Choose a consumer product and explain the role that pricing plays in its marketing mix and market positioning. When a new product comes onto the market its market position needs to be determined and this can be done using the marketing mix. Pricing plays a very important role in this decision. For the purpose of this essay the product used to highlight the role pricing plays in this decision will be the car. Reference will be made to three manufacturers of car, Ford, Skoda, and Subaru. The market positioning of a car can be decided upon in two ways.
The company can either copy existing market segments from similar products or they can create new segments giving the product a fresh image e. g. a car may be targeted at single women and so the marketing would reflect this. You can charge a higher price for a car when targeting higher social groups. Ford have a range of cars and each type of car is targeted at a specific social group. An example may be the Ford ‘Puma’ which is a sporty car targeted at Intermediate and junior non-manual workers. The Ford ‘KA’ is targeted more at Semi-skilled workers.
The targeting is taken a step further than this because some cars are aimed at a more specific buyer. The Ford ‘KA’ for instance is aimed at single females. The car is fun and not too expensive. The tools used to decide upon the market positioning are called the marketing mix but before using these tools a strategy must be assumed. Various pricing strategies call for the product to be priced in a number of different ways. These strategies provide a basis for the marketing mix. Once a strategy has been chosen the marketing mix is used to decide on a final price.
The different strategies are as follows, Profit Maximisation Using the profit maximisation strategy Ford would find the price customers were prepared to pay (demand) and use this as the price to charge them. In this way production costs are covered and the maximum profit is made. The problem with this is that it does not take into account the changing costs. Competitor’s prices change and so do the demands of the customer. Market Penetration If Ford were to adopt this strategy then they would take a car such as the ‘Mondeo’ and price it very low to capture a specific markets’ interest.
Then they can higher the prices when customers are loyal to the brand. In this way the manufacturer obtain maximum long-term profit through customer loyalty. Market Skimming This is where the car is sold at a high price to begin with. This concentrates on making a lot of money in a short amount of time. Prices are then lowered later on. An advantage to this is that customers associate the car with quality and if they are prepared to pay the high price initially then when the car comes down in price customers think they are getting a good deal.
Current Revenue Pricing If Ford felt that their future was uncertain then they may use this strategy to maximise sales and make money instantly. This is a short-term strategy and not a very certain way of making money. Target Profit Pricing This is a safe strategy to make an amount of profit that satisfies the amount of investment and risk. Ford may use this strategy if they brought out an innovative car and were uncertain about what response to expect. Most ventures need to be justified so production costs and a suitable profit must be obtained.
Market Oriented Approach This is where a price is decided upon by looking at what the market will bear and what competitors are charging. Ford would price their car based on what customers will comfortably pay. Promotional Pricing This is where Ford would price the ‘Mondeo’ to improve sales on all lines. So it would be priced to show how cheap the ‘KA’ is and the quality that the ‘Puma’ offers. Price Discrimination This is where Ford would offer a car such as the ‘Mondeo’ at different prices to different social groups.
So the same car may be offered at a normal price to high earning workers and a cut price to someone over a certain age or in a specific circumstance. ‘The marketing mix is… a conceptual framework that highlights the principal decisions marketing managers must make in tailoring their output to customers’ needs’. (Palmer and Hartley, 1999:13) There are four elements to the marketing mix, these are, product, price, promotion, place. Price is probably the most important as it is the only element that is concerned with profit.