Unit-3
Market Segmentation,
Marketing Mix, Product Life
Cycle, Product Mix
Market Segmentation
Meaning:-
Market segmentation is the process of dividing a
broad consumer or business market into smaller, more
defined categories or groups based on shared
characteristics.
By segmenting the market, businesses can better
understand consumer needs, target their marketing
efforts more effectively, and design products or
services that cater to the specific needs of different
segments.
Types of Market Segmentation
Market segmentation can be done based on various criteria. The most common
types of segmentation are:
1. Geographic Segmentation
• Basis: Dividing the market based on geographic variables such as country,
region, city, climate, or population density.
• Example: A company might offer different products in urban versus rural areas
or tailor its offerings for different climates (e.g., warm-weather clothing in
tropical regions).
2. Demographic Segmentation:-
• Basis: Dividing the market based on demographic factors like age, gender,
income, education, family size, occupation, etc.
• Example: High-end luxury products targeting high-income individuals or toys
marketed to children.
3. Psychographic Segmentation:-
• Basis: Segmenting based on lifestyle, personality traits, values,
interests, and social status.
• Example: Health-conscious consumers purchasing organic products,
or eco-friendly products targeted to environmentally-conscious
consumers.
4. Behavioral Segmentation
• Basis: Dividing the market based on consumer behaviors, such as
purchasing habits, product usage, brand loyalty, benefits sought, and
decision-making patterns.
• Example: Offering discounts or loyalty programs to repeat buyers or
targeting occasional buyers with personalized marketing.
5. Technological Segmentation
• Basis: Segmenting based on the technological preferences or usage
of consumers, particularly relevant in industries like electronics or
software.
• Example: Offering products tailored for users of different operating
systems or devices (Android vs. iOS).
Importance of Market Segmentation
1. Targeted Marketing: Enables businesses to focus on specific
customer groups, delivering tailored marketing messages and
products to meet their needs.
2. Improved Customer Satisfaction: By catering to the unique
preferences of different segments, businesses can enhance customer
satisfaction and loyalty.
3. Better Resource Allocation: Helps companies efficiently allocate
marketing resources by focusing on the most profitable or high-
potential segments.
4. Competitive Advantage: Businesses can differentiate themselves
by addressing the distinct needs of market segments, creating a
competitive edge.
5. Effective Product Development: Facilitates the design and
development of products that meet the specific needs and desires of
target segments.
6. Higher Profits: Targeting specific groups with the right offerings
can lead to increased sales, customer retention, and overall
Benefits of Market Segmentation
1. Improved Customer Understanding:-
Helps businesses better understand the needs, preferences, and behaviors of different
customer groups, allowing for more relevant and personalized marketing strategies.
2. Targeted Marketing Strategies:-
Enables companies to create tailored marketing campaigns and promotions that
resonate more with specific segments, leading to higher engagement and conversion
rates.
3. Increased Market Share:-
By focusing on specific segments, companies can tap into niche markets, expand their
reach, and capture a larger share of the market.
4. Cost Efficiency:-
Allows businesses to allocate marketing resources more effectively by focusing efforts
on the most profitable or high-potential segments, reducing wasted spending.
5. Enhanced Product Development:-
Facilitates the creation of products that cater to the unique needs of each segment,
improving product-market fit and increasing the likelihood of success in the market.
6. Improved Competitive Position:-
Businesses that effectively segment their market can differentiate their offerings from
competitors, providing a unique value proposition to targeted groups.
7. Better Customer Retention:-
By addressing the specific needs of different segments, companies can build stronger,
longer-lasting relationships with their customers, leading to improved loyalty and
retention.
8. Ability to Innovate:-
Market segmentation can highlight unmet needs or gaps in the market, providing
opportunities for innovation and the development of new products or services.
9. Better Decision Making:-
With clearer insights into different customer segments, businesses can make more
informed, data-driven decisions regarding pricing, product positioning, and market
entry.
