Price is an amount or value required to purchase a definite goods or services.
Pricing
is a process of determining consideration given in exchange for transfer of
ownership of the products. It can be influence by various Internal and External
factors.
The
Price Mix, also known as the pricing strategy, is one of the four
elements of the marketing mix. It refers to the set of activities and
strategies that a company uses to determine the price of its products or
services. The pricing strategy is an important part of a company's marketing
mix as it affects both the perceived value of the product and the company's
profitability.
The
price mix can include a range of pricing strategies, including cost-plus
pricing, value-based pricing, penetration pricing, and skimming pricing.
Cost-plus pricing involves setting a price based on the cost of production plus
a markup for profit. Value-based pricing involves setting a price based on the
perceived value of the product to the customer. Penetration pricing involves
setting a low initial price to capture market share, while skimming pricing
involves setting a high initial price and gradually lowering it over time.
Other
factors that can influence the price mix include competitive pricing, price
elasticity, and discounts or promotions. A company's pricing strategy should
take into account its overall business strategy, target market, and the value
that its product or service provides to customers. The goal of the price mix is
to find the optimal balance between pricing and profitability, while meeting
the needs and expectations of the target market.
Factors
Influence or Determine the Pricing
Internal Factors
- Organizational considerations
- Marketing Mix Strategies
- Product Uniqueness
- Cost of Production
- Stages of Product Life Cycle
- Pricing Objectives
- Depth of Distribution channels
External
Factors
- Product Supply and Demand
- Degree of Competition
- Economic Situation
- Government Regulations
- Ethical Consideration
- Suppliers
- Consumer Behaviors
Pricing
Policies
Refers
to the policies or the methods of determining the prices for a company products
or services based on the costs of production and provision with a margin of
profit with the following objectives. Such as:
- Profit Maximization
- Price Stabilization
- Achieve high Market Share
- Help for survival of the organization
- Cash Flow Management
- Competition
- Prestige and Image of the Company
- Return on Investment
- Ethical concern
Methods
or Policies of Pricing
Based
on Consumer
- Odd-even
Pricing – Under this method lower the rounded – up price of a
product. For Ex: If the T-Shirt is Rs. 250 then the marketer would probably
reduce it to Rs. 249.50 because most of the customer think this price is much
cheaper.
- Psychological
Pricing – Under this method marketer used the customer’s
emotional response to determining the price for the product.
- Prestige
Pricing – Is also known as Premium Pricing. Under this method
prices are set higher than the normal price to create an image of superior quality
and social status.
- Dual
Pricing – Refers to the sale of identical product at
different prices in different markets. It is illegal pricing practice as it
done with objective of dumping in different markets or due to government
regulations. For Ex: Petroleum prices
Based
on Competition
- Penetration
Pricing – Under which a firm introduce a new product at a
very low price to encourage more customers to purchase the same. For Ex: News
Papers.
- Skimmed
Pricing – Under which a marketer charges a very high premium
price for a given product or service at the time introduction to market.
- Monopoly
Pricing – Under which a marketer prices a product to maximize
profits under the assumption there is no need to worry about competition,
usually the monopoly price is higher than the price that would prevail if
competition existed.
- Administrated
Pricing – Under which price of the product set by the
Government or regulatory bodies, instead of being determined by regular market
forces of supply and Demand. For Ex: the Price of Protroleum product in India
determined by Government.
Based
on Cost and Demand
- Cost
plus Pricing method – Under which firstly decided the cost of
production, then profit level is determined and added to the product cost.
Therefore product price equal to the total of cost plus profit
- Target
Return Pricing - Under which a firm determine the price
based on target rate of return on investment. Therefore a pre-determined
percentage of return based on expected cost of production and cost of
selling.
- Demand
Pricing – In this prices are based on demand for the product,
if the demand is high then the prices are raised and if the demand is low the
prices are cut off.
Based
on Geographical Location
- FOB
(Free on Board) Pricing – Under this price includes goods
plus the services of loading and unloading the products.
- Zone
Pricing – Under which setting the prices of goods or services
based on the location where they will be offered for sale to customers.
- Base
Point Pricing – Under which marketers set price on the
basis of a base point cost plus transportation charges to a given market
