Explain the Role of Pricing within the Marketing Mix - Essay Example

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Explain the Role of Pricing within the Marketing Mix In marketing mix, pricing is one of the most significant components because it brings income. Other elements such as packaging, distribution, advertising, selling effort, product development, and promotion entail expenditures…
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Download file to see previous pages In order to use the best pricing strategy for the products, a good estimate of the quantity of money the consumers are willing to spend on the products is required by the company. It is important to note that most companies do not use adequate pricing strategies for the products they generate. Majority of the pricing decisions are cost oriented instead of being value-based as perceived by the consumer (Breidert 2006, p10). Product differentiation entails the modification of the product to make it appear more attractive to a particular group of consumers, thus making it different from the competitor’s products. The main purpose of differentiation is to divide the consumers into segments “and optimizing the products for the specific needs of the segments. Differentiation requires a sophisticated pricing strategy based on the perceived values of the products” (Breidert 2006, p10). In most cases, product pricing is placed within the penetration strategy. Penetration strategy determines the factors affecting pricing as noted by Cohen (1983). For instance, a company may want to look for short-term objectives using a defined strategy for a particular type of product. The common objectives mostly used are current product profit maximization or market share increase. Both objectives depend on the knowledge of how the market will respond to diverse pricing patterns. Price is the crucial element for such short-term objectives. This is because it is the mainly flexible component in marketing mix. Price can be adjusted and changed rapidly and short-term adjustments indicates changes in market shares and profits (Breidert 2006, p10). The price of a particular product for most of the companies is based on the consumer’s perceived value, that is, the company uses value-based pricing. The price of the product is considered with other marketing elements before setting the marketing program (Colin 1989). In order to develop a value-based pricing strategy, the company is required to estimate the present perceived value of its product(s). In such a case, the company attempts to measure the products demand and the demand is dependent on the historical sales data and the competitor’s prices. External factors such as holiday and weekends, and advertising also affect the demand for the products. Lastly, the introduction of a new product into the market by a company requires the adoption of different strategies. The launch of a single product requires a pricing strategy such as penetration or skimming strategy. Adoption of a skimming strategy entails charging the consumer for a short period of time a relatively high price for the launched product. Penetration strategy entails setting a lower price for the product to gain a large market share (Breidert 2006, p11). 2. Visit the Easyjet London (Luton) to Madrid for various periods. Return flights assumed with a duration of one week a. Leaving tomorrow 21-28 Jan 21 January, 2012 - Outbound -€ 73.99 21 January, 2012 - Return - € 46.99 Total = € 120.98 b. Leaving in 1 weeks time 28 January, 2012 - Outbound - € 73.99 4 February, 2012 - Return - € 46.99 Total = € 120.98 c. Leaving in 1 months time 21 February, 2012 -Outbound -€ 25.99 28 February, 2012 Return - € 10.99 Total = 36.98 d. Leaving in 3 months time. April 21, 2012 Outbound - € 35.99 April 28, 2012 Return – € 89.99 Total = 125.98 Easyjet generally offers competitive prices to customers on the same routes and ...Download file to see next pagesRead More
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