iv mrktg mgmt final

8/13/2019 IV Mrktg Mgmt Final

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SRI GANESH COLLEGE OF ARTS & SCIENCE, SALEM-14.

Name of the Staff: V.KESAVAN M.Com.,M.h!".,

M#A., G$CA., C"a%%:I M.Com CA'

T!t"e of the (a(e): Ma)*et!+ Ma+aeme+t +!t: IV

HO$% S!+at/)e:

Mea+!+ of 0)!e

Price is the exchange value of goods and services in terms of money. It is the amountpaid for the value and utility received by the buyers in the form of a product or

service.

A good pricing policy is significant to have maximum sales revenue. If the prices are

reasonable, more persons can be attracted towards the product. The ultimate obect of thefirm i.e., profit maximi!ation depends upon the pricing decision of the concern.

The price of a product influences the price paid for the factors of production namely,

land, labour, capital and entrepreneurship. Price can decide the success or failure of aconcern.

O23et!e% of ()!!+ 5e!%!o+%:

1. E+%/)!+ ta)et )et/)+%:"usiness re#uires capital for ma$ing both capital and revenue expenditure. %hen atrader invests capital in a business, he determines the problem return of his investment.

Then he fixes the price accordingly. &ost well established firms are fixing the prices theproducts in terms of '(eturn on Investment) i.e., (.*.I. +ere the target of the firm is

determined in terms of investment.

6. Ma)*et Sha)e:A good mar$et share is the best indicator of progress. %hen the mar$et share isdecreasing, low pricing policy can be adopted because competitors may be discouragedfrom entering the mar$et and new users may also be attracted. In this way, low pricing

policy enables the mar$eting management to increase their mar$et share.

7. )ee+t!+ Com(et!t!o+:&eeting competition is also one of the most important obectives of pricing particularly if

the product is introduced in a competitive mar$et. In such cases, a low price policy can

attract customers and can get a good mar$et share. It will discourage the competitors also."efore fixing the price, a proper price policy should be formulated having considered theprices of rival products, existing competition, etc., so as to enable the mar$eting

department to meet the competition in the mar$et.

4. Ma8!m!9!+ the ()of!t:ach business concern is running with an idea of maximi!ing the profits. "esides, profitsmaximi!ation will create an unhealthy image about the concern.

. Sta2!"!9!+ the ()!e:


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-ome companies see$ to $eep their prices relatively stable over long periods. A stable

price policy can win the confidence of the public. -o, the price should not be allowed to

fluctuate very often. ven during periods of depression, the prices should not be allowedto fall below a certain level, and in the boom period, the prices should not be allowed to

rise beyond a certain level.

;. A2!"!t< of the /%tome)%:-ometimes, price decision may be ta$en according to the ability of the customers to payfor the products. enerally, this type of policy is adopted by doctors, lawyers, etc.

=. Re%o/)e Mo2!"!9at!o+:In the case of firms, having resource mobili!ation as one of its pricing obectives, theproducts are priced in such a way to ma$e use of all available resources for the

expansion, etc., of the concern.

Fato)% I+f"/e+!+ )!!+ $e!%!o+%:

1. O23et!e% of 2/%!+e%%:

The obectives of the firm are the real deciding factor. There may be different obectivesof the firm namely, target return, mar$et share, stabili!ing the price. Thus, the pricingpolicy of the company should be framed only after having considered the pricing

obectives of the firm.

6. Co%t of the ()o5/t:/ost of the product is one of the most decisive factors. enerally, prices will not be lessthan the cost of its manufacture and it will be fixed in such a way to cover the entire cost

of the product and to give a reasonable profit to the manufacturer. *therwise, no business

can continue for long.

7. Ma)*et 5ema+5:In modern concept of the mar$eting which is consumer oriented, the consumer influence

the price. The value of particular product to the buyer is the main consideration. If theconsumer feel that the value of the product worth the price, he will buy. *therwise, he

will refuse to buy.

4. )!e% of om(et!to)%:&anufacturers while fixing prices for their products should first consider the competitiveconditions prevalent in the mar$et. +e should also consider the prices fixed and #uality

maintained by the competitors for their goods. Then the price should be fixed either e#ual

to or lower than the price of the competitors.

