Explain four pricing policies that businesses can adopt as part of their marketing strategy and apply one of them to a product of your choice. - Leaving Cert Business - Question A - 2007
Question A
Explain four pricing policies that businesses can adopt as part of their marketing strategy and apply one of them to a product of your choice.
Worked Solution & Example Answer:Explain four pricing policies that businesses can adopt as part of their marketing strategy and apply one of them to a product of your choice. - Leaving Cert Business - Question A - 2007
Step 1
Explain Strategic Pricing
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Answer
Strategic pricing involves setting a price based on the company's overall marketing strategy. This means that a business considers its target market, competitive landscape, and desired market position when determining prices. The goal is to align the product's price with the perceived value and the marketing message. For instance, if a brand wants to position itself as a luxury product, its pricing will reflect exclusivity and high quality.
Step 2
Explain Cost Plus Pricing
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Cost plus pricing is a straightforward pricing strategy where a business calculates the total cost of producing a product and then adds a markup to ensure profit. This method is simple and ensures that all costs are covered, making it a common approach in manufacturing. Businesses must carefully determine both fixed and variable costs to set a price that sufficiently covers expenses while remaining competitive.
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Answer
Market share pricing, or penetration pricing, involves setting a low initial price to attract customers and gain market share quickly. This strategy is often used in competitive markets to introduce a new product. The low price can stimulate demand, and once a significant market share is achieved, the business may gradually increase prices. This tactic helps in establishing a foothold in the market against larger competitors.
Step 4
Explain Premium Pricing
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Premium pricing is the strategy of setting prices higher than competitors to create a perception of quality or exclusivity. This approach is common in luxury markets where higher prices signal better quality, craftsmanship, or status. Businesses employing this strategy often emphasize branding, marketing, and customer experience to justify the higher cost to consumers.
Step 5
Apply one of the pricing policies to a product of your choice
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For example, if we apply premium pricing to a luxury watch brand, the company would set the price significantly higher than competing watch brands. The marketing strategy would focus on the craftsmanship, brand heritage, and exclusivity of the watch. By promoting limited editions and offering exceptional customer service, the brand reinforces its premium image and attracts customers willing to pay a higher price for perceived quality and status.
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