Levels of Market Segmentation
• Market segmentation can be applied at different levels, depending on how
broadly or narrowly the market is divided.
• The main levels of market segmentation are:
1. Mass Marketing (Undifferentiated Marketing):-
• Definition: In mass marketing, a company offers a single product or
service to the entire market, without distinguishing between different
segments. It assumes that the needs and preferences of customers are
similar enough to use one marketing strategy.
• Approach: The same marketing efforts and messaging are directed at all
potential customers.
• Example: Products like salt or sugar, where the marketing is intended for
a broad audience because the needs are universally similar.
2. Segment Marketing (Differentiated Marketing)
• Definition: In segment marketing, a company targets multiple market
segments, each with specific needs and characteristics. The company tailors
its products and marketing strategies to each segment, providing a different
offering for each group.
• Approach: The company develops separate marketing campaigns for
different segments to address their unique needs.
• Example: An automobile brand offering separate models for families, young
professionals, and luxury buyers.
3. Niche Marketing
• Definition: Niche marketing targets a very specific, smaller market
segment with unique needs that are not fully addressed by larger
companies. It focuses on specialized products and services that cater to the
interests of a well-defined group.
• Approach: The company dedicates its marketing efforts and resources to a
narrow target audience, offering highly specialized products or services.
• Example: A company specializing in vegan skincare products that caters to
environmentally-conscious, health-focused consumers.
4. Micro-Marketing (Individual Marketing)
• Definition: Micro-marketing involves tailoring products and marketing
strategies to individual customers. This is the most personalized level of
segmentation, where the company customizes its offering for each individual
based on detailed data and insights.
• Approach: Companies use advanced technology and data analytics to
personalize their marketing and offerings. This can include custom products,
personalized messages, or one-to-one marketing.
• Example: Online retail sites like Amazon offering personalized product
recommendations based on individual browsing history and past purchases.
Marketing Mix
Meaning:-
The marketing mix refers to the set of tactical marketing tools and
strategies a company uses to promote its product or service to its
target market.
It is often referred to as the 4Ps (Product, Price, Place, and Promotion),
which are the key components that companies must manage to
effectively meet customer needs and achieve business objectives.
Elements of Marketing Mix (The 4Ps)
The marketing mix consists of a combination of elements that a company uses to
effectively market its products or services.
These elements, often referred to as the 4Ps, are critical to designing a marketing
strategy that aligns with customer needs and the company’s objectives.
1. PRODUCT:-
• Definition: The product is what a company offers to satisfy the needs and wants of
its customers. It can be a physical product or a service, and it includes features,
design, quality, packaging, branding, and any additional services or warranties.
• Key Components:
• Product features and design
• Product quality
• Brand name
• Packaging and labeling
• After-sales services and support
• Variety and customization options
• Example: A smartphone with features like a high-resolution camera, fast
processing speed, and a recognizable brand like Samsung or Apple.
2. PRICE:-
• Definition: Price refers to the amount of money a customer
must pay to purchase the product or service. Pricing strategies
play a significant role in positioning the product and influencing
customer behavior.
• Key Components:
• Pricing strategy (e.g., penetration pricing, skimming, competitive
pricing)
• Discounts, offers, and payment terms
• Price relative to competition
• Perceived value for money
• Example: A premium pricing strategy used by luxury brands
like Louis Vuitton, or a low-cost strategy used by discount stores
like Dollar Tree.
3. PLACE (DISTRIBUTION):-
• Definition: Place refers to the distribution channels and
locations through which the product is made available to
customers. It ensures that the product reaches the right place at
the right time.
• Key Components:
• Distribution channels (direct or indirect)
• Retailers, wholesalers, online platforms
• Coverage (local, regional, global)
• Logistics and delivery systems
• Convenience and accessibility
• Example: Apple distributes its products through online stores,
physical retail locations, and authorized resellers worldwide.
4. PROMOTION:-
• Definition: Promotion involves the communication strategies
used to inform, persuade, and remind customers about the
product. It includes advertising, sales promotions, public
relations, personal selling, and direct marketing.