. $!%t)!2/t!o+ ha++e"%:Another factor which influences pricing decision is distribution channel policy.0ormally, the prices fixed will be higher if the company chooses lengthy distribution

channel because compensation for the services rendered by each such middleman in thedistribution channel must be included in the ultimate price.

;. Goe)+me+t (o"!


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K!+5% of ()!!+:

1. O55 ()!!+:*dd pricing refers to a price ending in an odd number or a price ust under a round

number. 6or example, "ata shoe company, priced on of its products at (s.78.879:. Thistype of pricing the products is generally adopted in the case of specialty or convenience

good. *dd prices by psychology may bring more sales.

6. %*ligopoly mar$et3.

4. )e%t!e )!!+

This method is followed by those who deal in luxury goods. -uch mar$eters, generally,

$eep the price of goods high for they thin$ that customers will udge #uality by the price.

E8am("e: Those who sell cosmetic items, leather goods, electronic items, etc., followprestige pricing.

. C/%toma)< ()!!+

The customers are familiar with the rates and mar$et condition. The prices are fixed tosuit local conditions. &anufacturers cannot control the price. "y custom or convention,

certain products are sold almost at the same price by different mar$eters.

xample2 &il$, butter, coffee powder, etc.;. FO# F)ee o+ #oa)5' )!!+

-uch a pricing has relevance when goods are to be transported to the buyers place. In

case of 6*" origin, the buyer will bear the transit charges himself and in the case if 6*"

destination, he need not pay the transit charges.

=. CIF Co%t, I+%/)a+e a+5 F)e!ht' )!e

In the case of /I6 price #uotation, the price paid by the buyer >may be an importer3 is

inclusive of cost, insurance and freight charges.

>. $/a" ()!!+

It refers to the practice of some mar$eters who #uote two different prices for the same

product? one may be for bul$ buyers and one for small #uantity buyers.If a manufacturer

sells the same product at two or more different prices is termed as dual pricing.?. e+et)at!o+ ()!!+: Penetrating pricing is intended to help the product penetrate into mar$ets to hold aposition. This is done by adopting low prices in the initial stages. 1ue to the low prices,sales volume goes up, competition falls down.

1@. S*!mm!+ ()!!+:


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@nder this method, a very high price is fixed for a new product initially and later the

price is reduced gradually when competitors enter the mar$et. This type of pricing is

called as '-$im 4the creampricing

11. )!e L!+!+:This $ind of pricing is generally followed by the retailers. @nder this method, pricing

decisions are made only initially and remain constant for a long period of time.Any changes in the mar$et conditions are met by ma$ing adustments in the #uality of the

product rather than the price of the product.

16. E8(ete5 ()!!+:+ere, the price which will be accepted by the consumers is found out. The customersresponse to the price is analy!ed and then a price is fixed.

17. Neot!ate5 ()!!+:+ere, the price is not fixed. The price to be paid on sale depends upon bargaining in

some cases, the goods may be produced on the basis of specification by the buyer. In

such cases, the price has to be negotiated and then fixed. This $ind of pricing is adoptedby industrial suppliers. It is also called as variable pricing.

14. A5m!+!%te)e5 )!!+The price determined by a mar$eter based mainly on personal considerations is $nown as

administered pricing. 6actors li$e cost, demand and competition are ignored.

1. Mo+o(o"< )!!+

The price fixed by a mar$eter who has no competition in the mar$et is $nown as

monopoly pricing.

1;. Sea"e5 Te+5e) )!!+

In case of contracts involving heavy outlay, e.g., construction contracts, sealed tenders

will be invited from interested parties. The wor$ is then assigned to the one who has#uoted the minimum price.

#ASIC RICING OLICIES

The following are the basic policies recogni!ed for pricing2

;. /ost 4oriented pricing policyB. 1emandoriented pricing policy

7. /ompetitionoriented pricing policy.

1. Co%t-o)!e+te5 ()!!+ (o"!


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6.)!!+ a+ Im!tat!e )o5/tA company that plans to develop an imitative new product faces a productpositioning problem. It must decide where to position the product on #uality

and price. 6or this, there are nine possible price#uality strategies as shown in

the following figure.

N!+e Ma)*et!+ M!8 St)ate!e% o+ )!eD/a"!tweighing D.E pound3 to a compels one >weighing pounds3 that

includes automatic focusing, fade control, and twospeed !oom lens. achsuccessive camera to the line offers come additional features. &anagement must

decide on the price steps to establish between the various cameras.

