Notesale: Turn your study into money

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Lecture 9 - Pricing and Communications Strategy
Price is the marketing mix tool that produces revenue and must be treated as part of the overall
brand strategy
The concepts of price are the

- Customers and their ability to afford and willingness to pay
- Competitors and their pricing strategies
- Costs of production
The objectives of pricing is:
Maximising profitability
Return on investments
Increase cash flow
Grow market share
Optimise production capacity
Product perception
Barrier to entry

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Pricing decisions are determined by both internal and external factors
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Pricing approaches can either be a premium pricing strategy, where price is high to signify
highest quality
or Economy pricing low and affordable prices
The key elements to pricing are:
Value - perceived value to customers
Variable - whether prices can change over time or in terms of payment
Variety - can be set at different levels, such as bundling
Visible - they may be open and visible or hidden and confusing
Virtual

Pricing decisions for new products can either choose to be:
Market skimming: High initial prices before being reduced due to demand
Market penetrating: Low initial prices before being raised
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If the change in demand is large in proportion to the change in price, demand is
said to be elastic >1
If the change in demand is small in proportion to the change in price, demand is said to be
inelastic <1
“The change in quantity demanded (divided by) The change in price = price elasticity “
Framework of pricing decisions
- Company and marketing objectives
- Consumer demand
- Cost considerations
- Competitors
Demand is determined by
price
consumer disposable income
necessity of product
consumer taste and fashion trends
price of competitors
time factors

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To determine price there are different strategies
Cost-based strategies look at fixed costs and variable costs (total costs) and sales to project
revenue and determine break even point and profits as a result of price
Competitor based strategies:
Competitor prices, discounts, terms of credit & trade
Competitor resources & marketing strategies
Ease of entry into & difficulty of exit from industry
Number of competitors & degree of differentiation
Substitutes from other industries

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Communication
The model of the communication process Relationship between
The Sender (Marketer) and the Receiver (Target audience)

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