Quite simply, the marketing mix involves getting the right product, in the right place, at the right price...and making sure people know about it. For Diesel, the traditional 4Ps of the marketing mix are all wrapped up in a passion for what it does. The people who work for the organisation have a passion for developing the brand so that the product range oozes a particular lifestyle, that of entertainment and experimental experiences. As far as price is concerned, a premium pricing model is used by Diesel. Not only does this reflect the high quality of its products, it also reflects the premium, dynamic lifestyle approach of the organisation.
Pricing products is a balancing act. Get the price too high and customers won't buy. Get the price too low and firms won't cover their costs or make a profit. In the music industry, radical changes to the pricing of albums has been recommended by Rob Dickins, formerly of Warner Music. He suggests that by charging as little as one pound for an album could help to reduce piracy and increase sales hugely. The theory behind this is that by making prices so small, customers"would not think twice about buying an album on impulse and the resulting sales boost would make up for the price drop." Experiments with dropping the price of music have taken place in the past. For instance, Prince gave his album Planet Earth away in a Sunday newspaper. Effectively a loss leader, this created enough interest in the music that he sold out 21 nights at the O2 Arena. (BBC 15th October 2010)
- What are the 4 Ps of the marketing mix?
- Other than loss leaders, explain two other pricing strategies that could be adopted by firms.
- Discuss whether the music industry should drop the price of albums to as little as one pound.
Answers to questions
- What are the 4 Ps of the marketing mix? - Product - Price - Place - Promotion
- Other than loss leaders, explain two other pricing strategies that could be used by firms. Answers may include: Cost-plus pricing: adding an amount or percentage onto the cost of making a product. Penetration pricing: pricing a product low initially to gain brand loyalty, then increasing the price. Often used with collectables magazines. Skimming: pricing products high to start with to earn as much profit as possible from early adopters, then dropping price later. Often used with technological items. Competitor pricing: charging a similar price to direct competitors. Differential pricing: charging a different price for the same product e.g. train fares are cheaper for children than adults. Psychological pricing: pricing a product so it looks cheaper than it actually is e.g. £39.99.
- Discuss whether the music industry should drop the price of albums to as little as one pound. On one hand: Pricing may need to be addressed as sales have declined, in part due to piracy, and changing pricing may help to combat this. If price is incorrect, it doesn't matter if the product, place and promotion are correct: the customers will not buy. If sales do increase as a result of dropping the prices, this may safeguard the future of the music industry. However: Unless the music is what people want (product) then the price will not matter because people are unlikely to buy it anyway. Other actions should be taken to reduce piracy instead of dropping the prices. This could include greater penalties for those found guilty of piracy. It will depend on: The cost to produce an album. If this is greater than a pound then the price reduction will result in losses. How much sales would increase by dropping prices to one pound. Whether people are aware of the price cuts.