Functions of Channel Intermediaries

Channel intermediaries, also known as middlemen or intermediaries, play several essential functions in a distribution channel. These functions contribute to the efficiency of the distribution process and help bridge the gap between producers and consumers. Here are key functions of channel intermediaries:

1. Distribution and Logistics:

   - Storage and Warehousing: Intermediaries often hold and manage inventories, providing a buffer between production and consumption to ensure a smooth flow of goods.

   - Transportation: They facilitate the movement of products from manufacturers to retailers or directly to consumers.

2. Risk Taking:

   - Inventory Risk: Intermediaries take on the risk of holding inventory. This includes risks associated with changes in demand, obsolescence, or perishability.

   - Credit Risk: They may extend credit to customers, assuming the risk of non-payment.

3. Market Information:

   - Feedback to Producers: Intermediaries provide valuable information about market trends, customer preferences, and competitors to producers, helping them adjust their strategies accordingly.

4. Negotiation and Transaction Facilitation:

   - Price Negotiation: Intermediaries often negotiate prices with producers to secure favorable terms and margins.

   - Order Processing: They handle the complexities of processing orders, invoicing, and other transaction-related tasks.

5. Promotion:

   - Advertising and Promotion: Channel intermediaries often contribute to the marketing efforts by promoting products at the retail level.

   - Sales Support: They may offer sales support, training, and assistance to retailers.

6. Assortment and Aggregation:

   - Product Assortment: Intermediaries aggregate products from various producers, providing consumers with a diverse selection in one location.

   - Bulk Breaking: They break down large quantities of products into smaller, more manageable units for retailers or consumers.

7. Customer Support:

   - After-Sales Service: Some intermediaries provide customer support, warranty services, and handle returns or exchanges.

8. Market Access:

   - Geographic Reach: Intermediaries, especially wholesalers and distributors, help products reach a broader geographic market by distributing them to different regions.

9. Efficiency and Cost Savings:

   - Economies of Scale: Intermediaries can achieve economies of scale in distribution, reducing overall costs.

   - Specialization: They can focus on specific aspects of the distribution process, becoming specialists in their roles.

In summary, channel intermediaries play a crucial role in efficiently getting products from producers to consumers by managing various functions in the distribution process. Their involvement can lead to cost savings, risk reduction, and improved market reach for both producers and consumers.

TYPES OF DISTRIBUTION CHANNELS

 

Producer have many alternative levels channels available for distributing the product, a channel levels indicates number of distinct categories of intermediaries in a distribution channel. These channels vary in the number and types of middlemen involved. The producer and consumer are part of every channel. Some channel provides direct link and others indirect link between producers and consumers. The distributions are generally divided into four types as follows:   

Zero Level Channel - Producer ------------------------------------------------------ Consumer   

First Level Channel – Producer ----------------------------------------Retailer---- Consumer

Second Level Channel – Producer ------------------Wholesaler-----Retailer---- Consumer 

Third Level Channel – Producer ---Distributor----Wholesaler-----Retailer---- Consumer 

A zero channel comprises of producer and customer. It also called as Direct distribution channel where product directly sells from producer to consumer without any middlemen. The major examples are Door to door sales, Telemarketing, Logistics provided by the organizations to transport capital goods. 

First level channel contains only one middleman called as Retailer. In this channel the prouder sells products to retailer who usually buys in bulk quantities and sells the same to ultimate consumers in different qualities. Sometime retailer also acts as wholesaler. This channel best suitable for the consumer durables such as Electronics 

Second level channel is the most common and traditional channel of distribution. A two-level channel contains two intermediaries such as Wholesaler and Retailer. This channel is best suited for producers with limited resource. It also ideal for the products with widely scattered market. 

Third level channel of distribution in which three intermediaries are engaged. Under the producer has to transfer the distribution work for Distributing Agents. Distributing agents simply facilitate the process of sale and so not take possession or title of products. This channel is suitable for wider distribution of various industrial products. The distributor exclusively appointed by the producer based on the experience and requirement of the market.       

Logistic Management – Is a process of planning, organizing, designing and controlling the transport activities of the organization. It includes activities like Acquisition, Storage and transportation, delivery of goods, etc. 

POLICIES OF PRICING

 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.

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

DIFFERENCE BETWEEN PACKING AND PACKAGING

 Packing or Package is the term refers to provide a place for the product in the Container or Wrapper. It provides protection, facilities to product use, and storage, and communicates certain information’s.    

