Principles of marketing/PMKT101/Optimizing the Marketing Mix/Price

The second P is Pricing.

Pricing is a difficult issue because most products will sell at some volume at just about any price level. Some customers are willing to pay almost any price for a specific product, but how many of those customers exist?

Marketers could consider a value priced model, but this may make the price so low that there is no way to make a profit on it.

A common pricing strategy is known as "the loss leader,” which involves selling one product below the cost to manufacture it to get it into the hands of the customers. (The business makes up for the "loss leader", by selling other products that are complementary, and often have a higher profit margin.) This occurs in many types of businesses - from grocery stores to video game suppliers. For example, console system manufacturers like Sony and Nintendo will price the system below the cost to manufacture it. As consumers adopt the systems due to the attractive price point, the manufacturer makes up for the initial loss on the system with sales of additional and proprietary accessories and video games.