4. In a marketing mix, what is ‘price’? Prices must be set at a level that will generate sufficient sales to allow the
business to earn a profit. Factors that influence price include: Costs of production and the need to make a profit. Level of demand for the product. The higher the demand, the higher the price that can be charged. Competitors’ prices. A business will not want its prices to be undercut by cheaper rivals. Stage in the product life cycle. Products in decline cannot support a high price. Government taxes such as VAT may need to be added to the final price.
¶ ¶
¶
¶ ¶
Business Careers Marketing Managers are responsible for developing effective marketing mixes for a business and its products.
Common pricing strategies used by businesses include: Mark-up (cost-plus pricing) means adding a profit percentage to the direct costs of production (cost of sales) of the item to arrive at the selling price. Example: A retailer adds 40% to the cost price of mineral water before selling it to customers. Psychological pricing means setting a price based on the expectations of the customers in the target market. Many companies, such as perfume and car producers, charge a high price for their product which is well above their costs. This creates a luxurious, exclusive image for the product that will attract higher sales. On the other hand, companies may set prices just below a certain level to encourage people to buy, e.g. at €1.95 instead of €2.
¶ ¶
5. In a marketing mix, what is ‘place’? In the marketing mix, place focuses on where customers will be able to buy the
goods or services. Channels of distribution describe the various routes that goods may follow to get from the producer to the consumer.
Channel 1: Producer ➔ Wholesaler ➔ Retailer ➔ Consumer Wholesalers are businesses that buy goods in very large quantities from producers and sell them in smaller quantities to retailers. This method of distributing
