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Q&A - What factors should a business consider when setting its prices?
There are several factors a business needs to consider in setting the price:
• Competitors – a huge impact on pricing decisions. The relative market shares (or market strength) of competitors influences whether a business can set prices independently, or whether it has to follow the lead shown by competitors
• Costs – a business cannot ignore the cost of production or buying a product when it comes to setting a selling price. In the long-term, a business will fail if it sells for less than cost, or if its gross profit margin is too low to cover the fixed costs of the business.
• The state of the market for the product – if there is a high demand for the product, but a shortage of supply, then the business can put prices up.
• The state of the economy – some products are more sensitive to changes in unemployment and workers wages than others. Makers of luxury products will need to drop prices especially when the economy is in a downturn.
• The bargaining power of customers in the target market – who are the buyers of the product? Do they have any bargaining power over the price set? An individual consumer has little bargaining power over a supermarket (though they can take their custom elsewhere). However, an industrial customer that buys substantial quantities of a product from a business may be able to negotiate lower or special prices.
• Other elements of the marketing mix – it is important to understand that prices cannot be set without reference to other parts of the marketing mix. The distribution channels used will affect price – different prices might be charged for the same product sold direct to consumers or via intermediaries. The price of a product in the decline stage of its product life-cycle will need to be lower than when it was first launched.
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Cut price cup cake deal goes wrong…... [23 Nov 2011]
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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]
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Pricing Strategy - Mobile Data Networks [15 Sep 2010]
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Marketing strategy in a recession - is attack better than defence? [17 Feb 2010]
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Taking Demand-based Pricing To Extremes [8 Feb 2010]
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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 - How does pricing link to the objectives of a business? [19 Dec 2009]
Q&A - What is price and why is it so important in the marketing mix? [19 Dec 2009]
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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]
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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 [30 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]
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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]
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