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Pricing Methods

Objectives of Price Policy:

1. Maximization of profits for the entire product line

2. Promotion of long-run welfare of the firm

3. Adaptation of prices to face the competitive situations

4. Flexibility of prices to meet the changing economic conditions

5. Stabilization of prices and margin

6. Get a rate of return on investment

7. Achieve the expected growth rate

8. Sustain and increase the market share.

Kotler has listed the following additional objectives.

1. Market Penetration

2. Market Skimming

3. Early cash Recovery

4. Satisfying.

Factors involved in Pricing Policy:

Costs;

Demand and Consumer psychology;

Competition;

Profit;

Government Policy;

Pricing Methods in practice:

1. Marginal Cost Pricing: Under marginal cost pricing, price is set equal to the marginal cost.

2. Cost plus/ Full Cost pricing: Under full cost pricing, price is set equal to the average total cost.

3. Transfer pricing: transfer pricing refers to the determination of the price of the inter-mediate products sold by one semi-autonomous division of the same firm.

4. Multi- product pricing: Under multi-product pricing, the price is determined at the point where the combined marginal revenue of the products equals the marginal costs.

5. Export pricing: (Export pricing under dumping)

6. Pricing of a new product: Pioneer Pricing

7. Skimming Price

8. Rate of return pricing

9. Administered price

10. Dual pricing

Profit Policy and profit Planning

Reasons for profit Policy

Marinating Business goodwill;

Wage consideration;

Avoiding high Taxation and Government’s intervention;

Obstructing potential competition

Goal of domination and leadership in the market;

Enlightened self-interest of survival;

Idealism and service motivation;

Liquidity preference

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