PRICING IMPORTANCE OF PRICING OBJECTIVES OF PRICING DECISIONS FACTORS AFFECTING THE PRICE DETERMINATION COSTS OF PRICING NATURE OF THE MARKET AND DEMAND

1. SRM INSTITUTE OF SCIENCE AND
TECHNOLOGY
DEPARTMENT OF COMMERCE
CLASS : I BCOM CS
COURSE CODE : UCC20S02T
COURSE NAME : MARKETING

2.  “Price is the exchange value of goods and service in terms of
money”. Setting the right price is an important part of
effective marketing. It is the only part of the marketing mix
that generate revenue (product, promotion, and place are all
about marketing costs).Price is also the marketing variable
that can be changed most quickly, perhaps in response to a
competitor price change.
 Put simply, Price is the amount of money or goods for
which a thing is bought or sold. The price of a product
may be seen at a financial expression of the value of that
product.
 For a consumer, price is the monetary expression of the
value to be enjoyed/ benefits of purchasing product, as
compared with other available items.

3.  Without price there is no marketing, in the society, It
money is not there, exchange of goods can be undertaken,
but without price. That is there is no exchange value of a
product or service agreed upon in a market transaction is
the key factors which affect the sales operations.
 Price is important economic regulator.
 Can decide the success or failure of a firm.
 The marketing demand for a product or service to a large
extent depends upon the price of the product.
 Price will affect the competitive position and share of the
market.
 Price is always an important consideration both to the
buyer and seller.

4.  To maximize the profits
 Price Stability
 Competitive situation
 Achieving a Target-return
 Ability to pay
 Long-run Welfare of the firm

5.  Economic factors
Consumer demand, competition, political consequences,
legal aspects, ethical aspects.
 Internal factors
Costs
Business objectives
Return on investment
Market share
Preventing competition
Meeting competition
Stability in price
Maximizing profits

6.  External Factors
Demand
Competition
Middlemen
Government regulations
Political conditions

7.  Cost price is the total amount of money that it costs a
manufacturer to produce a given product or provide a
given service.
 A cost price includes all outlays that are required for
production, including property costs, materials, power,
research and development, testing, worker wages and
anything else that must be paid for. The manufacturer must
calculate a product’s cost price carefully to avoid taking a
loss on sales or not being profitable enough. Scrupulous
accounting and careful deliberations are required to set
subsequent prices realistically. A sum for contingency may
also be included in the cost price, given the difficulty of
ensuring that all costs are accounted for.

8.  Cost price, along with the profit margin, determines a
product’s wholesale price. Between the manufacturer’s
suggested retail price (MSRP) and the wholesale price,
there is generally room for profit for
both distributors and retailers. However, manufacturers
occasionally offer a product at cost or even below cost
– forgoing their profit – as a special incentive or a
means of dealing with unforeseen circumstances, such
as unfavorable market environments.
 Cost price is often considered sensitive information that
the manufacturer wants to protect from both customers
and competitors.

9. NATURE OF THE MARKET AND DEMAND
 Market demand is the total amount of goods and
services that all consumers are willing and able to
purchase at a specific price in a marketplace. In
other words, it represents how much consumers can
and will buy from suppliers at a given price level in a
market.


10. COMPETITION
Competition is the rivalry between companies selling similar
products and services with the goal of achieving revenue,
profit, and market share growth. Market competition
motivates companies to increase sales volume by utilizing
the four components of the marketing mix, also referred to
as the four P's. These P's stand for product, place,
promotion, and price. Knowing and understanding your
competition is a critical step in designing a successful
marketing strategy. If you are not aware of who the
competition is and knowledgeable about their strengths and
weaknesses, it's likely that another firm could enter the
picture and provide a competitive advantage, such as
product offerings at lower prices or value added benefits.
Identifying your competition and staying informed about
their products and services is the key to remaining
competitive in the market and is crucial to the survival of
any business.

12.  Willingness to pay or WTP is the maximum amount of
money a consumer is inclined or willing to spend on a
commodity. This amount can never be expressed in
exact numbers as all the consumers will never have the
same willingness to pay.
 In other words, the willingness to pay keeps on
fluctuating depending on certain factors. So, it is
generally measured as a range. Willingness to pay gives
an idea of the aggregate demand for a particular period.

13.  Willingness to accept is the minimum
amount at which sellers sell their
commodity. Contrary to this, the
Willingness to Pay is the maximum price
consumers would pay to buy the item.

14.  What makes your product or service
different and more appealing to customers
than other options in your category. Product
differentiation is what gives you a
competitive advantage in your market.
Product differentiators can include better
quality and service as well as unique
features and benefits.

15.  Management of the 4-P’s of marketing (marketing mix)
is the mandate of a marketing manager in firm. A
marketing manager therefore analyzes the market, plans
for the future, develops marketing strategies, and meets
market needs and desires. The marketing plan identifies
all controllable elements of the exchange relationship
between an organization and its customers. The 4-Ps are
considered controllable since they represent the key
inputs into a marketing manager’s plan. Such inputs may
entail budgetary allocation, human and physical
resources.

16.  Regardless of the pricing strategy a company ultimately
selects, it is important to do a break-even analysis
beforehand. Marketers need to understand break-even
analysis because it helps them choose the best pricing
strategy and make smart decisions about the short- and
long-term profitability of the product.
 The break-even price is the price that will produce enough
revenue to cover all costs at a given level of production. At
the break-even point, there is neither profit nor loss. A
company may choose to price its product below the break-
even point, but we’ll discuss the different pricing strategies
that might favor this option later in the module.
Formula in rupees: Break-Even Price = Costs / Units
In units : Break-Even Quantity (in terms of units) =
Costs / Price

17.  Cost-plus pricing, also called markup pricing, is the practice by a
company of determining the cost of the product to the company and
then adding a percentage on top of that price to determine the selling
price to the customer.
 Cost-plus pricing is a very simple cost-based pricing strategy for
setting the prices of goods and services. With cost-plus pricing you
first add the direct material cost, the direct labor cost,
and overhead to determine what it costs the company to offer the
product or service. A markup percentage is added to the total cost
to determine the selling price. This markup percentage is profit.
Thus, you need to start out with a solid and accurate understanding
of all the business' costs and where those costs are coming from.
 In certain cases, the markup percentage is agreed upon by both
buyer and seller. This percentage can also serve as a bargaining chip
during the sale.