Marketing Strategy - the marketing mix - promotion - product - price - place

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My Marketing Strategy

As previously mentioned in this report, there are several aspects, that play a big part in a products successes or downfall. These are classified as the marketing mix, and are again shown below,

Pricing

Pricing is one of the key features of the marketing mix. The producer sets the price of a product with great caution, as incorrect pricing can result in product failure, and sometimes even market failure.

If the price of a product is too high, then consumers will simply not be willing to pay for it, and yet if a product is priced too low, people will view the product as cheap, and so it will loose its exclusivity, and demand from consumers.

There are many different pricing methods used by companies today including,

Cost-plus pricing

This involves setting a price by calculating the average cost of producing a product, and then adding a “mark-up” (profit margin) on to that price. If it costs £35.00 to produce a small television, firms usually add up to 100% profit margin on top, and so the consumer would have to pay £75.00 for the television.

Cost plus pricing has a number of disadvantages though such as it doesn’t take into account the needs, wants and opinions of the consumers.

Market orientated pricing

These methods are those which are based upon a careful analysis of the market at which products are aimed, and so are much more effective pricing methods for companies that are market orientated firms. For example if there is a sudden boom in the amount of mobile telephones being sold, then mobile phone suppliers would raise their prices, as demand is high and consumers will pay higher prices. This works on the same basis with Pepsi.

Penetration Pricing

This is used by firms seeking to gain a foothold in a market, either with new products or with established products being placed in new markets. It involves pricing a product at a low level so that retailers and consumers are encouraged to purchase that product in large quantities.

The advantage to this is that consumers become encouraged to buy large amounts of the product, and then when a habit builds up of buying a product, the company raises its prices again, and generally most consumers still continue to buy that brand and product. A bigger market share can be achieved in this way, as large retailers will buy large amounts from one firm, and will not buy from the competition until all of their stock has gone, helping the penetrative firm to gain a bigger market share. This would be a very effective tactic for Pepsi, as it sells to many large retailers, and cash and carry outlets.

The disadvantages however it that it is very costly. If it costs £30p to produce a can of Pepsi, and we sell it at £0.25 it means we loose 5p on every can produced. This method is really only ideal for products with long life cycles such as Pepsi so the firm has enough time to recover the costs that it has lost.

Market Skimming

Market skimming involves charging a high price for a new product for a limited period. The aim is to gain as much profit as possible for a new product while it remains quite unique in the market. It usually means selling a product to the most profitable segment of the market before it is sold to a wider market at a lower price, at a later date, for example playstation 2’s were £399.99 before Christmas, and are not only £199.99 in March, however this is unsuitable for Pepsi as they are already a fairly well established firm, with a powerful brand name behind them.

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The two reasons that a firm may want to skim are to maximise their revenue before competition enters the market.

Customer value pricing

This involves charging the price that consumers are willing to pay. Products, which have prestige names, attached to them; such as Nike will be able to charge higher prices due to the status involved in the brand name. This works in almost the same way as Pepsi. Happy shopper could not charge more than Pepsi for the same amount of a similar drink, as it has not got a large brand name, unlike the ...

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