• Key Components:
• Advertising (TV, digital, print)
• Sales promotions (coupons, discounts, special offers)
• Public relations (events, media coverage)
• Personal selling (sales staff interaction)
• Direct marketing (emails, telemarketing)
• Example: Coca-Cola uses TV ads, sponsorship of major sports
events, and special promotions like limited-time flavors to
engage with customers.
Extended Marketing Mix (7Ps):-
In service-based industries or more complex markets, the 4Ps are
often extended to 7Ps by adding three more elements:
5. PEOPLE:-
• Definition: This element focuses on the employees and other
individuals who interact with customers or influence the
customer experience.
• Example: Friendly and knowledgeable staff at a hotel or
restaurant enhancing the customer experience.
6. PROCESS:-
• Definition: Refers to the procedures, mechanisms, and flow of
activities that deliver the product or service to the customer.
Efficient processes improve customer satisfaction and loyalty.
• Example: The seamless and efficient process of booking flights
online or the quick checkout system in e-commerce platforms.
7. PHYSICAL EVIDENCE:-
• Definition: In services, physical evidence includes the
tangible aspects that help customers evaluate the
service and form perceptions about its quality.
• Example: Clean and well-organized hotel rooms,
professional-looking service websites, or branded
uniforms worn by employees.
Product Life Cycle
Meaning:-
The Product Life Cycle (PLC) refers to the stages that a product goes
through from its initial introduction into the market to its eventual
withdrawal or discontinuation.
The concept is used to understand and manage a product’s lifespan,
helping companies optimize their marketing strategies, production
processes, and pricing over time.
The PLC consists of four key stages:
1. Introduction
2. Growth
3. Maturity
4. Decline
Each stage has distinct characteristics in terms of sales, profits, market
competition, and marketing strategies, and understanding these stages
allows businesses to make informed decisions about product
development, marketing efforts, and resource allocation.
Stages of Product Life Cycle:-
The Product Life Cycle (PLC) consists of four key stages, each with its
own set of characteristics and challenges.
These stages describe the journey of a product from its introduction to
the market to its eventual decline and discontinuation.
1. Introduction Stage:-
• Definition: This is the phase when the product is launched into the
market. At this stage, the product is new, and customer awareness is
low.
• Characteristics:
• Sales: Slow growth as the product is still gaining recognition and acceptance.
• Costs: High development, promotion, and distribution costs as the company
works to build awareness and demand.
• Profit: Little to no profit because of the high initial investment and low sales
volume.
• Marketing Focus: Heavy promotion and advertising to generate awareness,
educate potential customers, and create interest.
• Challenges: Overcoming customer resistance, establishing brand identity,
and securing distribution channels.
• Example: The launch of a new type of electric car or a cutting-edge
wearable technology.
2. Growth Stage:-
• Definition: In the growth stage, the product begins to gain acceptance in
the market, and sales increase rapidly. The product is now recognized, and
competitors may enter the market with similar offerings.
• Characteristics:
• Sales: Rapid growth as more customers buy the product and word-of-
mouth spreads.
• Costs: Costs decrease due to economies of scale and more efficient
production.
• Profit: Profits start to rise as sales increase and the company gains
market share.
• Marketing Focus: Expanding distribution channels, differentiating the
product from competitors, and enhancing brand loyalty.
• Challenges: Increasing competition, maintaining product
differentiation, and managing market expansion.
• Example: The adoption of smartphones or the growth of streaming services
like Netflix.
3. Maturity Stage:-
• Definition: The maturity stage is characterized by a slowing in the
rate of growth. The product has reached widespread market
acceptance, and competition is intense.
• Characteristics:
• Sales: Peak sales are reached, but the growth rate slows as the market
becomes saturated.
• Costs: Production costs continue to decrease, but marketing costs may
increase to retain market share.
• Profit: Profit margins begin to decline due to increased competition and the
need for promotional efforts.
