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Study Notes

Price positioning

Level:
AS, A-Level
Board:
AQA, Edexcel, OCR, IB

Last updated 22 Mar 2021

How much would you pay for a portion of fish & chips? In the UK, the average price is around £3.30. However, you can find fish & chips sold for much less than that in some parts of the country, and for significantly more in an upmarket restaurant.

So what accounts for the variation in price – and what signals does price provide to a potential customer? The answer lies in price positioning.

Thinking about the goods and services that you buy, you will have a view on whether a particular product is seen as cheap (low-priced) or expensive (high-priced).

Most customers like you have a notional range of prices that help you work out where the price of a product is positioned. Whether the price is considered to be good value for money will depend on several factors, including their age, income, product knowledge and experience of buying similar products.

Price positioning is, therefore, crucial in helping to convince customers to buy a product.

If you're running a discount grocery store like Lidl or Aldi, you're always going to be trying to keep your prices as low as possible (certainly much lower than competitors like Waitrose and Marks & Spencer).

On the other hand, if you're positioning your product as an exclusive luxury product, a price that's too low may actually hurt your image.

The pricing has to be consistent with the positioning. Many consumers really do hold strongly to the idea that you get what you pay for. Bear this in mind when you consider the various pricing strategies and tactics that a business can use.

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