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± Every human being in
society is required to pay a price for the product or service is the
number of monetary units a person pay to obtain one unit of the
product or service.Every organization, irrespective of whether it is for
profit organization or not, needs to fix certain price for its products or
service. Pricing the products and services might be a routine job for
most Producers and retailers, but pricing involves a thorough and a
deep understanding of the principles and practices governing the
business environment.A marketer should bear in mind the following
factors before adopting a pricing strategy- the demand for the product
/ services in the market, customers perception how much margin is
adequate to sustain in a market, the image of the company in the
market, the expenditure incurred for producing the goods, and finally
the intensity of competition.
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  ± Business organizations normally have many
objectives to be considered while making pricing decisions.
Objectives could be long ± term or short ± term. Some common
pricing objectives of organizations are ±
1. Profit maximization in the short run, and profit optimization in
the long run.
2. Assured minimum return on investment or sales turnover.
3. Ensure a specified targeted sales volume or market share.
4. Make entry into new market share.
5. Maintain price leadership or price parity with competitors.
6. Launch price war to check competitors¶ activity or keep
competitors out of the race.
7. Improving cash flow through faster sales.
8. Liquidation of accumulated inventory of products.
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r    ± The pricing of product in a

market is dependent on the type of competition existing in it. The
competition can be broadly divided into two categories ± price and
non price.
r  ± A marketer who resorts to price competition
will compete with his competitors on the price by offering his
product /service at same price or at a lower price than that of
competitor. In price competition marketer who can sell his
products at lowest cost will usually win a larger part of market
share.
   ± Non ±price competition ensues when
marketers focus on factors other than the price, such as product
features, quality of the product /service being provided, packaging,
promotions and so on.
 Pricing strategies 1
Pricing strategies or methods will depend on the pricing objective of the company.
The strategy must be suitable for achieving the desired objective of the
company.
Strategies of pricing ±
Ä
  ± Firms fix a selling price on the products they produce,
which normally exceeds the costs incurred in producing these products .In
this type of pricing, a marketer adds a mark-up on its cost of the product.
Mark-up pricing involves fixing a price for a product by adding (marking
up) a margin to its cost price.
    ± The target return pricing is set by marketers to
achieve a specified rate of return on their investments. A marketer can fix
the price of his products on the investment with the help of following
formula
Target return pricing = Unit cost +(desired cost * invested ) / Unit sales
Suppose a marketer produces a product and the cost of each unit is 200. He
made an investment of Rs. 100,000 to set up his business.He expects that he
will be able to sell 500 units, and obtain 15 % return on investment. He will
price his product at
200 + 0.15 *100,000/500 = 230
Price = 230 Re.
 Pricing strategies -2
K r  In this type (perceived value) of
pricing , marketers set the prices of the products on the basis
of their perceived value in the minds of customers .Marketer
normally use advertising and sales promotional activities to
enhance the perceived value of the product in the market. If the
marketer overestimates the value of the product , the customer
will not buy the product and will be difficult for him to survive
in market.
     ± Going rate pricing is a simple method in
which a company simply follows the prevailing pricing
patterns in the market. The company adopts the pricing
strategy similar to those adopted by the major players in the
market or slightly adjust its price to suit the company¶s system
and process.Generally, in this method , marketers give
importance to price changes made by the market leader and
alter their own prices accordingly.
 Pricing strategies -3
5. |   In some markets,business is carried out on
the basis of sealed bids rather than on the basis of openly setting
prices for products. This type of pricing is more suitable for
industrial products. Many companies compete in this process,
where the price of the product or service is usually quoted in a
sealed cover.The sealed bid method is usually followed by
government organizations.Whenever a government organization
needs to purchase a product or service, it is required to call for bids
and several companies are invited to quote their prices in a sealed
form. After receiving the sealed bids, the organization will
normally purchase the product or service from the company, which
has bid the least price.
 

   In different pricing, marketers adopt

different prices for the same product at different locations or for
different types of customers.
   ± Value pricing is a method in which marketers
offer low prices for high quality products or services
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The idea of value pricing is to help the customers perceive that
they are getting a high quality product at a low price.Value
pricing is not implemented as a response to the pricing patterns
of the competitors. On the contrary, it is an outcome of improved
research and development that helps the company deliver high
quality goods at low price .For ex. The Times of India started a
revolution in the newspaper market by offering the daily
newspaper for as less as Re. 1 on some days of week.
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  In skimming pricing, the objective is to
skim the market and take the cream, by pricing the new product
high and concentrating on market segment which are not price
sensitive.This strategy will bring in high profits which would
ploughed back for further market development and
promotion.There are two ways of skimming ± rapid skimming
and slow skimming. Later, the company could reduce the price
while going in for mass markets which are more price sensitive.
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This strategy will bring marketers usually adopt such an objective
when they develop unique and innovative products or a breakthrough
technology. Certain companies prefer to set high prices for their
products and recover the costs incurred in developing and producing
them as early as possible.It becomes necessary for a marketer to do
this because company wants to earn maximum before entering any
competitor in the market. If any competitor enters then company may
apply other pricing strategy.
r  ± This strategy is usually called monopoly price
discrimination .Monopoly Power must be present in a market for price
discrimination to exist. Price discrimination refers to the situation
where a monopoly firm charges different prices for the same product .
The firm discriminates between buyers by charging them different
prices.There are three types of price discrimination ±
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     ± Refers to a situation where the
monopolist charges different price for different price for different units
of output according to the consumer¶s willingness to pay.ex. A doctor
who is the only super ±specialist in the town may charge different fee
for conducting surgery, from different patients based on their to pay.
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     ± Refers to a situation where the
monopolist charges a different price for different sets of units of the
same product. For ex. ,the electricity charges per unit the first 10 kwts
of power consumption may be different from the rate charged for the
additional 100 kwts.In the case of railway passenger fares, the per
kilometer fare is higher for the first few kilometers ,which declines as
the declines as the distance increases.Here the discrimination is based
on volume of purchase.
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  Here the monopolist firm segments the market
for its product into two or more market and charges different price in
each market.For example ,airlines ticket rates are different for
economy class .Similarly ,electricity rates applicable to residential
users are lower than those applied for commercial use.