Packaging is the process of designing and producing the container or wrapper for the product with certain marketing objectives of the organizations. It also includes package factors. 

Needs or Importance or Benefits 

Protection and preservation 

Logistic Efficiency (In terms of Loading and Unloading, Handling the products) 

Provide relevant information about the product as well as producer

Convenience for consumer for the time of purchase 

Enhance the product Image

Support for product Identification 

It create better Product Positioning in the market 

It helps for product promotion   

Types of Packaging 

Family Packaging – Refers package for closely resemble products with same design. It provide similar visuals for the all the products. It can be in terms of colour combination produced by a company for a group of consumers. 

Multiple Packaging – Refers to offer a range of distinctive package configurations in basket, Wrap-style and enclosed cartons, combined, with innovative storage and dispensing features. For Ex: Johnson’s New born baby girl package with Baby Towel, Pampers 24 piece with Johnson’s baby Powder, Oil, Shampoo, Cream, Soap, Brush, etc. 

Reuse Packaging – Refers to a package can be reused after consumption of the product. It may construct of durable materials such Metal, Plastic, Wood, Fiber, etc. 

Ecological Packaging – Refers the package which offers environmentally responsible package for the product. The goal of ecology packaging is to sell functional products that raise awareness and inspire individuals to change the way they see the world and to provide the consumer better ways to save energy and planet. 

 Labeling 

It refers an attractive small piece of paper, Fabric, Plastic or similar material that is a part of package to indentify Producers, Use, Nature, Intergradient, Distinction etc. In India Food and Safety Authority of India under the guidance of Minister of Health and Family Welfare to give proper direction for packaging for agriculture goods. 

Needs or Functions or Benefits 

Identifies the product or Brand     

Describe the product features, qualitative aspects

It provides instructions for the use, store, and dispose the product

Describe the contents

Facilitate exchange offers.

Communicates warranty and Guarantees of the product 

Meet the Legal Compliance

BRAND AND BRANDING STRATEGIES

 

Brand is an identity of the marketer that allows consumers recognize the maker of the product. Trade Mark is the legal term for the Brand Name. A registered brand is the exclusive property of the seller. The letter “R” in a circle on each package will indicate that the brand is duly registered.   

The term brand is broadly applied to all identifying market such a trade names, trademarks, trade symbols, picture, design, of the package, distinctive coloring or lettering with or without some attractive slogan.  

Branding is a process of through which a marketer creates a unique name and image for the product in the consumers mind through marketing communication. In other words, is the process of determining the brand with consideration Company Objectives and product features and Target Consumers.    

Brand Equity refers to the value of a brand to an organization in terms of Commercial benefits. That increases reputation and goodwill of an organization. 

Importance or Benefits of Banding of the product 

It helps for Product Identification 

It helps the consumer to perceive (Understanding) the product  

It creates Consumer Loyalty 

Helps for compete with other products 

Enhance revenues and market shares

Enhance the Retailers Loyalty

Provide Unique and differentiated image for the company 

Creates name and reputation for the company  

Essentials of Good Brand

Suggest the product benefits

Help for visual interpretation 

Registered and protected legally

It should not depends on temporary 

General and common name of the products

It should Unique, Attractive and Distinctive. 

Branding Strategies or Types 

Corporate Branding – Refers to use of company’s names as product brand name in order to associate credibility of established company for the product. For Ex: Reliance includes the word “Reliance” in the name of many offerings. It’s also called as Family branding and umbrella branding. 

Individual Branding – Refers to use of unique brand name for each product offered by a company in order to provide a separate image and identity. For Ex: HUL for its product such as Lifeboy, Lux, Rexsona, Dove, Clinic Plus, Pepsodent etc.  

Multi Branding – Refers to use of different brand names for two or more mutually competing products offered by a company.  For Ex: Honda Company a Two Wheeler manufacturer are producing product in different name such as Dream Yuga, Honda Shine, Honda Unicorn, etc. It is a strategy used by an organization to promote internal competition between the products. 

Range Branding – Refers to use of different ranges of product in effect creating a family or product offered by a company. For Ex: Nataraj a Stationery, Lakmi a Cosmetics, Jhonson and Jhonson a Baby products, etc. 