2.O(t!o+a" A55!t!o+a" Item%:These additional items or features a customer may or may not choose to add to the main

product purchased. The basic strippeddown product carries a low price, and the margin

on additional components is more. 6or example, some computer and auto companies

$eep a lower price for the basic model and for additional components such as 5/1monitor, larger (A&, power windows, or power steering etc. charge additionally.

7. Ca(t!e )o5/t )!!+:

B. Penetration

-trategy

=. Average-trategy

F. "orax -trategy

E. ood value-trategy

8. /heapvalue -trategy

7. -uperbvalue

-trategy

;. Premium

-trategy

D. *vercharging -trategy

G. (ipoff -trategy


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-ome companies produce products that need the use of ancillary products such as

ra!ors and manufacturers of In$et or 5aser printers. illette manufactures

different types of ra!ors and for each type the company has different blades thatfit a particular type of ra!or. The ra!or is priced low but the margins are high on

blades. In$et or 5aser printer manufacturers sell their printers at a low initial

price and price their in$ or toner cartridges at a price to earn higher margins.4. #


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!!!'"ae #a%!%:In this basis, different locations are priced differentlyeven though the cost of offering each location is the same. A cric$etstadium varies its seat prices because of audiences for certain

locations.

!'T!me #a%!%:+ere prices are varies seasonally, by the day, and

even by the hour. Public utilities vary their prices to commercial usersby time of day and wee$ end versus wee$ day.

7.%


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D. Problems of scarcity and famine in certain areas are solved by effective

distribution.

=. -copes for speciali!ation and division of labor have enlarged.E. It has offered gainful employment opportunities to millions of persons.

G. rading, pac$aging and branding are made possible.

F. Price stability is made possible.8. They are very important in the modern ever widening mar$et.

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The Fo""oB!+ a)e the metho5% /%e5 2< ()o5/e)%, /+5e) 5!)et ha++e">a3 *pening sales counter at manufacturer plant.>b3 1oor to door sales

>c3 -ales by mail order method

>d3 -ales by opening own shops.

>e3 -ales through mechanical devices.

a' o(e+!+ Sa"e% Co/+te) At Ma+/fat/)e)% ("a+t:&anufacturers of nondurable goods generally dispose of their products to customers

who call on them, for example, ba$ery products, ice cream, cold drin$s etc.

2' $oo) to $oo) Sa"e%:-alesmen employed by the manufacturers call at the door of customers. 1ealers may

not have $nowledge of the goods or they need a good margin of profit or they do not

want to stoc$ un$nown products, for them this system is good.

' Sa"e% 2< Ma!" o)5e) metho5:

It is a system by which products are sold to consumers. The postoffice plays asignificant role. This system is also $nown as

5' Sa"e% 2< o(e+!+ oB+ %ho(%:It is common that producers of perishable and oneperishable goods sell their

products to customers, by opening their own retail shops. It is also common thatmanufactures of clothes, footwear, certain electrical e#uipments etc., can push the

goods #uic$ly through retail shops and can offer satisfactory service to customers.

e' Sa"e% th)o/h meha+!a" $e!e%:In advanced countries li$e ermany, the @.-.A., Hapan etc. mechanical devices areemployed to sell the goods directly to the customers. /ommodities li$e coffee, soft

drin$s, newspapers, mil$ etc., are sole by mechanical devices. These deviceseliminate sales personnel and economy in space with the help of automatic sellingmachines? sales are done on cash basis.

6. Ma+/fat/)e) Reta!"e) Co+%/me):In the channel there is an intermediary retailer. A manufacturer sells goods to

consumers through these retailers. There is a gap between the manufacture and the

consumer.

If the buyers are large, this channel is preferable. 6or perishable articles which needspeed in distribution this channel is suitable. 5arge retailers are2 departmental store,

supermar$et, cooperative store etc. It sells its products through the large number of

its retail shops. It is established in cities.

7. Ma+/fat/)e) ho"e%a"e) Reta!"e) Co+%/me):%holesaler and retailers are the two types of intermediary in this channel. A

manufacturer channels his products to consumers through these intermediaries. The

gap between the manufacturer and the consumer is widened due to theseintermediaries. It is oldest method.