• Marketing Focus: Efforts are focused on retaining customers, differentiating
the product, and finding new uses or target markets to extend the product's
life cycle.
• Challenges: Intense competition, price reductions, and maintaining customer
loyalty.
• Example: Household appliances (e.g., refrigerators, washing
machines) or established soft drink brands like Coca-Cola.
4. Decline Stage:-
• Definition: The decline stage occurs when the product’s sales and profits
start to decrease. This could be due to market saturation, technological
advancements, changing consumer preferences, or the emergence of better
alternatives.
• Characteristics:
• Sales: A significant decline in sales as the product loses relevance or is
replaced by newer alternatives.
• Costs: High costs relative to diminishing sales and profits. Marketing
expenses are usually reduced.
• Profit: Profits decline as the product becomes obsolete, and the market
shrinks.
• Marketing Focus: Companies may either reduce costs, discontinue the
product, or attempt to revitalize it through repositioning or product
updates.
• Challenges: Managing product discontinuation, reducing costs, and
dealing with negative perceptions or competition from newer products.
• Example: VHS tapes, traditional film cameras, or older mobile phone models.
Applications in Business:-
The Product Life Cycle (PLC) is an essential concept for businesses to
strategically manage a product's journey from introduction to decline.
Both pre-introduction (before launch) and post-introduction (after
launch) strategies are influenced by the PLC, guiding marketing,
production, and sales decisions to maximize a product’s success.
1. Pre-Introduction Stage (Before Product Launch)
Before a product is introduced to the market, businesses focus on
research, development, and strategic planning. Key activities in this stage
include:
Market Research and Analysis
• Objective: Understand customer needs, market demand, competition, and
potential gaps in the market.
• Applications:
• Conducting surveys, focus groups, and competitor analysis to assess
customer preferences and product feasibility.
• Identifying target market segments and understanding how to position
the product effectively.
Product Development and Design
• Objective: Develop a product that meets customer expectations and outperforms
competitors.
• Applications:
• Creating prototypes and testing product designs.
• Conducting quality control and ensuring product features are aligned with market
demand.
Marketing and Branding Strategy
• Objective: Build anticipation and awareness before the product enters the market.
• Applications:
• Developing brand positioning, logo, messaging, and promotional strategies.
• Pre-launch marketing campaigns (e.g., teaser ads, influencer partnerships) to
generate interest and excitement.
Pricing Strategy Development
• Objective: Set an initial pricing strategy based on market research, competition, and
production costs.
• Applications:
• Deciding between penetration pricing (low price to attract customers) or
skimming pricing (high price to capture high-value customers).
Post-Introduction
Stage
(After Product
Once the product is introduced, businesses move into the post-introduction stages of
the PLC (Growth, Maturity, and Decline).
Launch)
Strategies differ based on the current phase of the product’s life cycle.
1. Growth Stage (After Introduction):-
• Objective: Maximize market share, build customer loyalty, and scale up production.
• Applications:
• Aggressive Marketing: Expanding marketing efforts to build brand recognition
and increase sales (e.g., mass advertising, social media campaigns).
• Product Differentiation: Highlighting unique selling propositions (USPs) to
stand out from competitors.
• Distribution Expansion: Increasing product availability by expanding
distribution channels (e.g., adding retail partners, increasing online presence).
• Pricing Adjustments: Depending on market response, businesses may adjust
prices (e.g., offering promotional discounts or bundling products).
2. Maturity Stage (After Introduction):-
• Objective: Maintain market leadership, protect profit
margins, and extend the product's life.
• Applications:
• Product Modification: Innovating or improving the product (e.g.,
new features, updated designs) to keep it fresh and relevant.
• Brand Loyalty Programs: Offering rewards or discounts to loyal
customers to retain them and reduce churn.
• Market Segmentation: Targeting new customer segments or
demographics to expand the customer base (e.g., targeting
different geographic areas or niche groups).