Private Branding – Refers selling of products by the manufacturer in bulk to large distribution channel member with freedom use their own brand for the product. For Ex: Metro Cash and Carry, Bigbazzer, Electronics, etc. 

Generic Branding -   Refers selling of a product without brand name and they are usually sold at the lowest price possible as there are no promotional expenses involved. For Ex: Bread, Milk, Juice and Chicken item etc

NEW PRODUCT DEVELOPMENT

New Product Development refers to a product, that is new to the company introducing to market or any product that consumer treat as an addition to the available choices could be consider as new idea. It taken place in the following ways: 

• Any addition to the existing product line 
• Improved performance of product 
• New product line 
• Cost reductions 
• New to the world market 
• Reposting in the product  

Steps in New Product Development 

 Step 1 - Idea Generation: It may happened by internal and external sources. Internal sources include R& D Department, Employees, Agent and Middlemen’s. External sources includes from any sources other than internal sources such as Consumer, government, Companies etc 

Step 2 - Idea Screening: After gathering ideas from a variety of sources are evaluated by review committee to provide the required market validation to ensure they meet customer need and wants. 

Step 3 – Business Analysis: Under this stage the producer should determine Break Even Point (BEP), Return on Investment (ROI), Cash Flows, Pay out ration etc to evaluate business effects on the product. 

Step 4 – Product Development: Under this stage the producer is try to describe the Technical Aspect such as Product Specification, Product method etc. Marketing Aspects such as Branding, Packaging, labeling, etc. 

Step 5 – Test Marketing: Is the actual conduct of marketing of the product with in limited areas or location for the short period to test the acceptability from the consumers. Essentials of test marketing are Responsiveness, Demographic validation, Competition, Profit project etc. 

Step 6 – Commercialization:  Refers the actual introduction of the product in the market. Under this stage the product enters the market with large scale production, distribution, advertising and sales promotion. 

Reasons for the Failure of New Products

• Poor demand management 
• Changes in consumer taste and preferences 
• Changes in environmental factors 
• Low profitability 
• Unattractive features 
• Wrong segmentation and targeting 
• Weak positioning strategy 
• Distribution related problems 
• Bad pricing strategies

PRODUCT LIFE CYCLE

 Is a strategy to predict the product over a period of time in the market environment in terms of several stages such as Introduction, Growth, Maturity and Decline. In other words, it refers the graphical representation of the product sales history from the time of introduction to decline or withdrawn in terms of Sales, Cost of production, Profit, Competition, promotion, etc. 

Stages in Product Life Cycle 

Introduction: Under this stage a product introducing first time in the market. The product is promoted to create awareness in the minds of consumers, The sales level is at low rate, High cost of production due to lower production, profit not exist and high promotion expenses. 

Growth: Under this stage the product acceptable by the consumers. Therefore, sales at increasing trend with small amount of profit. On account of competitor’s price become more flexible, distribution channels are expanded and also need high promotional expenses. The stage is also called as Break – Even Stage, where total cost is equal to revenue. If any excess revenue over cost treated as profit 

Maturity or Saturation: It is the longest stage of the product. Under this the product becomes more mature and stable in the market with sales in increasing trend. Sufficient profit, intense competition and more substitute available in the market. Hence the marketer or producer has to concentrate more on product modification, affordable price, extended distributed channel, brand loyalty of the product. 

Decline: Is a stage where product are become obsolete or producer withdraw the product form market. Sales are decreasing gradually, more competition, profit decreasing, cost of product in the increasing trend because low production. At this stage price become the primary weapon of competition and considerably reduce expenditure on advertising and sales promotion. Cost control becomes the key to generate profits. 

Graphical Representation of Product Life Cycle  

  

Product Planning 

Is the systematic determination of the product line in terms of various products to be offered by the enterprise to his customers. It is designed to achieve some of the specific objectives of the organization. Such as: 

• Meet the consumer needs and requirements
• Assess firm and product SWOT Analysis 
• Better allocation of marketing resources 
• Help for the organization to survive the market
• Generate sufficient sales etc

PROMOTION MIX: OBJECTIVES, ELEMENTS AND PROMOTIONAL MIX STRATEGIES

 Is a set of activities designed to inform and persuade consumers about the products or services offered for sale by the marketer.  It includes various tools like Advertising, Personal Selling, Sales Promotion and Publicity etc.  

