The price or pricing policy is the second “P” in McCarthy’s marketing mix. The pricing policy is not just about the selling price of a product. The price in relation to the target group is also being considered. Higher prices often mean a richer, but smaller target group. Lower prices often mean a poorer, but larger target group. Payment methods, payment terms and discounts are also covered by this marketing tool. When determining the “P” price, the following questions may be asked:
What is the price segment we want to be in?
What is the price we ask for our product?
Do we offer fixed or recommended prices?
Which payment methods are possible, such as cash, pin or invoice?
Which payment conditions apply, such as installment and prepay or afterwards?
Do we give discounts to customers?
Do we have a quantity discount?
Do we offer promotional prices?
There are also many more questions to think of with the “P” of price. This is how optician Specsavers thinks about the price in relation to its competition: “If we sell glasses below cost for a long time, can we eliminate a competitor like Hans Anders?” This form of competition is also known as price war or cutthroat competition.
The frequency with which “bargains” are offered is also a question that is asked when determining the pricing policy. At companies such as Carpet Right, Gamma and Kruidvat it sometimes seems as if their range mainly consists of offers. On the other hand, companies such as Apple and Mercedes hardly do ‘bargains’. These examples of the “P” of price are closely related to the image of the “P” of product and the “P” of promotion. Therefore, the Ps cannot be viewed separately. It is no coincidence that McCarthy speaks of a mix of marketing instruments in his marketing mix.