• Competitive Pricing: Adjusting prices to stay competitive as
many similar products enter the market. This might include
discounts or bundled offers.
• Promotional Strategies: Shifting focus to promotions, loyalty
programs, or seasonal offers to boost sales.
3. Decline Stage (After Introduction):-
• Objective: Minimize losses, optimize remaining profits, or
phase out the product.
• Applications:
• Cost Reduction: Cutting production and marketing costs to
maintain profitability (e.g., reducing advertising spend,
limiting product variations).
• Harvesting: Maintaining minimal marketing efforts while
continuing to sell to loyal customers or niche markets.
• Discontinuation: If the product no longer generates
enough profit or customer interest, companies may
discontinue the product or replace it with a new offering.
• Repositioning: In some cases, a product may be
repositioned to target a different market segment, or
repackaged to appeal to a niche market.
Exit Strategy:-
• Objective: Deciding the right time to phase out or replace the
product.
• Applications:
• Liquidating remaining inventory through discounts or special offers.
• Transitioning loyal customers to newer product offerings.
Key Applications of PLC in Business Strategy:-
1. Strategic Planning: The PLC helps businesses forecast future sales,
determine resource allocation, and plan long-term strategies, especially in
terms of R&D and product portfolio management.
2. Marketing Tactics: From creating awareness in the introduction stage to
managing competition in maturity and handling declining sales, marketing
campaigns and tactics are aligned with the product’s life cycle stage.
3. Pricing Decisions: Businesses use the PLC to determine pricing strategies—
starting with a high price (skimming) or a low price (penetration) and
adjusting prices as the product moves through its life cycle stages.
4. Resource Allocation:-
Understanding the life cycle helps companies allocate resources
more efficiently, whether investing in marketing during the
growth phase or reducing costs in the decline phase.
5. Product Portfolio Management:-
Companies assess the overall health of their product portfolio by
evaluating the PLC stages of each product, deciding which
products to continue, phase out, or innovate further.
Product Mix
Meaning:-
The Product Mix (also known as Product Assortment) refers to the
complete range of products that a company offers for sale to its
customers.
It encompasses all product lines, categories, and individual products
sold by a business.
A well-managed product mix helps a company meet the diverse needs
of its target market and optimize its business performance.
Key Elements of Product Mix
The Product Mix is typically described using the following
dimensions:
1. Product Line
• Definition: A product line is a group of related products that share
common characteristics or are marketed under a single brand. These
products usually satisfy similar customer needs or target the same
market segment.
• Example: A company like Apple has product lines for smartphones
(iPhone), tablets (iPad), and computers (MacBook).
2. Product Width (Assortment)
• Definition: The width of the product mix refers to the total number
of product lines a company offers. It indicates the variety of
product categories available.
• Example: A supermarket that offers a wide range of product lines,
such as food, beverages, cleaning products, personal care, and more,
has a broad product width.
3. Product Length:-
• Definition: The length of the product mix refers to the total number of products
in all the product lines combined. It indicates the number of individual items in the
product assortment.
• Example: A company’s product mix might include 10 different models of phones, 5
types of chargers, and 3 different accessories—so the total product length would
be 18.
4. Product Depth:-
• Definition: The depth of the product mix refers to the number of variations of
each product within a product line. These variations could include different sizes,
colors, styles, or features.
• Example: Within the smartphone line, a company may offer several models in
different colors, storage capacities, or feature sets. Each variation adds depth to
the product line.
5. Product Consistency:-
• Definition: The consistency of the product mix refers to how closely related the
product lines are in terms of their end-use, production processes, and distribution
channels.
• Example: A brand that offers only high-tech gadgets (smartphones, laptops,
tablets) has a consistent product mix, as the products are all technologically
advanced and cater to similar customer needs.
Types of Product Mix Strategies
• Businesses often adjust their product mix to meet market demands, improve sales, or
enter new markets.
• Common product mix strategies include:
1. Expansion of Product Mix:-
• Objective: Introduce new product lines, categories, or variations to target more
market segments.
