Product, price, place and promotion should support the same target and position. A high price is harder to sustain when the quality, service or accessibility conflicts with the intended offer.
Evaluate a mix in context rather than declaring one price or feature universally best. Customer research, costs, available capacity and rival offers inform a coherent choice.
Product
Product decisions cover features, quality, design, branding, packaging and after-sales support. The design mix balances function, aesthetics and cost; added features may increase cost without enough customer benefit.
A USP is a distinctive selling benefit relevant to buyers. Brand identity and customer associations can support trust or loyalty, but performance matters. Packaging can protect, inform, aid use and promote; consider cost and environmental trade-offs.
Balance the design mix
Product life cycle
The product life cycle is a descriptive model: development normally has no sales of the new product; introduction brings launch; growth has rising sales; maturity has slower or level sales; decline has falling sales. It does not fix durations, guarantee every stage or show profit directly.
Extension strategies may change packaging or features, find new uses or markets, or alter promotion and price. Assess expected contribution and cost rather than assuming an update pays for itself. A product portfolio can balance offers at different stages, but the life cycle alone cannot decide the investment.
Life-cycle sales patterns
Price
Cost-plus adds a mark-up to a stated unit cost; competitive pricing references rivals; skimming starts relatively high, penetration relatively low; psychological pricing aims to influence perceptions; promotional pricing is temporary; loss leaders aim to encourage additional purchases. Each approach has conditions and risks.
Fictional full cost £10 plus 25% mark-up gives £12.50. The £2.50 surplus is 20% of the price. State which costs are included: an allocation based on expected output may not recover all costs if actual volume differs. Neither price nor unit mark-up guarantees overall profit.
A fictional cost-plus calculation
Factors affecting price
Costs, competitor offers, customer willingness to pay, brand image, target market, life-cycle stage and economic conditions can affect price. Price must fit both the positioning and feasible demand, not simply copy the cheapest rival.
For a differentiated new smartphone, skimming may work if enough buyers value the innovation; penetration may help trial but strain contribution. Research the audience and rival alternatives, compare expected volume and cost, and explain why the chosen strategy fits this case.
Evidence for a smartphone price
Price and demand
Other factors unchanged, a higher price usually reduces quantity demanded. A price movement differs from a shift in demand caused by income, tastes or another factor. Revenue is price × quantity sold; a higher price need not raise revenue or profit.
Extension where required: PED compares percentage quantity response with percentage price change. Price +10% with quantity −20% gives −2, elastic by magnitude; quantity −5% gives −0.5, inelastic. With price £10 → £11 and quantity 100 → 80, revenue £1,000 → £880; with quantity 95 it becomes £1,045. These are fictional teaching changes, not market estimates.
Price responses: fictional examples
Product portfolio: the Boston matrix
The Boston matrix uses relative market share and market growth. High share/high growth is a star; high share/low growth a cash cow; low share/high growth a question mark; low share/low growth a dog. These categories differ from the sales-over-time stages of a life cycle.
The model can structure discussion about investment, support or withdrawal, but category labels alone do not establish actual profit, cash generation or the right decision. Consider competition, costs, links between products and the value to customers. Check the required board terminology and coverage.
Boston matrix categories
幻灯片
Sign up free to view the lesson slides
Step through every slide for this topic — plus flashcards and revision notes — with a free account.
