Bargain costs fair points premium sensitive significance solutions unique

When deciding on the price of a product or service you have to consider the product or service itself. For example, does it have (1)….. benefits? Does the consumer have any alternative (2) ….? What is the monetary (3) …. of the product or service? You also have to think about the possibility of complementary (4) ….. , and how price (5) ….. the consumers are to these and the product or the service cost.

Then you need to think about the pricing strategy and how this relates to the brand. For a luxury brand it is essential to follow a (6)…. pricing strategy in order to maintain the brand image. A no-frills low price would not be suitable for a brand such as Cartier.

Finally, you need to carry out a price test to check the price (7)….. you are considering. The (8) ….. price is the amount that the consumer is prepared to pay for the product or service. A (9) ….. price is a low price that may be used during special offers or for promotional pricing.


Think about three products you have bought recently. Identify the pricing strategy.

6.13 Read the attachment that marketing managersent to his team and find words or phrases that mean the following:

1 when a customer pays the same fee each month / year / etc.

2 to sell a group of things (like products or services) as a package

3 reduced price

4 another word for product launch

5 enhanced features or services that customers have to pay more money for

Cable Internet package pricing model

I have a few questions I'd like everyone to think about in advance of the meeting. As you know, we're introducing a new DSL package, and we need to decide what we should be charging for our services. Some points to consider are:

• What should our pricing model be? A monthly flat fee or charge by data

• Do we want to offer different prices in different regions?

• Should we bundle our services and offer a discount?

• What about adopting a penetration pricing strategy for the roll-out? How long should these prices be valid for (3 months, 6 months, ...)?

• What optional extras shall we offer (e.g. guaranteed 24-hour servicing)?

Please think about these questions, and we can discuss everything in more detail

6.14 Match these different pricing models to the definitions. Two definitions are missing. Which ones?

1 captive product pricing

2 economy pricing

3 geographical pricing

4 penetration pricing

5 premium pricing

6 price skimming

7 mark-up or cost-plus pricing

8 current-revenue pricing


a pricing goods/services as cheaply as possible
b charging a high price for an item where you have a competitive advantage

c charging a high price for a unique high-quality item
d pricing goods at a very low price to encourage people to buy them

- often the prices are later raised
e pricing according to area where goods are sold
f pricing one item very low and its complement very high

Now decide which model is being discussed.

A Naturally we need to price our goods lower in countries with a lower per-capita income.

B We at Chamonix Ecrit believe the quality of our pens justifies their cost.

C These low prices will only be in effect for the first six months. After that they will be raised by 10-25%.

D Yes, the printers we sell are inexpensive, but we charge quite a bit for the ink cartridges.

E Our own-label brands sugar, flour, and milk have much lower prices than the brand-name competitors.

F They just worked out the unit cost and added a percentage, without even considering demand elasticity or anything like that.

G Firstly we need cash, and secondly, we don’t think the product will last very long – it’s really just a gimmick – so we’re trying to maximize our sales income now.

Unit 7 Market segmentation

Text 1 Market segments

Market segmentationidentifies groups of buyers within a market who share similar needs and demonstrate similar purchasing behaviour. Market segmentsare described by demographicsand psychographics.


■ Age group or age bracket: their age, for example 21-25

■ Sex: male / female split - for example, 75% of Elle readers are women

■ Religion or ethnicity: Hispanic, Asian, American, white, black, Muslim, Jewish, etc.

■ Income: how much money a person earns; how affluent, or rich, they are

■ Life cycle: single, married, with children


■ Education: the highest qualification that a person has, such as a diploma or a degree

■ Attitudes and opinions: how a person feels or thinks about issues, people, brands, etc.

■ Lifestyle:a way of life that reflects a person's values and attitudes

How does market segmentation work?

Demographics and psychographics are used to target a segmentby using data to build up a customer profile- the image of a typical consumer. People can be targeted as individuals or as a family group that lives together and makes up a household. Marketers use the ABC socio-economic categories to target groups. In the UK this is known as ACORN,which stands for A Classification Of Residential Neighbourhoods.

ABsare a prized customer segment,as they have a high disposable incomeand strong economic power- that is, they have money to spend. Housewives who stay at home and look after the family are often the main shoppers for a household and are frequently targeted by marketers for certain types of products. Marketing messages that appeal to singles (unmarried people) will not be the same as the messages that appeal to the specific tastes of people married with kids. City dwellers, also known as urbanites - people who live in a city or a large conurbation or metropolis - will have different preferences from country dwellers.Commuters travel to their place of work from the country or suburbs and can be targeted on public transport or on out-of-home advertising along roadsides.

Although every marketing department has its own definitions and names for the market segments they target, there are some common terms. In 1962 Everett Rogers described five market segments in his book Diffusion of Innovations:



Innovators create something new and start a new trend.

Early adopters identify trends early and like to be associated with the start

of a trend. Early majority follow the trends set by the early adopters.

Late majority follow the trends that have been tested by the early majority.

Laggards are the last group of people to buy a product or brand: indeed they

may never buy it.

Marketers use socio-economic categories to describe segments.

Social grade Social status Occupation of head of household or chief income earner
A upper middle class higher managerial, administrative or professional  
В middle class intermediate managerial, administrative or professional
Cl lower middle class junior managerial, administrative or professional; clerical
C2 skilled working class skilled manual workers
D working class semi-skilled and unskilled manual workers
E those at lowest level of subsistence state pensioners or widows (no other earner); casual or lowest grade workers

Note: The head of household is usually the person in the household with the highest income.

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