C18FM – Fundamentals of Marketing

Feedback for Tutorial prep work

Price

Below you will find a guide to how we would normally assess answers to this week’s essay/exam style
question. It is hoped that this will help you to structure future revision efforts. The question was:

‘Discuss pricing as a vehicle for effective marketing’

Read these notes in conjunction with your answers to the set ‘boxed’ questions. The boxed questions are not
definitive, but direct you to relevant knowledge bases (there are others you can source!)

An explanation of how your mark would be calculated

The question draws upon both the recommended chapter reading and complimentary information provided in
lectures and additional reading. To gain at least 50% for this question, you would need to adequately define
price; be able to identify and describe the key pricing related concepts (such as estimates of demand,
types of costs; strategies and tactics; etc.), and, further, be able to identify and describe the value this
understanding. Answers that offer a more complete account (for instance, noting the importance of
associated concepts (e.g. Expectation; deception; environment; etc.) with more detailed (though concise)
descriptions will attract higher grading. Solomon et al offer a six-stage process model to help

We would expect you to be able to detail key elements and relate this knowledge to any context provided in
the question. For this question we note ‘effective marketing’, others may ask you to think about sectors (e.g.
fashion/grocery, etc.) or consumer groups (e.g. children, etc.). The chapter reading provides a useful
framework for a concise exposition of ‘price’ and supporting concepts, whilst the additional reading offers
insights into the application of concepts within various contexts. Better answers will look to discuss the
effects of such perspectives within this process. This is a means of explaining (and so showing your
knowledge of) the various arguments that support the use (or not) of such approaches within marketing. So,
it is not enough to know the elements of pricing in isolation – you need to understand the value of this process
to both academic and practitioner audiences. Higher grades are naturally given to answers that attempt to
relate knowledge and understanding directly to this specific need, rather than to those that attempt to
paraphrase standard/generic solutions from the set text, with little or no reference to available contexts. These
aspects were all asked for in the question (‘discuss’/’value’). Higher grades are also awarded to those that
indicate they can apply the concepts through their own examples (anecdotal & empirical) to support their
discussion. Evidence of reading beyond that given on the course is rewarded.

Less than 40%: Answers that inaccurately (or incompletely) list and/or describe the elements of
pricing decision making and other factors will probably receive a grade less than 40%. F

Band D - (40 TO 49%): Answers that simply list and/or describe some of these approaches and make
little or no attempt to discuss their relative value/effectiveness will probably receive a grade in the 40's. D

Band C - (50 TO 59%): Answers that describe an inclusive range of issues and describe the more
generic potential value of such understanding (rather than discussing these implicitly or explicitly within C
the context of the question) will probably be graded in the 50's.
Band B - (60 to 69%): Answers that discuss the relative effectiveness of a range of issues, and provide
insights relevant to this context will probably be graded in the 60's. Answers that also bring in relevant
reference material and discuss the importance of supporting issues will probably be graded to the higher B
end of this band. (It is important that you don’t simply discuss one exemplar, but combine your ideas (e.g.
use other contexts to show how theories/practices may be context specific and so of more limited value).
Band A - (70+%): Here, answers will be expected to discuss all the issues at Grade B, with particular
attention given to the support of your argument through evidence (theoretical and/or empirical). Further,
perhaps other short examples and/or references have been added beyond those given on the course to A
support your discussion (indicating to us that you really understand and can apply the concepts and/or
have gained wider knowledge). The presentation of knowledge may be innovative and interesting.
These answers will probably receive a mark in excess of 70% and merit at least a trip to the shops where
you will be able to complain about the price then be seduced by a 3 for 2 offer
Here are some guideline answers for the prep questions. These are NOT DEFINITIVE. They do not replace your
own, but merely give you a flavour of the way I was thinking about these questions.

Provide at least one definition of ‘pricing’ … ?

‘ … what the company gets back in return for all the effort that is put into producing and marketing the product’ ( Jobber and
Ellis-Chadwick, 2016)
‘...the value that customers give up or exchange to obtain a desired product’ (Solomon et al, 2013, p376).

Do you agree? Is it about relinquishing/giving up; is it about value; is it about obtaining products; is it about ‘getting back’;
should ‘desire’ be in here? Etc…be critical Do you have alternative definitions?

Jobber and Ellis-Chadwick note that price is the profit centre of marketing and that product, promotion and place are cost
centres – do you agree? It seems sensible and ‘obvious’ that pricing is a core driver of returns but conceptually this may not
always stack up! Pricing is not free! It costs resource to decide on pricing strategies and to operationalise pricing; it costs to
physically price offerings. Some promotion is absolutely free. Pricing may attract additional direct and indirect costs (e.g.
through tariff thresholds; lost custom; etc.). Some pricing is not financial/economic…see psychological pricing, etc. So, just
because the textbook says it is true – doesn’t make it true challenge, always.

