The marketing mix elements for a good/service
Price element of the marketing mix
Price is the amount charged for a good or service, and the pricing approach is the method a business uses to decide that amount. Price is one of the four Ps of the marketing mix. The approach might start with the business's costs and then be adjusted to suit customers and rivals.
Pricing is not the same as calculating costs. Adding up materials, wages and other expenses tells you what it costs to provide something; the price decision is about what to charge. A price below cost loses money on every sale, even if sales are high.
What shapes the price
| Influence | Question the business asks | Example |
|---|---|---|
| Business costs | Will each sale cover costs and contribute towards profit? | A phone case costs £5 to make and post. Charging £4 would lose £1 per sale. |
| Target market | What will these customers pay, and what do they expect? | Students may pay £14 for a custom case they cannot buy elsewhere, but not £30. |
| Competitors' prices | What do similar businesses charge? | If online rivals charge £12 to £15, a price of £14 sits within the market range. |
Imagine you print custom phone cases. Each case costs £5 in materials and printing. Similar sellers charge £12 to £15, and your customers are students who will pay more for a personal design but compare prices. You set £14: it covers costs, fits what the target market expects and stays close to competitors. Charging £8 might attract more buyers, but it would leave very little after costs and other expenses.
A low price is not automatically best. The price must cover costs and still be an amount the target market is willing to pay, while making sense next to competitors' prices.
Practise this
Cambridge National Enterprise & Marketing · 4.1 The marketing mix elements for a good/service
Cambridge National Enterprise & Marketing · 4.9 Factors to consider when pricing a product