Pricing policy

Pricing policy

    • One half of the failures in small business can be traced to a product or service that was being sold at the wrong price.
    • Relating price to costs: All items should be priced at a level to provide an adequate profit margin.
    Setting a Price Strategy
    • The firm’s goal should be to find the price – volume combination that will maximize profits. The product, price, delivery, service and fulfillment of psychological needs form the total package that the customer buys. The price should indicate the product image.
    Price cutting
    • It should be considered as a form of sales promotion. Price cutting will be useful wherever the added sales resulting from price-cutting offsets the added cost. However, in case of inelastic demand price – cut will not increase sales.
    Other Aspects of Pricing
    i) Mark – up Pricing
    • An initial mark – up price should cover operating particularly selling expenses, operating profit, and subsequent price reduction. An initial mark-up maybe expressed as a percentage of sales price or product cost. Mark – up price is needed to meet competitors’ prices and promotional activities.
    ii) Price Lining refers to offering of merchandise at distinct price levels. Shirts sold at rs.50, Rs.75, and Rs.100 etc. income level and buyer’s desires of a store’s customers are important factors. Advantages of price lining are the simplification of customer’s choice and reduction of the store’s minimum inventory.
    iii) Odd Pricing: Small businesses managers believe customers will react more favourably to prices ending in add numbers E.g.Rs.13, Rs.15, beta prices – Rs.179.95, Rs.499.95.

Last modified: Thursday, 21 June 2012, 9:49 AM