Promotion and Pricing Strategies (Edexcel 9BS0 1.3.2–1.3.3)
Promotion tells customers why to buy; pricing decides whether the sale earns a profit. This topic covers the main promotion methods, the shift to social and viral marketing, and the full menu of Edexcel pricing strategies with the factors that determine which one fits.
Promotion methods and the shift to social media
Promotion includes advertising, sales promotions (discounts, loyalty schemes, BOGOF), public relations, sponsorship, direct marketing and personal selling. The right blend depends on the target market, the budget and where customers spend attention. Spending has shifted heavily online because digital promotion is measurable, targeted and cheap relative to television.
Viral and social media marketing use customers themselves to spread the message. Gymshark built a business with roughly £600m of revenue in its 2024 financial year largely through influencer partnerships and community events rather than paid TV campaigns. Loyalty-based sales promotion is equally powerful in groceries: Tesco's Clubcard Prices give lower prices to members, which both promotes and gathers data for further targeting.
- Emotional branding suits image-led products.
- Sales promotions lift volume quickly but can cheapen a brand if repeated.
- PR is low cost but hard to control.
Pricing strategies on the Edexcel specification
You must know six strategies. Cost-plus adds a mark-up to unit cost — simple, but it ignores demand. Price skimming launches high to harvest early adopters, then lowers price; it suits genuinely new products with inelastic early demand. Penetration pricing launches low to win share fast, then edges upwards — streaming services entering the UK used this. Predatory pricing deliberately prices below cost to drive rivals out and is illegal under UK competition law. Competitive pricing matches the going rate, as Tesco does when it price-matches Aldi on hundreds of essentials. Psychological pricing uses price points such as £9.99 to make prices feel lower.
Subscription repricing shows strategy in action: in September 2024 Pret a Manger replaced its £30-a-month 'free drinks' Club Pret with a £10-a-month half-price version after the original proved too generous to sustain — a live lesson in matching price to cost and demand.
Choosing a strategy and changing it over time
Four factors steer the choice. First, costs and the need for profit: price must at least cover unit cost eventually, whatever the launch tactic. Second, the level of competition: crowded markets with close substitutes force competitive pricing, while a differentiated product earns pricing freedom. Third, price elasticity of demand: cutting price only raises revenue when demand is price elastic, so strong brands with loyal customers gain little from discounting. Fourth, the stage of the product life cycle: skimming suits introduction, competitive pricing suits maturity, and clearance pricing suits decline.
Strategies also shift with positioning. BrewDog began as a premium craft brand but by 2024 faced supermarket own-label craft beers, forcing sharper price competition and contributing to the closure of around ten UK bars that year as costs rose. The exam skill is matching the strategy to the product's elasticity, brand strength and competitive context — never recommending a price change without discussing how rivals and customers will react.
Key terms
Practice questions
Explain one reason why penetration pricing might suit a business launching a new snack product into UK supermarkets. [4 marks]
Model answer guidance: Snacks are a crowded market with many close substitutes, so demand for a new entrant is likely to be price elastic. A low launch price encourages trial, wins shelf-space credibility and builds volume quickly. Once repeat purchase is established, the price can rise gradually towards the market level. The main cost is early margin sacrificed, which the business accepts to gain share.
Explain one risk to a business of relying heavily on sales promotions such as discounts. [4 marks]
Model answer guidance: Frequent discounting trains customers to wait for the next offer rather than pay full price. This lowers average revenue per unit and can permanently damage the brand's premium image. Rivals can also match discounts quickly, so any sales gain may be temporary while the margin loss is real. Over time the business may find demand at full price has fallen.
Discuss whether social media promotion is more effective than traditional advertising for a clothing brand targeting under-25s. [8 marks]
Model answer guidance: Social media reaches under-25s where they already spend attention, allows precise targeting and turns customers into promoters — the route Gymshark used to reach around £600m of revenue by 2024 with minimal traditional advertising. It is also cheaper and measurable, so budgets adjust in real time. However, content can misfire publicly, influencer credibility is fragile, and reach depends on platform algorithms the brand does not control. For this audience social media is usually more effective, but the judgement depends on having authentic content and a community, not just adverts moved online.
Assess whether Pret a Manger was right to reprice its Club Pret subscription in 2024. [10 marks]
Model answer guidance: The original £30 'free drinks' subscription attracted heavy users whose consumption cost more than the fee, so repricing to £10 for half-price drinks cut losses on every extreme user and kept a loyalty incentive. It also gathered the scheme closer to actual demand elasticity — customers valued discounts, not unlimited volume. The risk was alienating subscribers and losing the footfall the offer created, and some customers did cancel publicly. On balance the change was right because a promotion that loses money per use grows losses as it succeeds; the real debate is whether a gentler transition would have protected goodwill better.
Evaluate whether price is the most important factor in the promotional and pricing decisions of a business operating in a highly competitive market. [20 marks]
Model answer guidance: In highly competitive markets, price visibly drives switching, and competitive pricing is often unavoidable — Tesco price-matching Aldi shows even the market leader conceding that essentials must hit the going rate. Price also interacts with elasticity: with close substitutes, demand is elastic, so being undercut costs volume rapidly. However, competing on price alone erodes margins for everyone, which is why differentiation through branding, loyalty schemes and service exists: Clubcard Prices tie discounts to data and retention rather than blanket cheapness. A business with a genuine USP can hold prices above rivals even in fierce markets. The strongest judgement is conditional: price is the most important factor only where differentiation is weak; the smarter long-term investment is building reasons why price comparisons matter less.
Examiner tips
- Match every pricing recommendation to price elasticity of demand — examiners specifically reward that link at A Level.
- Know that predatory pricing is illegal in the UK; naming that in an evaluation of aggressive pricing shows precise knowledge.
- For promotion questions, state the target segment first; the 'best' method is impossible to judge without knowing who it must reach.
In The Business School simulation your students make these exact decisions in a live market against rival firms — every choice mapped to the specification. Free teacher demo, no installs, students join with a PIN.