Question

Question 1:

Describe and discuss the Pricing practices in marketing Management?

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Answer 1

Price is one of the 4P's as described in marketing management. Price plays an important role in the success of a product or service and there are many ways in which the marketer decides the price. The different pricing methods are listed and defined below:

1. Cost based Pricing - In this method of pricing, some percentage of the desired profit margins are added to the cost of the product and the final price is obtained. The costs of the products include fixed and variable costs for a product. Margins are decided as per the market situations.

Example - A product costs company $50. Producer aims for a profit of $10 per unit. Hence, the price will be $60.

2. Demand based Pricing - In this type of pricing strategy, the price of the product is based on the demand of the product in the market. If the demand for the product is high, the prices are set higher and if the demand is low, the prices are set lower.

Example - It is mostly used in Hospitality and travelling businesses.

3. Competition based pricing - In this type of pricing strategy, the prices are set according to the price of the competitor for the same or substitute product. The prices can be set higher, equal or lower than the competiton prices.

Example - Airline industry uses similar pricing strategy.

4. Other strategies - There are a number of other pricing strategies in marketing which are not generakly used as listed below:

a. Value based pricing

b. Target return pricing

c. Going rate pricing

d. Transfer pricing

Above is the non-exhaustive list of pricing methods along with the description of the major pricing strategies in marketing.