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To be successful, you need to understand what customers in your market need and how other businesses in your market are meeting the customer’s needs. Therefore, it is important for entrepreneurs to have a lot of market information to help them understand the market they plan to start a business in.

 

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Marketing Mix

 

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Key Concepts - Value and Target Marketing

Key Concepts - Target Market

Key Concept - Customer Value

Your customers ultimately decide if your price matches the value and benefits your product/service provides.  Their perceptions of your competitive advantage determine how much they’re willing to pay.

Key Concept - Differentiation + Positioning

LOWER PRICES compared with competition

  • Aims for a high volume of sales with low profit margins
  • Purpose is to expand the market, to steal market share from other competitors, to remain competitive in the market, or to keep competition from entering the market

HIGHER PRICES compared with competition

  • Aims to maintain a quality position in the market with high profit margins to support production costs and promotional activities
  • Purpose is to offset development costs for a product with a short life span, substantiate a quality image, take advantage of a high-demand and low­ supply situation, or to charge more because the product or service is hard for competitors to copy

 

PARITY PRICES compared with competition

  • Aims to have a portion of the market without being the highest- or lowest-priced competitor
  • Purpose is to stay in the game when little differentiation in the product or service exists or when price is the basis of competition

 

Key Concept - The 4Ps of Marketing

Key Concept - Market Segmentation

Customer Validation

Key Concepts - Pricing

 

Business Plan Template Activity

– Pricing Strategy

The primary consideration is to ensure that all business costs are covered, this includes the cost to manufacture or purchase a product/service and the level of profit desired after all expenses are covered.

There are many considerations and factors that affect pricing strategies. Additionally, different pricing may be set for specific occasions, such as Boxing Day Sales. Another key consideration is competitors’ pricing strategies and or what is considered standard for the industry the business operates within.

 

Describe in detail the pricing strategy and the rationale supporting the pricing strategy chosen. Pricing strategies should accurately reflect the business’ brand and are interrelated with promotional strategies.