Price, place and promotion
Price
| Method / strategy | How it works |
|---|---|
| cost-plus | add a profit margin to unit cost |
| penetration | low price to enter a market and win share |
| price skimming | high price first for a new product, then lower |
| competitive | price close to rivals |
| psychological | prices like 9.99 that feel lower than 10 |
- The best price depends on costs, competitors, life-cycle stage, and price elasticity.
Practice
Penetration pricing means setting:
Penetration pricing uses a low price to break into a market; skimming starts high then lowers.
Place
- Place = how the product reaches customers, through a distribution channel.
- A short channel (maker → customer) gives more control; a longer channel (maker → wholesaler → shop → customer) reaches more buyers.
Practice
A shorter distribution channel (maker → customer) gives the firm:
Short channels give control; longer channels (via wholesalers/shops) reach more buyers.
Promotion
- above-the-line — paid advertising in mass media (wide audience).
- below-the-line — targeted methods the firm controls (discounts, free samples, direct mail).
- Digital marketing and e-commerce let small firms reach world markets cheaply and target the right people.
Practice
Above-the-line promotion is:
Above-the-line = mass-media advertising; below-the-line = targeted methods like samples and direct mail.
You've got it
Key idea
- pricing: cost-plus, penetration, skimming, competitive, psychological (choose by costs, rivals, elasticity)
- place: short channel = control; long channel = reach
- promotion: above-the-line (mass ads) vs below-the-line (targeted); digital/e-commerce is huge