The promotion is represented by the elements such as Advertising, Personal Selling, Sales Promotion and Publicity etc. It is also called as “Promotion Mix” 

Objectives of Promotion 

• Create Awareness about products
• Educate the consumer 
• Motivate or induce the customer to buy the products
• Convert prospective consumer into Actual consumer
• Create an Image for the company and products 
• Create the strong perception in the minds of consumers
• Control and regulate the competition 
• Motivates all other parties involves in the process of Marketing

Elements or Methods or Medias of Promotion Mix/ Promotional Mix Strategies 

Advertising

Is a favorable presentation of ideas, goods or services that offer from a marketer in order to make customers and general public aware and induce them to buy the product. 

According to American Marketing Association “Any paid form of non-personal presentation of ideas, goods and services by an Indentified Sponsor”.  

Medias or Methods of Advertising

Electronic Medias                                                      

• Radio                                                                           
• Television                                                                   
• Computer/Internet                                                      
• Mobile Technologies                                      
• Electronic Sign and Bulletin Boards
• Cinema Theatres
• Cable TV
• Discs
• Tele Marketing                                                        

Print Medias 

• News Papers (for a Day)
• Magazines (for 15 Days)
• Journals (for a Month)
• Publication (Once in a year)
• Catalogues 
• Prospectus 
• Pamphlets and Posters
• Mailers
• Street Furnitures 

The analysis of the above method is explained with the help of following points such as: 

• Cost Effectiveness
• Level of Motivation 
• Forms of Message
• Life of the media 
• Flexibility in presenting the information 
• Exposure 
• Attractions 
• Convenience of the Consumers   
• Scope of the Media 
• Quality of the Message 

Advantages of Advertising 

• Helps in Promotion 
• Assist channel partners 
• Brand Awareness 
• Encourage the Sales and salesmen’s
• Create employment opportunities 
• Can be reach large no of Customer  

Disadvantages of Advertising

• It increases the product cost 
• Misleads the consumers 
• It increases the stupidity of consumers
• Create unwanted desire in the minds of Consumers
• Encourage Monopolistic competition 
• Waste of National resources   
• One way communication 

Personal Selling or Salesmanship

Is a direct form of communication between company responsiveness and a customer to communicate about a product or service. Under this Salesmen and consumer meet face to face with each other’s.  The sales people or Company representatives should be equipped with expertise, appearance, and specialist product knowledge to answer the questions. 

Types of Personal Selling or Levels of Salesmanship 

• Industrial Salesman – Represent by a company with sufficient information about particular goods to connivance and induce the Consumer. 
• Merchant Salesman – Represents salesmanship at the resale level 
• Customer Salesman – At the retail level for selling all types of consumer goods to customer in the store  

Advantages 

• Direct form of selling 
• Two-way communication 
• Quicker feedback
• Cost Effective
• High level adoptability 
• Provide flexibility 
• Individual Attention 

Sales Promotion

A set of collection of incentives, tools, designed to stimulate quicker and greater purchase of particular product or Services. The sales promotion activities attempts to provide added value or incentives to consumers also other members of distribution channel 

Methods and Techniques of Sales Promotion 

• Allowance, Discount and Deals – These are conditional benefits offered for quantity purchases or for advertising the manufacturer’s product for carrying a special product display.  For Ex: Metro Cash and Carry Discounts. 
• Loyalty Programs – Are also called as frequent buyer programs, rewards who engage in repeat purchases. For Ex: Benefits provide by Credit Card Companies 
• Point of Purchase Promotion – Displays and demonstrations, in store exhibits designed to induce impulse purchases 
• Samples – Fee Samples to stimulate trial of a product, this could in the form of food, bottles or packs of the product. 
• Vouchers and Coupons – A coupon is certificates that entitle the bearer to get rebate on the price of a product. Some these are printed or inserted on newspapers and magazines, on packs.   
• Contest and Prize Draws – Consumer contest and lucky prize draws or scratch cards, chance to win cash, trips are offered to customer if they purchase something. 
• Premiums – This can in the form of gift or buy one get one or more free deals. 
• Exchange Offers – This includes buying new merchandise by offering a used product plus some amount to compensate the value of new merchandise. 
• Publicity – Is the unpaid communication about an organization that appears in the mass media. It’s more powerful to building credibility (Goodwill) and awareness of marketers and consumers. They are many forms of Publicities such as:  
• News articles and Interview (Photo Journalism) 
• Experts Quotes
• Self- Authorized stories
• Documentary programs in Medias 
• Social Networking  

