Marketing Aptitude - Pricing
Category : Banking
Introduction
Pricing is the most crucial aspect of marketing management since it has significant economic and social implications. Price is the amount of money and/or other item with utility needed to acquire a product. The businessmen want to get the highest possible price for the products, he sells whereas the consumer wishes to pay the least possible price for his purchases.
Factors Affecting Pricing Decisions
Pricing decisions can be affected by two factors which are as follows
Sometimes companies offer different types of discount to boost the sales.
They are
(1) Cash discount
(2) Seasonal discount
(3) Trade discount
(4) Quantity discount
Most companies will adjust their list price and give discounts and allowances for early payment, volume purchases and off-season buying.
Types of Pricing Policies
Pricing policies can be categorised as
It is a marketing approach that permits different rates to be extended to different customers for the same goods or services. This pricing policy is applicable in retail trade.
It is the pricing strategy in which the same price is offered to every customer who purchases the product under the same conditions. A one price policy may also mean that prices are set and cannot be negotiated by customers.
Different Ways of Price Policy
Different ways of price policy are as follows
Process of Pricing
Steps in setting a pricing policy are
Step 1 Selecting the pricing objective.
Step 2 Determining demand.
Step 3 Estimating costs.
Step 4 Analysing competitors costs, prices and offers.
Step 5 Selecting a pricing method.
Step 6 Selecting the final price.
Methods of Pricing
Methods of pricing are as follows
Under this method, set the price at production cost, including both cost of good and fixed costs at current volume, plus a certain profit margin.
\[\text{Per}\,\,\text{Unit}\,\,\text{Cost=}\frac{\text{Total}\,\,\text{Cost}}{\text{Total}\,\text{Production Cost}}\]
Under this method, variable costs and semi-fixed costs are added in price of a product then the product will be purchased.
Under this method, a product is widely promoted and its introductary price is kept comparatively low. The strategy aims to encourage comsumers to switch to the new product because of the lower price.
It is not related with the volume of production, e.g., interest, tax, rent, salaries, etc.
It is related with the volume of production. e.g., wages, fuel, commission, etc.
Under this method, fixed amount of the sales value is added to the per unit cost of the product.
\[\text{Sales Value=}\frac{\text{Average}\,\,\text{Cost}\,\,\text{Per}\,\text{Unit}}{\text{ }\!\!%\!\!\text{ }\,\text{of}\,\text{Anticipated}\,\text{Mark-up}}\]
Some Important Terms Barter
The oldest form of exchange trading of products is known as barter, the buyer and seller directly exchange goods, with no money and no third party involved,
It is a pricing or marketing strategy based on the theory that certain prices have a psychological impact on the consumer.
Items that are perceived as being very high quality and thus warrant a higher price based on the added value that the purchaser feels, he will obtain from the product.
It is a term used in accounting for assets and property that cannot easily be converted into cash. Building, real estate, equipment and furniture are good examples of fixed assets.
A type of market that features the traits of a monopoly like high price levels, supply constraints or excessive barriers to entry is known as monopoly market.
This is used by a business firm that wants to price their products at or lower than their competition's price.
It occurs when a company penetrates a market in which current or similar products already exist. The best way to achieve this by gaining competitor's customers.
It is the amount by which a manufacturer reduces the retail price of a product when it sells to a reseller, rather than to the end customer. Trade discount is given to a purchaser for performing activities such as transporting, storing and selling.
They are defined as expenses that do not change as a function of the activity of a business, within the relevant period, e.g., a retailer must pay rent and utility bills irrespective of sales,
Sometimes prices are varied by season, day or hour e.g., commercial airlines charge higher fares during the festival season in India.
Company fixes different prices for their products depending on the place from where consumer buys it, The price of the same cold drinks varies in a fine restaurant, a fast food restaurant or in an airport.
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