Q&A - How does pricing link to the objectives of a business?

The price a business charges needs to take account of, and be consistent with the strategic objectives of the business.

For example, it may be that the objective is to position the business as the highest quality provider – in this case, a high price would be used to signal high quality to the consumer. Exclusive designer fashion labels and luxury holiday businesses apply this strategy.

At the other end of the pricing scale, a business that positions itself as a low-cost or discount provider will look to set prices that are lower or as low as any rival. The strategy is to gain competitive advantage by offering the lowest prices (not just in the short-term).  The battles in the discount supermarket and low-cost airline markets are great examples of this strategy in action.

In general, a business tries to set a price which:

Maximises profits and the return on assets or investment.  The selling price achieved for a product directly affects the gross profit margin made on each sale.

Maximises the sales revenue.  Sales revenue is the total amount of money made from sales and is the price of the product multiplied by the number of sales.

For a new business with a new product setting a price can be particularly difficult to do because it has no experience of what customers are prepared to pay. Market research can help identify competitor prices, but the ultimate “proof of the pudding” is starting to sell at a particular price to see what happens.

• If the business gets the price too high, sales might be lost
• Set the price too low and customers who are prepared to pay more don’t have to

Revision Presentation - Marketing Mix: Introduction to Pricing [17 May 2012]
Same product - different prices: Greggs sausage roll costs more in Hammersmith than Hull [9 May 2012]
Marketing analysis: the UK supermarket battleground [3 May 2012]
What’s going wrong at Superdry? [23 Apr 2012]
Pricing and the consumer - a question of haggling? [10 Feb 2012]
The 7p Valentines Day Card [1 Feb 2012]
Tesco’s Big Price Drop - on the Stock Market, or, Porter and Ansoff in action [12 Jan 2012]
Pricing - Daftest In Store Deals! [14 Dec 2011]
Marketing and the supermarket ‘price war’ [6 Dec 2011]
Cut price cup cake deal goes wrong…... [22 Nov 2011]
Revision Quiz - Marketing: Pricing [1 Nov 2011]
The Business of Newcastle United [12 Oct 2011]
Pricing tactics - cheap flights (no feckin way) [22 Aug 2011]
Strategy Video - Innovation through technology at Fern Howard [10 Jun 2011]
An end to outsourcing? [18 May 2011]
Jaguar goes for NPD investment with £5bn plan [10 May 2011]
Using Chucklevision to Teach Business [8 May 2011]
Discounters move into UK shopping malls [19 Apr 2011]
The Profit Margin Bloodbath of UK Recession [6 Mar 2011]
Revision games - Marketing Basics (True / False) [16 Feb 2011]
Q&A - How can a business use contribution pricing? [2 Jan 2011]
Q&A - What is competitor-based pricing? [2 Jan 2011]
Q&A - Why might a business use psychological pricing? [2 Jan 2011]
Q&A - What is predatory pricing? [2 Jan 2011]
Q&A - Outline what is meant by cost-based pricing [2 Jan 2011]
Q&A - Outline how market research can help a business set its prices [2 Jan 2011]
Q&A - Distinguish between price and cost [2 Jan 2011]
Q&A - Should a business use a “loss leader” as part of its pricing tactics? [31 Dec 2010]
2011 - A chance for retailers to slip in some sneeky price rises? [14 Dec 2010]
Marketing strategy: North Face aims to become the “Nike of outdoors” [12 Dec 2010]
Euro Disney - an HRM & Finance Nightmare? [24 Nov 2010]
Segmentation & Pricing - the Ice-Cream Price Pyramid [17 Nov 2010]
Revision Crossword - Pricing Basic [6 Nov 2010]
Cash flow Clue-doh! The Mystery is Revealed… [2 Nov 2010]
Making the FT Brand Sweat! [19 Oct 2010]
Pricing Strategy - Mobile Data Networks [14 Sep 2010]
Fighting for a share of the fast-growth tablet market [11 Sep 2010]