4. Ma+/fat/)e Ae+t m!55"eme+ ho"e%a"e) Reta!"e) Co+%/me):Agent &iddlemen, wholesalers, retailers are the three types of intermediaries in this

channel. The gap between the manufacturer and the consumer is very great. In this


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2' The N/m2e) of (ote+t!a" /%tome)%: There is the need for a number of middlemen service if the number of potentialcustomers is large. If the number of potential customers is small direct selling is

suggestible.

' Geo)a(h! o+e+t)at!o+ of the ma)*et:

1irect selling is effective if the customers are concentrated in places. If they are situatedover the whole country. Then a large number of middlemen will have to be employed.

/ompanies branches can sell their products in thic$ly populated area. In a thinly

populated area, direct selling is costly and ineffective.

5' O)5e) %!9e:If the sale volume is large, direct selling is suitable.

e'C/%tome) #/

pattern of consumers are fre#uent and small in si!e, we must adopt indirect channel.

II. )o5/t o+%!5e)at!o+:

a' +!t %a"e a"/e of a ()o5/t:

%hen the unit value of a product is high, direct channel is effective. *n the other hand,when the unit value is low, the direct channel is in effective. If the product is of low

value, larger and cheaper channels will be better. -hort and costly channels may be usedif the product is of high value.

2' e)!%ha2"e Nat/)e: Perishable products such as mil$, dairy products, bread, meat etc. are sent by shortschannel or direct channel, while long channel is used for nonperishable products.

'Teh+!a"!t


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INTERME$IARIES:

&iddlemen or business intermediaries act as the connecting lin$ between the

manufacturers and consumers. They are very important in the mar$eting the products,

through them products flow in the mar$et. The gap between the producers and consumersis reduced by the middlemen. They speciali!e in carrying out the transfer of title between

the producers and buyers.

C"a%%!f!at!o+ of m!55"eme+!+te)me5!a)!e%:

There are two types of middlemen in distribution2 I3 6unctional middlemen II3 &erchant

middlemen

I' F/+t!o+a" m!55"eme+Ae+t m!55"eme+:

They are mostly engaged in wholesale dealing. They assist in negotiating sales or

purchase or both on behalf of the seller or buyer. They do not ta$e title to the goods

which they handle. The $inds of agent middlemen are as follows2

1' #)o*e):A bro$er is an agent. +is main service is to bring the buyer and seller

together. +e is agent of the owner of the goods, see$ing a buyer other than the agent of abuyer who is see$ing for supply.

6' Comm!%%!o+ ae+t:

/ommission agent is an agent individual, firms, or even companies. Itnegotiates the sales of the goods belonging to the principal. It has the power on the prices,

and terms of sales under the condition that it must obey the instructions of the principals.

/ommission agent may arrange for delivery? he may extend necessary credit. +is

services are mainly used for rapid sale of perishable commodities li$e fruits, vegetablesetc., it is very important in agricultural mar$eting.

7' Ma+/fat/)e)% ae+t:

The agent receives a percentage of commission based on his sales. +e useshis techni#ue. +e employs his sales representatives, who wor$ for him. They are

important in the mar$eting of industrial goods. &anufacturers use such agents when2

!' they find the sales force uneconomical

!!' the firm is financially wea$

!!!' experienced and $nowledgeable representation is needed

!' new product is introduced

' new mar$et area is opened4' Se""!+ ae+t%:

+e is an independent middleman. +e operates on a contractual basis. +e

negotiates all sales of a specified line of merchandise or the entire output of itsprincipal. -elling agents are in close contact with the buyers, and hence they

guide the manufacturers on styling, design and pricing matters.

' Re%!5e+t 2/


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C"a%%!f!at!o+ t


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!!!' O+ the 2a%!% of 2)ea5th of the!) "!+e ()o5/t:

a' Ge+e)a" me)ha+5!%e Bho"e%a"e)%:

-uch a wholesaler never restricts the varieties of products to behandled. +e may even handle unrelated product lines. 6or ex.

A wholesaler may stoc$ food items together with hardware.

2' Ge+e)a" "!+e Bho"e%a"e)%:/ontrary to the above $ind of wholesalers, they deal in closely

related items, for ex. A wholesaler dealing in various types of

cosmetics.

' S(e!a"t< Bho"e%a"e)%:

They give a strong promotional support to the restricted

manufacture brand. They create special displays, demonstration

and arranging for distribution of samples.

iv mrktg mgmt final

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