Pricing is the most important element of the marketing mix, as price is the only element of the marketing mix, which generates a turnover for the organisation. An organisation can adopt a number of pricing strategies, the pricing strategy will usually be based on corporate objectives.
A television satellite company sets a low price to get subscribers then increases the price as their customer base increases. The organisation sets an initial high price and then slowly lowers the price to make the product available to a wider market. A games console company reduces the price of their console over 5 years, charging a premium at launch and lowest price near the end of its life cycle.
An example would be a DVD manufacturer offering different DVD recorders with different features at different prices e.g. Examples of products and services using this strategy include London department store Harrods, first class airline services and Porsche.


Cost plus pricing sets the price of the product by adding a set amount (mark up) to the production costs.
Cost based pricing is similar to cost plus pricing as it is based on costs of production and marketing but it will build in additional factors such as market conditions to set pricing. Cost based pricing can be useful for firms who want to base their products on costs but operate in an industry where product pricing changes regularly (volatile pricing). Getting Pricing correct can be tricky; pricing must reflect supply and demand relationship and Pricing a product too high or too low could mean a loss of sales for the business.
Really a firm has three options and these are to price lower, price the same or price higher than competitors. Other firms may take this further by refunding the customer more money than the difference between their product price and the lower price offered by the competitor firm. The reason why this methods work, is because buyers will still say they purchased their product under £200 pounds or dollars, even thought it was a pound or dollar away.


Firms will need to select one that suits their product type, industry, target market and product life cycle stage for pricing such as penetration pricing and skimming pricing . Within the UK some firms are now moving into the realms of buy one get two free can we call this BOGTF i wonder? Cost plus pricing ensures that the costs of production are covered but it could place the company at a competitive disadvantage as it fails to consider consumer demand or competitor pricing.



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