• Example: A clothing brand that starts offering footwear, accessories, and home
goods in addition to clothing.
2. Contraction of Product Mix:-
• Objective: Eliminate underperforming or non-profitable products or product lines.
• Example: A company may decide to drop one of its product lines if it no longer
aligns with consumer interests or company goals.
3. Extension of Product Mix:-
• Objective: Add new variations of existing products within the current product lines
(e.g., sizes, flavors, or formulations).
• Example: A beverage company introduces new flavors or limited-edition packaging
for its existing soft drinks.
4. Pruning the Product Mix:-
• Objective: Remove some of the product variations or product lines
that are no longer profitable or are too complex to maintain.
• Example: A smartphone company may discontinue older models or
low-selling colors to focus on best-sellers.
5. Mixing Depth and Width
• Objective: Adjust both the depth (product variations) and width
(number of product lines) of the product mix to achieve better
market coverage.
• Example: A company offering both men's and women's clothing may
expand the line by adding children's apparel, thereby increasing
both depth (new sizes and styles) and width (new categories).
Importance of Product Mix
1. Customer Satisfaction:- A well-balanced product mix helps meet
the diverse needs and preferences of customers, enhancing
customer satisfaction.
2. Market Penetration:- A broad product mix can help a business
penetrate multiple markets, attracting different customer
segments.
3. Revenue Growth:- By offering a variety of products, companies
can increase sales opportunities, cross-sell products, and increase
overall revenue.
4. Competitive Advantage:- A diverse product mix gives businesses a
competitive edge by differentiating their offerings from competitors
and allowing them to respond to market trends.
5. Resource Optimization:- Companies can optimize production and
distribution resources by managing the product mix, ensuring that
products are developed and marketed efficiently.
Pricing Policy and Methods
Pricing is a critical element of the marketing mix, as it directly
influences a company's revenue, competitiveness, and market
positioning.
Pricing decisions involve setting a price that reflects the value of a
product or service, while also considering production costs, competition,
and customer perceptions.
Pricing Policy:-
A pricing policy outlines the guidelines a company follows to determine
the prices of its products or services.
It helps ensure consistency, profitability, and alignment with overall
business strategies.
Some common types of pricing policies include:
1. Skimming Pricing Policy:-
• Definition: Setting a high initial price for a new or innovative product to maximize
profits from early adopters who are willing to pay more.
• When to Use: For innovative or premium products with little competition.
• Example: Launching a new technology like the latest smartphone model at a high price,
gradually lowering it over time as competition increases.
2. Penetration Pricing Policy:-
• Definition: Setting a low initial price to attract a large number of customers and
capture market share quickly.
• When to Use: When entering a competitive market or launching a mass-market
product.
• Example: Offering discounted subscription services or low-priced smartphones to build
brand loyalty and gain customers in a competitive market.
3. Psychological Pricing Policy:-
• Definition: Pricing products in a way that makes them appear more attractive or
affordable, such as setting prices just below round numbers (e.g., $9.99 instead of $10).
• When to Use: For consumer goods and retail products where perception of price plays
a role in buying decisions.
• Example: Pricing a product at $99.99 instead of $100 to make it seem like a better
deal.
4. Prestige Pricing Policy:-
• Definition: Setting high prices to create a perception of premium
quality or exclusivity.
• When to Use: For luxury products or high-end brands that aim to
convey prestige and exclusivity.
• Example: High-end watches, designer handbags, or luxury cars.
5. Competitive Pricing Policy:-
• Definition: Setting prices based on what competitors charge for
similar products. This helps maintain market competitiveness without
significantly undercutting or overpricing.
• When to Use: In highly competitive markets where differentiation is
difficult.
• Example: Setting a price for a product similar to that of leading
competitors in the market.
Pricing Methods
Pricing methods are the specific techniques used to determine the actual price
of a product or service.
The method chosen depends on factors like costs, competition, and perceived
value.
