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Price

The price element of the marketing mix refers to an organisation’s pricing policies which 

are used to define 

pricing models

 and, of course, to set prices for products and services. 

The Internet has dramatic implications for pricing in many sectors and there is a lot of lit-

erature in this area. Baker et al. (2001) and more recently Xing et al. (2006) have noted two 

approaches that have been commonly adopted for pricing on the Internet. Start-up com-

panies have tended to use low prices to gain a customer base, while many existing compa-

nies have transferred their existing prices to the web. However, Case study 8.1 showed how 

easyJet discounted online prices in an effort to meet its objectives of online revenue contri-

bution. In this case, price reduction was possible because of the lower overhead of process-

ing a customer transaction online in comparison with on the phone. Similarly, to acquire 

customers online booksellers may decide to offer a discount of 50% on the top 25  best-  selling 

books in each category, for which no profit is made, but offer a relatively small discount on 

the less popular books of the long tail to give a profit margin.

The main implications of the Internet for the Price aspect of the mix are as follows.