Tyrrells Entrepreneur Does it Again - with Vodka! [14 Jul 2010]
Lessons from the business model of King & Allen [13 Jul 2010]
Book wars! [5 May 2010]
Pricing strategy in action - John Lewis (video) [25 Mar 2010]
Marketing strategy in a recession - is attack better than defence? [17 Feb 2010]
Can Greggs Become the Skoda of Pies? [16 Feb 2010]
Taking Demand-based Pricing To Extremes [8 Feb 2010]
Video case study - substitute goods benefiting from the recession [1 Feb 2010]
What business students can learn from how businesses have handled the recession [1 Feb 2010]
Product, pricing and profitability in a changing market [20 Jan 2010]
Revision Presentation - Revenues and Demand [30 Dec 2009]
Q&A - When is it appropriate for a firm to use penetration pricing? [21 Dec 2009]
Q&A - Explain price skimming [21 Dec 2009]
Q&A - What is the difference between pricing strategies & tactics? [21 Dec 2009]
Q&A - Explain what is meant by price positioning [21 Dec 2009]
Q&A - What factors should a business consider when setting its prices? [19 Dec 2009]
Q&A - What is price and why is it so important in the marketing mix? [19 Dec 2009]
Video Case Study - Meet the CEO of Accurist Watches [14 Dec 2009]
A tale of two bakers [16 Nov 2009]
Emerging markets drive demand for oil [16 Nov 2009]
Santa goes back to basics in attempt to reduce the cost of Christmas [29 Oct 2009]
Q&A - How are businesses affected by unemployment? [27 Oct 2009]
Pricing strategies and tactics under investigation [15 Oct 2009]
Dyson launches a new premium product [14 Oct 2009]
Ukraine 1 England 0 - A match to remember? [12 Oct 2009]
Napster - Trying to compete, or getting desperate? [9 Oct 2009]
V-Water - from start up to exit [4 Oct 2009]
The lights go out for the nightclub market [26 Sep 2009]
Sony cuts the PS3 price to extend its life cycle [30 Aug 2009]
More trouble in the skies [27 Aug 2009]
Sainsbury’s and Diageo pitch in to battle [17 Aug 2009]
Own label brands profit from the recession [4 Aug 2009]
Demand and supply in action - tea prices surge [4 Aug 2009]
The Death of Newspapers - to be replaced by Nichepapers? [2 Aug 2009]
Instore Takes a Pounding [6 Jul 2009]
Swimsuit malfunction - a failure of quality or just the wrong size? [2 Jul 2009]
U2 on Tour - Investment appraisal and capacity utilisation rolled into one! [2 Jul 2009]
Q&A - Outline the main costs and benefits of inflation [1 Jul 2009]
Q&A - Explain the causes of inflation [1 Jul 2009]
Q&A - What is inflation and how is it measured? [1 Jul 2009]
East Coast Rail Line is Nationalised [1 Jul 2009]
Recession Bites - new food shopping habits [29 Jun 2009]
Budget Hotel Chain Now Feeling the Squeeze [17 Jun 2009]
Milk co-operative turns sour [4 Jun 2009]
How to improve a profit margin through a hidden price increase - the Snickers way [4 Jun 2009]
Video case study - football shirt sponsorship under pressure [25 May 2009]
BA posts a record loss [22 May 2009]
Video case study - the effect of deflation on businesses [19 May 2009]
Motivating employees - the end of the mobile phone sales shark? [17 May 2009]
AQA AS Business Unit 1 - Possible Evaluation Questions [17 May 2009]
A booming rental market – for car parking spaces [12 May 2009]
Shareholder strategy at M&S [7 May 2009]
Q&A - What is the link between product differentiation and a USP? [1 May 2009]
Q&A - How do changes in commodity prices affect businesses? [1 May 2009]
Q&A - What are commodities and how are their prices determined? [1 May 2009]
Q&A - What is market supply [1 May 2009]
Q&A - What is market demand? [1 May 2009]
Q&A - What are the implications for UK businesses if the pound strengthens? [1 May 2009]
Q&A - What causes an exchange rate to change? [1 May 2009]
Q&A - What is an exchange rate? [1 May 2009]
Q&A - How are businesses affected by changes in interest rates? [1 May 2009]
Q&A - What goes into the “marketing mix”? [1 May 2009]
How can the same product be cheaper to buy new than second-hand? [16 Apr 2009]

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