICE AND
THE FINAL CUSTOMER.

●“THE PLANNED RECORDING, ANALYSIS AND TRACKING OF CUSTOMER BEHAVIOUR

TO DEVELOP A RELATIONAL MARKETING STRATEGIES”. – INSTITUTE OF DIRECT
MARKETING

DIRECT MARKETING

●THE PROCESS OF DIRECT MARKETING COVERS A WIDE RANGE OF PROMOTIONAL

ACTIVITIES, THESE

INCLUDE:

○DIRECT-RESPONSE ADVERTS ON TELEVISION AND RADIO

○MAIL ORDER CATALOGUES

○E-COMMERCE

○MAGAZINE INSERTS

○DIRECT MAIL

○TELEMARKETING