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  1. Price ‘We’ll give it all away for free and figure out how to make money later’ isn’t much of [a] business model. -Jason Fried

  2. Price • The price is what you pay; the value is what you receive. • -Anonymous The price of a product will depend on: • The cost to make it • The amount of profit desired • The price competitors charge • The objectives of the business • The price customers are willing to pay • Is there a high demand? • Is demand sensitive to changes in price?

  3. 3 potent forces • Image • Competition • Value

  4. 3 potent forces A NYC drugstore chain found that parents of newborns are less price sensitive than are parents of toddlers. Managers decided to make diaper pricing a function of the child’s age, cutting prices to meet those of competitors on toddlers’ diapers and raising them on diapers for newborns. The Result? Within one year, the new pricing strategy had produced a 27% increase in its baby care revenue (earning$).

  5. 1. IMAGE • a company’s pricing strategy communicates important information about its overall image to the customers • i.e. Nordstrom’s vs. Factory Outlet Stores

  6. 1. IMAGE HIGH PRICES… …convey (give) the idea of quality, prestige, and uniqueness to the customers • Companies often misjudge customers and undercharge for an item they could sell for far more People want quality…they want value. But if you lower prices, they think that you are lowering the value and lowering the quality. -Upscale goods merchant

  7. 2. COMPETITION 74% of retail stores work “within an extremely price competitive environment” • Other factors to take into account: • What are my motives (reasons) for pricing this the way I have? • What prices do my competitors have for similar goods/in the same target market? • Should I match them, beat them, or change my product enough (differentiate) that they don’t have a chance against me? If so, how? • Unique product features • Unique benefits • Value provided to the customer

  8. 3. VALUElisten to the Norms What value does your product provide for the customers? How does that affect the price you can charge? The “right” price for a product or service depends on one factor: the value that it provides for a customer. -Norman Scarborough Charging too little is more dangerous than charging too much. If you set your prices too high, you can always reduce them. If you undercharge, you develop the wrong kind of reputation. -CitiStorage owner Norm Brodsky

  9. Pricing strategies and tacticsways to price a product

  10. Pricing strategies and tacticsways to price a product

  11. Place Good order is the foundation of all things. -Edmund Burke

  12. Place - a source of competitive advantages - The use of e-commerce (promoting and selling on the internet) has grown massively over the last few years • Products should be conveniently available for customers to buy • ‘Places’ include: • Stores • Mail order • Telesales • Internet

  13. PLACE Advantages + Meeting customers face-to-face & direct interaction + Easier to tell if they are happy or not + You have complete control over product How do you get your product into your customers’ hands? • DIRECT SALES • Retail sales • Door-to-door • Mail order • E-commerce • On-site (at the store itself)

  14. Channels of distribution

  15. MARKET COVERAGE • Q1: How can you get to know your target market better? • Market Research • • • Customer Feedback • Talk to people – see what they want!

  16. MARKET COVERAGE • Q2: What type of coverage do you want to have? • Intensive distribution • Located in as many places as possible • i.e. Subway • Selective distribution • Limited selection available • i.e. More swanky/upscale products • Exclusive distribution • Only one option for obtaining the product – nowhere else to go • i.e. specialty products

  17. Price & Place Review • Price is the only component of the marketing mix that creates sales revenue • The price of an item is clearly an important determinant of the value of sales made. • In theory, price is really determined by the discovery of what customers perceive is the value of the item on sale. • Researching consumers' opinions about pricing is important as it indicates how they value what they are looking for as well as what they want to pay. • An organization's pricing policy will vary according to time and circumstances. • Crudely speaking, the value of water in the Lake District will be considerably different from the value of water in the desert. • Although figures vary widely from product to product, roughly 1/5th of the cost of a product goes on getting it to the customer. • 'Place' is concerned with various methods of transporting and storing goods, and then making them available for the customer. • Getting the right product to the right place at the right time involves the distribution system. The choice of distribution method will depend on a variety of circumstances. • It will be more convenient for some manufacturers to sell to wholesalers who then sell to retailers, while others will prefer to sell directly to retailers or customers. • Think about traffic! Where there is traffic, there are people. Where there are people, there are more potential customers.

  18. Manchester United Marketing MixExample of Price &Place • Manchester United Marketing Mix: • The product is an excellent football club that is a consistent winner. It also includes: • Merchandising through the sale of shirts , books, key rings, and other memorabilia • Television rights – they have their own television channel • The place involves the following: • The physical location of their stadium (called Bricks & Mortar) • The club’s website ( • Any other stores that sell their merchandise (Retailers & Promotional Deals) • Manchester United sells globally – they have a global brand • In addition, they participate in fusion marketing with Vodafone (mobile phone company) • “Fusion marketing is one of the most effective marketing tactics in the world, mostly because it is mutually beneficial and therefore more likely to work for extended periods of time. The concept of fusion marketing involves teaming up with another business in order to refer clients from one to the other. You can choose a partner for fusion marketing based on location, services, products or any number of other common denominators.” – Steve Thompson, 12/1/06 • Product Positioning: The club has positioned itself at the premier end of the market and, as a result, it tends to charge premium prices as evidenced by the high cost of a season ticket to watch home league games.