The marketing mix is a marketing tool that describes the 4P’s, which are the four elements of the marketing strategy. These elements include product, price, place and promotion. The varying proportions of these elements allow marketers to make changes in how they market their product. This allows them to adjust to the current environment they operate in by maximizing profits while satisfying customer needs and desires through creating effective branding strategies. There are 7 types of marketing mixes (also called “advertising strategies”) used during product promotion: penetration pricing strategy, skimming pricing strategy, discriminatory pricing policy, rebates, coupons and two-part tariffs.
1. Penetration Pricing Strategy
In this case marketers choose a low price point from the beginning with no intention for change. This strategy is used to attract early adopters and people who are willing to try a new product at a low price. The idea behind this is that as the penetration of the market increases, it will help marketers lower their costs and increase sales volume. Once the market has been penetrated and customers have begun to trust your brand, then you can begin increasing prices and move into other marketing strategies such as competitive pricing where you compete on price with several brands (discriminatory pricing).
2. Skimming Pricing Strategy
This strategy works best when demand for a product or service is forecasted to be high but very short-lived. In order for this type of pricing to work, you must have a strong marketing plan to take advantage of the short period that prices are high. A skimming pricing strategy involves increasing your price gradually over time, thus creating an illusion of being out of reach for awhile. This helps companies achieve two goals. First goal is to increase revenue as quickly as possible before the product’s decline in value occurs after increased competition enters the market or expiration of patents/copyrights which allows competitors free access to your products without having to pay royalties; Secondly, it is used by marketers to make consumers think their product has unique qualities and is worth paying more for (by fooling customers into believing they will miss out if they don’t purchase right now).
3. Price Discrimination
Price discrimination is a strategy that helps marketers charge consumers different prices for the same product. This may sound unethical to many, however, pricing activities involve using the information about spending habits and needs of different price segments in order to attain higher profits. In other words, it addresses the differences among consumers from various strata who have different willingness to pay for a product or service. Price discrimination strategies can be implemented by either increasing prices of your products or services within certain defined geographic regions (geocentric approach) or according to the “psychological profiles” of customers based on their age group, gender and other demographic factors (psychocentric approach). There are several types of price discrimination: first-degree price discrimination charges each customer depending on their willingness to pay, or what economists call “marginal benefit of product.” Second-degree price discrimination charges customers different prices depending on the number of products purchased. This is done by charging a lower unit price for bulk purchases and higher unit prices for smaller quantities (for example: family packs). Third-degree price discrimination charges consumers different prices based on how sensitive they are to change in product price.
4. Discounts and concessions
Marketers use discounts as an incentive to encourage purchasing decisions that will result in increased revenue. A discount is used as a promise of future savings after purchase such as buy one get one free deals (BOGO) or two-for-one offers where you make your initial purchase at the regular price and receive a second at half. Marketers use discounts to encourage consumers to buy additional products, increase the frequency of their purchase and create loyalty. Price concessions are price reductions which help keep customers loyal, give them an incentive to return and maintain business momentum.
5. Psychological pricing
There is no industry standard on how marketers should price their products or services; instead there are numerous strategies that can be implemented depending on your business goals, customer demographics and market landscape. Furthermore, prices need to be flexible in order to meet changing economic conditions; therefore, it’s important for marketers to take into consideration psychological pricing factors including odd-number pricing (prices that end with 1, 3 or 7), sale prices that end with “9” (known as clearance or discount prices) and using the terms “sale,” “discount” or “clearance.” One of the most popular psychological pricing strategies is odd-number pricing. It works on the principle that we tend to perceive items as cheaper when their price ends with nine or five and, conversely, we associate rounded up numbers with higher costs. For example: $19.99 sounds 19.9% less than $20 and $49 seems closer to $50 than $45 despite being a smaller amount of money overall.
6. Psychological Pricing Strategies
There are several ways marketers can use specific words to promote sales, generate interest and boost revenues from individual customers or target groups by using key words in order to make an offer more attractive, thus increasing the likelihood of generating a sale. For example, the word “free,” is one of the most powerful sales promotion tools and can be used to stimulate sales in many ways: loss-leader pricing (a product offered below cost in order to generate interest for other products), coupons and vouchers. Promotions such as “50% off” or “$10 off” are designed to create urgency by reducing prices on existing inventory for a limited time period. Therefore, it’s essential that these words are used strategically across marketing channels so that they demonstrate value and benefit over several touch points before encouraging consumers to act.
7 . Psychological Pricing Channels
Psychological pricing strategies can be implemented across different digital channels including search advertising , email campaigns, display advertising on websites and mobile, social media campaigns and bots.
There are a number of ways marketers can use psychological pricing on search which include:
Headline Search Ads : Lure consumers in with discounts. For example, “10% off all shoes.”
Product Listing Ads : Feature prominent prices that end with 9’s or 5’s to make them look cheaper. For example, “$49” rather than “$50.” Marketers should also use price extensions . In the U.S., where it is more widely used across search advertising platforms, these allow up to six additional digits beyond the advertised price for advertisers to list information such as tax and shipping costs alongside product prices.
8 . Offers and Coupons
Psychological pricing strategies can be implemented across different digital channels including email campaigns, display advertising on websites and mobile, social media campaigns and bots.
One of the most effective strategies marketers can use to encourage consumers to buy products or services is discounts. Coupons are a popular way for marketers to position offers that customers find irresistible because they give them the chance to pay less than what was originally paid by another consumer making it a win-win situation! Marketers should also combine coupons with incentives as this helps build stronger connections between brands and their customers. For example, Gatorade has been combining online games with their coupon offers via email which has helped increase redemption rates by 888% .
Generally speaking, there are five types of coupon offers: money off (coupon value equals the price of the item), percentage off (coupon value is a certain % of the total cost), free product (coupon is for a free product, typically sent with qualifying purchase), buy one get one free and two for one.
Example: “20% off all shoes”
In order to stimulate sales, marketers can also use seasonal promotions such as Black Friday or Cyber Monday which are used to generate interest before key shopping periods, bringing traffic and revenues back up to normal levels. Although prices may not actually be discounted these days, retailers tend to advertise them as shopping events which encourages consumers to visit their website or store during specific time frames.