Public Relations

Is a marketing communication factions intended to collaborate and build relationship with publics including stakeholders and government. The person one who engaged in this activity is called a Public Relation Officer (PRO) 

Types of Public Relations

• Press Release 
• Investor Relations 
• Speeches 
• Media Relations
• Sponsorships 
• Public Service Activities  

PHYSICAL DISTRIBUTION MIX: IMPORTANCE, FACTORS AND TYPES OF DISTRIBUTION CHANNELS

Distribution channels is a set of independent organizations involved in a process of making a product or service available for consumption. It facilitates the flow of goods from Producer to consumers in right time and right place.  

Need, Role and Importance of Distribution Channels

• Serves as a connecting link between Producer and Consumer
• Creating time and place benefits or utilities 
• Increase the efficiency of marketing process 
• Facilitate the consumers in the buying process 
• It converts Potential buyers to Actual buyers 
• Help for reducing the cost transactions 
• Act as a promotional tool and represent the company in the market Help for maintaining good relationship with consumers It facilitates the flow of goods.   

Factors affecting choice of Distribution Channels 

Product Factors

• Product Feature – Quantitative and qualitative aspect of the product  
• Technicality of the Product – such as Product specifications 
• Range of Products – Variety of product produced by an organization 
• Product Price – Depends on the Length of the distribution channels 

Institutional Factors 

• Financing Capacity – Investment in organizing and development of channels 
• Promotional Ability – Creating awareness and motivate the consumers 
• After Sales Service – Add on services for the product 
• Channel cost – Consideration for the distribution channels 
• Reputation and Prestige – Attractions and Values of the distribution channels 
• Marketing Policies – No of Retailers and Wholesalers in the distribution channel and availability of the goods. 

Market Factors 

• Target Market – Depends on Development, Level, and Importance of the Places 
• Availability of Channels – Permanent and Temporary in Nature 
• Buyer’s Behaviour – It depends on Attention, Customized service, Credit facilities etc
• Legal Constraints – It depends on various regulation and standards lay down by the Government and regulatory bodies For Ex: Licenses for the Liquor items. 

Types of Distribution Channels 

Producer have many alternative levels channels available for distributing the product, a channel levels indicates number of distinct categories of intermediaries in a distribution channel. These channels vary in the number and types of middlemen involved. The producer and consumer are part of every channel. Some channel provides direct link and others indirect link between producers and consumers. The distributions are generally divided into four types as follows:   

Zero Level Channel - Producer ------------------------------------------------------ Consumer   

First Level Channel – Producer ----------------------------------------Retailer---- Consumer

Second Level Channel – Producer ------------------Wholesaler-----Retailer---- Consumer 

Third Level Channel – Producer ---Distributor----Wholesaler-----Retailer---- Consumer 

• A zero channel comprises of producer and customer. It also called as Direct distribution channel where product directly sells from producer to consumer without any middlemen. The major examples are Door to door sales, Telemarketing, Logistics provided by the organizations to transport capital goods. 
• First level channel contains only one middleman called as Retailer. In this channel the prouder sells products to retailer who usually buys in bulk quantities and sells the same to ultimate consumers in different qualities. Sometime retailer also acts as wholesaler. This channel best suitable for the consumer durables such as Electronics 
• Second level channel is the most common and traditional channel of distribution. A two-level channel contains two intermediaries such as Wholesaler and Retailer. This channel is best suited for producers with limited resource. It also ideal for the products with widely scattered market. 
• Third level channel of distribution in which three intermediaries are engaged. Under the producer has to transfer the distribution work for Distributing Agents. Distributing agents simply facilitate the process of sale and so not take possession or title of products. This channel is suitable for wider distribution of various industrial products. The distributor exclusively appointed by the producer based on the experience and requirement of the market.       
• Logistic Management – Is a process of planning, organizing, designing and controlling the transport activities of the organization. It includes activities like Acquisition, Storage and transportation, delivery of goods, etc. 

Functions of Channel Intermediaries 

• Procurement and Assembling 
• Warehousing and Storing 
• Grading and Packing
• Selling
• Assumption of Risk 
• Financing 
• Supply of Market Information 
• Advertising and Communication

PRICE MIX: FACTORS INFLUENCING, POLICIES AND METHODS OF PRICING

 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