Types of Pricing Methods

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What is the importance of labelling in selling a product?

Labelling helps in selling the product, grading products, and providing required information by law.

Explain the process of pricing and its objective related to survival.

Pricing is the process of fixing the value in exchange for services and goods. The objective related to survival is to set a reasonable price for consumers and the producer to survive in the market.

What is the objective of pricing related to expansion of current profits?

The objective is to enlarge profit margins by evaluating demand and supply in the market.

How can pricing help in ruling the market?

Firms can impose lower prices to capture a larger market size, increasing sales and demand while reducing production costs.

Explain the concept of Market-Oriented Pricing Method.

Market-Oriented Pricing Method adjusts the cost of the producer's offerings suitable for both the manufacturer and the customer.

What internal factors influence pricing decisions?

Internal factors like production costs, marketing strategy, and company objectives influence pricing decisions.

How do external factors impact pricing strategies?

External factors such as market competition, economic conditions, and government regulations impact pricing strategies.

What is the objective of Target-Returning Pricing?

The objective is to set prices that target a specific return on investment for the company.

Explain the concept of Value Pricing.

Value Pricing focuses on setting prices based on the perceived value of the product or service to the customer.

How does a company move from the survival phase to striving for extra profits?

Once the survival phase is over, the company can strive for extra profits by adjusting prices and increasing market share.

Study Notes

Types of Pricing Methods

  • Cost-Oriented Pricing Method: Evaluates the price of finished goods based on production costs.
  • Cost-Plus Pricing: Calculates the cost of production and adds a fixed percentage (mark-up) to obtain the selling price.
  • Markup Pricing: Adds a fixed number or percentage of the total cost to the product's end price to get the selling price.
  • Target-Returning Pricing: Fixes the cost to achieve a desired Rate of Return on Investment.

Market-Oriented Pricing Method

  • Perceived-Value Pricing: Sets the price based on customer perception of the product's value, considering factors like quality, advertisement, and distribution.
  • Value Pricing: Offers high-quality products at low prices.
  • Going-Rate Pricing: Sets the price based on competitors' rates.
  • Auction Type Pricing: Uses online platforms to buy and sell products, with prices determined by auctions.
  • Differential Pricing: Charges different prices for different groups or customers, based on factors like region, product, or time.

Factors Influencing Pricing

  • Internal Factors
    • Organizational Factors: Top-level managers decide the price range, while lower-level staff fix the distinct price.
    • Marketing Mix: Ensures the marketing mix is in sync to attract customers to the price.
    • Product Differentiation: Highlights unique features, quality, size, color, packaging, and utility to justify higher prices.

Note: I've omitted some details and rephrased sentences to create concise and independent bullet points, while maintaining the key facts and context.

Learn about different types of pricing methods used by companies, including Cost Oriented Pricing Method. Explore Cost-Plus Pricing and Markup Pricing under this method, which help in evaluating the price of finished goods.

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