PRICING

PRICING
PRICING
PRICING
PRICING
 WHAT IS PRICING?

Meaning and concept of Price:

 Price refers to the sum of values that consumers exchange for the benefit of
having or using the product.
Normally expressed in monetary terms.
Pricing occupies an important place in the marketing of goods and services .
No product can be launched without a price tag or atleast some guidelines for
pricing.
Pricing is often used as a regulator of the demand for a product.If the price of a
product is increased,it's demand comes down and vice versa.
 FACTORS AFFECTING PRICE DETERMINATION
1.)PRODUCT COST-
The most important factor affecting the price of a product is the product cost.
The same principle also applies in case of services. The product cost will be
inclusive of the cost of production, the distribution costs and the selling and
promotion costs. This cost will act as a benchmark for setting the price.
3 types of costs of a company-
1.) Fixed Cost-They have no relation to the level of activity or production of the
company. Even if there is no production of goods these costs will occur.
2.)Variable Cost- These are the costs that vary in direct proportion to the
production levels of an entity. Higher the production, higher the cost and vice
versa.
3.)Semi-Variable Costs: These costs also vary with the production levels.
But they are not directly proportional.
2.)UTILITY AND DEMAND-
Utility provided by the product and the demand of a product set the
upper limit of price that a buyer would be willing to pay for a product.
Buyers pay to the point where the utility of the demand is more than
or eequal to the utility derived from it.
Law of demand = consumers purchase more at a lesser price.
• Elasticity of demand = responsiveness of demand to change in prices
of a product.
Demand = elastic if a small change in price results in a large change in
quantity demanded.
• If demand is inelastic, firm can fix higher prices.
 3.) EXTENT OF COMPETETION IN THE MARKET-
One factor that affects price termination is the price the competition
charges for their product
Not only their price but their products, its features and other factors
like distribution channel, promotions etc.
In a market, with free competition, the prices have to be very
competitive.
You cannot risk pricing yourself out of the market. But on the other
hand, if your products have special r additional features this must be
reflected in the price.
4.)GOVERMENT AND LEGAL REGULATIONS-
The government has a duty to protect its citizens from unfair practices
and pricing.
 So it may impose certain laws and regulations with regards to the pricing of
a product.
It can even regulate the prices of goods that it considers essential goods.
5.)PRICING OBJECTIVES-
Pricing objectives are another important factor affecting the fixation of the
price of a product or service.
Apart from price maximization,the pricing objectives of a firm may be
included.
A.)OBTAINING MARKET SHARE LEADERSHIP- If a firm's objective is to obtain
larger shares in the market,it will keep the price of it's products at a lower
level,so that greater number of people are attracted to purchase the products.
B.)ATTAINING PRODUCT QUALITY RELATIONSHIP- In this case,normally
higher prices are charged to cover high cost of research and development.
C.)SURVIVING IN A COMPETITIVE MARKET-If a firm is facing difficulties surviving
in the market because of intense competetion or introduction of a more effecient
substitute by a competitor.
6.)MARKETING METHODS USED-
Price is also affected by other elements of marketing such as distrubution system,
quality of salesmen employed,quality and amount of advertising,sales promotion
efforts,the type of packaging, product differentiation,credit facility, and customer
service provided.
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BY JAHNVI DUBEY