Identify and describe 4 types of pricing objective and offer an example to illustrate each objective.
Profit – targeted profit growth or margin. Profit primary importance – perhaps product has short ‘life’; perhaps organisation
requires external investment and needs to justify this through ‘successful profit generation.
Competitive Effect – deliberate attempts to affect competitors’ offerings…e.g. low-fare flights.
Customer Satisfaction – adding value … e.g. augmented service offerings /upgrades/ extras, etc.
Image Enhancement – direct link between price and status … e.g. high end goods are expected to have high prices. What about
low end goods, does a low price for a good quality product make good value or compromise the image effects?

Different textbooks may have different ways of presenting these ideas, we are just looking for you to have a range of these
ideas in your toolkit you could, of course, make up your own objectives (but justify them)

Draw demand curves for normal and luxury products and (briefly) explain why they are different
I’m sure that you’ve all found these safely in the text book(s).
Consider the usefulness of these curves. Consider the effects of using standardised approaches to the measurement of
demand and the problems of assuming 'perfect' data… there is an implicit assumption of patterns and trends in this approach

Define ‘price elasticity of demand’ and write down the formula for calculating this measure
Price elasticity of demand is a measure of the sensitivity of customers to changes in price.
Price elasticity of demand = Percentage change in quantity / Percentage change in price.

Define ‘fixed’ and ‘variable’ costs and provide an example of each

Fixed costs are costs that do not vary with the number of units produced (e.g. rent; utility costs; capital assets)
Variable costs are ‘per-unit’ costs of production that will fluctuate depending upon the number of units produced.

Identify 4 types of pricing strategy and provide examples for each

Demand-based pricing relies upon an estimate of volume or quantity of units that a firm could sell in different markets at
different prices
Competition-based pricing – taking competitor prices as guide – e.g. price leadership strategies will attempt to drive prices up
or down within markets.
Customer Needs pricing – emphasising value. Need to convince customer that price is true measure of value – e.g. Everyday low
pricing strategies (EDLP)
New Product pricing sets basis for success or failure of product…e.g. do you go in high and limits sales but recoup costs
(skimming) or low and build broad customer base quickly at expense of profit (penetration)?

Again, different textbooks may have different ways of presenting these ideas, we are just looking for you to have a range of
these ideas in your toolkit some will interchange pricing objectives with pricing strategies

How might psychology be used by consumers and marketers within pricing decision-making?
By creating differential perceptions of value through price…e.g. odd-even pricing; whole pound pricing; price lining (offering
products at different (evenly spread) price points. Remember how consumers use price as a heuristic to other dimensional
values such as quality, difference, exclusivity, etc.
Recall an occasion where you experienced deceptive pricing practice and explain how it made you feel
I’m sure that you will all appreciate this opportunity for cathartic experience

Explore the value/usefulness of understanding Pricing:

(This question is a chance for you to collect some insights that will help you to provide a more critical answer in
your examination (e.g. think of useful and less useful elements, explain why you think they are more or less useful,
give examples…this then becomes a great crib sheet for your revision).

Again, look to demonstrate your deeper thinking about these issues. We would expect you to be able to demonstrate awareness of theories by
identifying theories, concepts, models etc.; offering a description of these ideas and showing examples. More useful would be to extend this by
exploring the usefulness of the theories. See my essay tips sheet One way is to show how theories seek to explain behaviour. Where
explanations are similar, discuss how the theory adds value to understanding; where different, do the same theories should aid understanding
and hopefully offer an ideal truth…lots of theories may work against this aim…or help, you decide One clear difference may lie in whether
consumers look for value or price when making decisions and this lies at the heart of the course.

Most of you will now be able to identify key ideas within Price, for instance Solomon et al build understanding within six stages of
implementation.…this is a great place to start challenging existing approaches…where concepts are useful and how we recognise this
usefulness…where they are less useful, and how do we recognise this…if less useful, how else might we conceptualise such processes? For
instance, at a basic level, we have lots of conceptualisations of ‘price’ – are these valid and useful. Many pricing concepts seem to be ‘common
sense’ and are accepted readily. Many concepts derive from basic economic theory – do you agree with them. Are these theories useful or
merely convenient? What is the effect upon the market of an acceptance of standardised concepts? What are the limits of these processes
and how does this affect our ability to be more effective? Etc…

Keep asking, keep challenging and ensure that when you answer questions in exams, that you bolt down the basics of showing awareness and
leave lots of room to explore deeper questions on the topic … questions that you may define … … have fun

Hope these answers help you

Keep them safe with your own as a revision aid