Pricing Strategy Homework Help, Assignment Help, Online Tutor, Tutoring

Submit Assignment

* *

Payment Online Assignment Help

Business Economics Homework

Homework Help

sfsf

Pricing Strategy

Theoretically, if a firm is a price taker, there it has to design strategy to sell quantity. Knowing fully well that neither product nor promotion is relevant competitive consideration. The real world business situation is of course, far away from this theoretical position. In reality the firm is price maker; it may be a price breeder or price follower or price discrimination either in the product market or in the factory market or both.

1. Full cost pricing or Mark-up pricing

It is also known as cost plus pricing, such that P = C + π where C stands for average cost and π, the normal rate of profit fixed as percentage of average costs. It is this fixed percentages (or absolute quantum) which is called mark-up. Lower the elasticity of demand, higher is likely to be mark-up.

2. Price minus costing

This is a comparable strategy. This particularly holds for the tailor made products. In this case, C = p = π and the profits π may be fixed either as a percentage or an absolute amount. If the customer wants $ 400 for product, the producer may want 25% profit then he decides to spend only $ 300 on its labour and material cost, if he has a predetermined objective to make 25% profit. Thus

$ 300 = $ 400 = $ 100

3. Incremental pricing or Direct cost pricing

In this, the price of a product is based on incremented or direct costs of labour and materials, and not on average cost (full cost). In economics sense, in full cost pricing, both fixed and variable cost have to be covered; but here only variable costs are to be covered.

4. Going rate pricing

Some firm examine carefully the general pricing structure of the industry to which they belong and then fix their respective prices. Going rate pricing does not necessarily mean that the firm becomes a price-taker. By accepting the current market rate, the firm only tries to avoid some market risks.

5. Product line pricing

In the context of marketing, a product mix includes at least one or usually several product lines. A product line is a group of products which perform generally similar functions, with similar physical features, classified according to size, quantity, customer’s age and other problems etc.

6. Price line

Within each product group, there may be varieties and qualitative differences. For example, the children wear shops may sell baby suits of same size in different design and quality, and price them accordingly.

7. Peak load pricing

It is typical of price discrimination. It involves charging a higher price for consumer who require service during periods of peak demand and a lower price for those who consume during low or off-peak period. Such pricing is often practiced with regard to telephone tariff and allocation of computer timing.

8. Transfer pricing

This is sometimes referred as pricing of ‘intermediate goods’. In modern economics system, goods are produced, in stages, may be in different centres, before the final goods’ roll out of the factory. Many times, each centre is required to work as a profit centre.

9. Pricing of public goods and services

Public enterprise and suppliers of public goods and services including utilities like electricity follow several principles while pricing. In some cases, the government follows administered pricing policy in setting procurement price, levy price, release price/issue price of grains.