Some common pricing methods include:
1. Cost-Based Pricing:-
• Definition: Pricing is determined by adding a markup to the cost of producing the
product or service.
• Formula: Price = Cost + Markup
• Types:
• Cost-Plus Pricing: Adding a fixed percentage markup on the cost of production.
• Target Return Pricing: Setting a price to achieve a specific return on
investment or target profit margin.
• When to Use: For simple, straightforward products where cost structure is well-
known and competition is moderate.
• Example: A manufacturer selling a product with production costs of Rs.10 and a
markup of 30% would set the price at Rs.13.
2. Value-Based Pricing:-
• Definition: Pricing based on the perceived value to the customer
rather than the cost of production. It focuses on what customers are
willing to pay for the benefits or features they receive.
• When to Use: For products that offer unique features, advantages,
or emotional value to customers.
• Example: A premium brand of skincare that customers perceive as
more effective and luxurious might be priced higher than ordinary
skincare products, even if production costs are similar.
3. Competitive Pricing:-
• Definition: Setting a price based on the prices of competing
products in the market.
• When to Use: In markets with similar products or services, where
competition is fierce.
• Example: In the mobile phone market, many brands set their prices
similar to those of leading brands like Apple and Samsung to stay
competitive.
4. Dynamic Pricing:-
• Definition: Prices are adjusted continuously based on demand,
competition, and other factors.
• When to Use: For products or services with fluctuating demand
(e.g., airline tickets, hotel rooms).
• Example: Airlines or ride-sharing services like Uber adjust prices
based on demand, time of day, and availability.
5. Psychological Pricing:-
• Definition: Pricing designed to have a psychological impact on
customers. Common techniques include using prices just below a
whole number (e.g., Rs.19.99 instead of Rs.20) or offering "special"
pricing like Rs.1 items to increase perceived value.
• When to Use: In retail or consumer-focused products.
• Example: Pricing a product at Rs.9.99 to make it appear as if it
costs less than Rs.10.
6. Bundling Pricing:-
• Definition: Offering several products or services together at a single
price, typically lower than the total price if bought individually.
• When to Use: When businesses want to encourage customers to purchase
more by offering value through a bundle.
• Example: Fast food restaurants offering a "meal deal" that includes a
burger, fries, and a drink for a discounted price compared to buying each
item separately.
7. Skimming Pricing:-
• Definition: Setting a high initial price for a new or innovative product and
then gradually lowering it over time as the product moves through its life
cycle.
• When to Use: When launching a unique or high-demand product that
lacks competition.
• Example: New technology gadgets like the iPhone or gaming consoles are
often launched at high prices, then reduced after a few months as newer
models are introduced.
Factors Affecting Pricing Decisions
1. Costs:- The company needs to ensure that the price covers
the cost of production, marketing, and distribution, while
also providing a margin for profit.
2. Customer Perception of Value:- Prices should align with
the perceived value of the product or service.
3. Competition:- Pricing should consider competitors' prices
to remain competitive in the market.
4. Market Demand:- Higher demand may justify higher
prices, while lower demand might require price reductions
or adjustments.
5. Economic Conditions:- Inflation, recessions, and changes
in disposable income can influence pricing strategies.
6. Legal and Ethical Considerations:- Pricing should comply
with regulations to avoid deceptive practices, price fixing,
or predatory pricing.
Conclusion
In summary, the key marketing concepts—Market Segmentation,
Marketing Mix, Product Life Cycle, Product Mix, and Pricing
Policies and Methods—form the foundation of effective marketing
strategies.
Market segmentation enables businesses to understand and target
specific customer groups, while the marketing mix ensures a
balanced approach to delivering value.
The product life cycle helps in planning strategies for different
stages of a product’s journey, and the product mix allows businesses
to diversify and optimize their offerings.
Finally, thoughtful pricing policies directly influence revenue and
customer satisfaction.
Together, these elements help businesses meet customer needs, stay
competitive, and achieve sustainable growth.
