Banking Marketing Aptitude Pricing Pricing Decision

Pricing Decision

Introduction

Appropriate price of a product can be fixed by conducting extensive marketing research and through test marketing technique. The price policies serve as guideline to the marketing manager in price fixation. They provide the broad framework within which the management of a company administrates the prices in order to match market needs. However, there should be consistency in the pricing policies because frequent fluctuation in the pricing policies will adversely affect the long term interest of a company. Again this does not imply that there should be no periodical review of the pricing policies. The ultimate objective of framing a national pricing policy is to generate sale as well as profits, keeping a long term view of pricing policy as follows?

(a) One Price Policy: For the same product same price is charged from all customers throughout the country. There is no discrimination on any ground. Discounts and allowances are governed on equal terms. This policy when adopted enables the company to give confidence to the customers and expand its markets.

(b) Variable Policy: For the same product different price is charged from different customer group. Discount allowances are offered on equal terms. Variable pricing is very common in case of retail trade.

Based on Price Level

(a) Price in line: When Product differentiation through branding is minimum and when the buyers and sellers are well informed a free market economy prevails and force loses its importance. In such a situation the goods are sold at the traveling market price. However competition methods like advertising, sales promotion, packaging etc.

(b) Market Price: Price always goes with quality, durability, reliability, performance and after-sale services .In fact the customers are willing to pay a higher price for a high quality product because of its reliability of service over a longer period of time.

(c) Market Minus: The large retail stores, shopping malls, supermarkets etc. can sell their goods at a low price because the facilities secured by them can be shared with customers. The facilities obtained by the producers to sellers.

Based on Geographical Location

(i)         Point of Origin Price

(ii)         Uniform Delivered Price

(iii)        Base Point Price

(iv)        Zonal Price

(v)        Freight Absorption Price

Pricing Objective

Pricing objectives are as follows?

(i) Market Penetration objective: In initial stage a company entering a market may deliberately charge a low price. The objective is to capture a large share of the market by setting a relatively low price. In a highly priced sensitive market a businessman continues to sell his goal at a very low price for capturing more market share.

(ii) Market Skimming Objective: In this case a company studies the requirement of the customers and offers a suitable product but charges a high price. The degree of competitions in the market is low and the customers believe that the product is of superior quality. But this objective will not be realized if the customer refuses to purchase the product at the price fixed by the company.

(iii) Market Share Objective; A company may want to increase its market share or maintain its present market share depending on its financial condition Normally large and well established organizations do not try tom increase their market share. Further since it may attract the attention of the government again many companies continue to sell their goods at a low price for capturing more market share.

(iv) Target Rate of Return Objective: The rate of return is normally measured in relation to investment and sales. In fact every company or businessman wants to secure a certain percentage of returns on the funds that has been invested in business. For example? if the objective is to earn 20% profit then the price of the good will be fixed accordingly.

(v) Cash flow Objectives: One of the objectives of pricing is to recover the invested funds within a stipulated period. We normally find different prices for cash states and credit sales. Generally the price charged in case of credit sales is higher than the price discharged in case of cash sales.

(vi) Product line Promotion Objectives: While framing the product line, a company may include same products which are not very much popular here the objective is to push all the products in the line equally without any discrimination. In other words the purpose is to achieve increase in demand for the entire product line and not any particular product and brand.

(vii) Social Objectives: Marketing concept in modern times is not only confined to selling of goods and profits making but also social welfare. In fact, the aspect of social welfare has become a cause of great concern. Price discrimination is one of the policies that is adopted to achieve equality and social justice. Under price discrimination for some products different price is charged from different sections of customers in the same geographical region.

(viii) Price Stabilization Objectives:  Frequent changes and violent fluctuations in the price of goods adversely affect the long term interest of a company. Normally companies do not try to exploit a short supply situation for earning maximum profit during period of good business. Companies try to prevent prices from increasing further and during period of recession.

They try to prevent prices from falling further.

(ix) Profit Maximization Objectives: Almost every trader or company wants to maximize its profit in the long run, but profit maximization should be on the total output or entire product portfolio. Profit maximization through the price hike is rarely adopted.

Discount:

(i) Cash Discount: It is a deduction from the amount of debt i.e. standing in the name of a debtor. It encourages a person to make full payment in cash within a short period.

(ii) Seasonal Discount: It is offered by the producers of seasonal goods to those who purchase seasonal goods during off season periods. It enables the producers to earn study revenue throughout the year.

(iii) Trade Discount: It is offered by the producers to campaign the middleman for their services like buying, storing, assembling, record keeping etc.

(iv) Quantity Discount: It is given to encourage bulk purchase of goods. The benefit is that the sale of moving items will increase and also the producer can enjoy the benefits of both large scale production and large scale selling. Also they will be relieved from the burden of accumulated stock of goods and inventories.