Marketing refers to the strategies and preparation you do to get your product or service ready to sell and identifying the target customers for your product. Marketing is a long term forward looking process whereby you determine how you’re going to package and brand your product and design it to appeal to the target market you seek to capitalize on. But for ever successful business only marketing can’t take the entire responsibility, the price of the product plays a key role in the mind state of the product as well.
Pricing is the method of determining the value a producer will get in the exchange of goods and services. It is undoubtedly a vital decision area in marketing. The consumer of a product should get a good picture of the significance of pricing before we proceed with a discussion of the various issues relating to it. It is the only element in the marketing mix of a firm that generates revenue. All else generate cost. In this competitive environment price plays a crucial role in capturing the market share in any country by different companies.
There are few pricing methods or strategy that the firm can fix the price of a product according to the needs of consumer. Some the few pricing methods are;
Cost-Based Pricing
Under this method Mark-up or Cost plus pricing, absorption cost pricing, target rate of return pricing and marginal cost pricing are commonly used in this method.
Mark-Up Pricing;
Mark-up pricing refers to the pricing method in which the selling price of the product is fixed by adding a margin to its cost. The mark-ups may vary depending on the nature of the product and the market.
Target Rate of return Pricing
Target rate of return pricing is similar to absorption cost pricing. In absorption cost pricing, after the costs of manufacturing, selling and administration are based on a per unit basis the firm adds its mark-up towards profits.
Traffic cans Bear Pricing;
The seller takes the maximum price that the customers are willing to pay for the product under the given circumstances. It is not a sophisticated method and is used more by retail traders than by manufacturing firms. This method brings high profits in the short-term. But in the long run is not safe concept.
Skimming Pricing
This method literally skims the market in the first instance through high price and subsequently settlers down for a lower price. It aims at high price and high profits in the early stage of marketing the product. It profitably taps the much about the price.
Penetration Pricing
As the name indicates, seeks to achieve greater market penetration through relatively low price. It is the opposite of skimming price. The method too is quite useful in pricing of new products under certain circumstances. For example, when the new product is capable of bringing in large volume of sales, but is not a luxury item and there is no price insensitive segment backing it, the firm can choose the penetration pricing and make large size sales at a reasonable price before competitors.
