Pricing Class 12 explains the meaning of price and Factors affecting price of a product class 12. Price determines the demand for a product in the market as consumers are ready to buy more at lower prices. A detailed explanation of the topic is given below.
Pricing Class 12
Price means the amount of money which is exchanged in order to get the product or service. Price is an important factor in the marketing mix because it is the factor which affects the revenue and profits of the firm. No product can be introduced in the market without a price mentioned on it or without a price scheme for the product or service.
Every product and service has certain prices mentioned, for example, fees for doctor’s consultations, ticket prices for watching movies, prices for buying a mobile phone, fare for bus etc. The name may differ but nature is the same.
The price of every product is based on certain factors such as the cost of the product, the profit expected, government regulations etc. These factors should be considered because we cannot charge very less otherwise the company will run into losses and ultimately shut down we cannot charge higher because of societal responsibility and also because of the competitive charging policy.
Factors Affecting Price of a Product Class 12
So the factors can be described as under:
Product cost
One of the important Factors affecting the price of a product class 12 is the cost of a product or service. If a firm is fixing the price of its product or service they need to consider the amount that they have invested in its production or procurement.
Every organization wants to cover the cost of the product or service along with earning some amount of profit. While in some cases the cost may not be covered initially.
For example Market penetration i.e. entering a new market or introducing a new product would require the company to set a price which is lower than the cost. But in the longer run, covering costs and earning some profits is important. Without covering the cost, the breakeven point cannot be achieved.
There are three main types of costs which a company considers while fixing the price. They are – fixed cost, semi-variable cost and variable cost. Fixed cost is the one which does not change with the number of products produced or manufactured. For example, the rent of the building will remain the same for the month even if we do not produce anything or we produce more than in other months.
Semi-variable cost is the mixture of fixed and variable factors. It is fixed for certain levels and will start varying after that level is crossed. For example, an employee may be given a fixed amount of salary but the bonus will vary according to the targets he achieves.
Variable cost is one which varies with the level of production. For example, the electricity bill will depend on the number of units produced, if they are produced, then the electricity bill will also be more. All these costs will be considered before deciding the price.
The utility and demand under Pricing Class 12
The cost of the product helps the producer to fix the lower limit of the price. The demand for the product will help in fixing the higher limit of the price. The higher limit of the price means that the price cannot exceed the demand for the product.
The buyer should be ready to pay the amount of price which the company has fixed. The rational buyer would always try to bargain a lower price and a seller would try to cover the cost and add some profit. And to manage these two elements, the price should be according to the interest of both parties.
When the demand for the product is inelastic i.e. the change in price does not change the demand or there is only a small amount of change in the demand, then the firm will be in a position to fix the price in their favour.
The extent of competition in the market
There are various external factors which affect the price of the product class 12 and among those, the extent of competition is one very important factor. The product and the features of the product must be carefully analysed. The reaction of the competitors should also be evaluated.
A firm can fix a price which is either lower than the competitor’s price to gain more market share. They can set the same level of price or they can set a higher level of price than them. It all depends upon the demand for the product and also on the reaction of the buyers based on the price change. If the company has more loyal customers then the price change may not affect it to a great extent but still, they should be careful before setting a price for the product.
Government and legal regulations
Many a time, to protect the interest of the consumers, the government needs to intervene in fixing the price limit. There are certain products which can be considered essential and their price should be as low as possible so that the consumers can buy them.
For example there are certain medicines which are very necessary and the producers may not consider their necessity and fix a higher price for the product, but when the price is set high the consumers may get in trouble. Thus, the government fixes a limit for those medicines.
Pricing objectives under Pricing Class 12
As per Factors affecting price of a product class 12, Depending on the organizational objective the price may be fixed. There can be two types of objectives, such as, getting an increased market share for the product or surviving in this competitive market. The market share can be obtained by the organization for their product or service by setting a price at low levels so that it becomes affordable for a larger amount of audience.
While surviving in the competitive market means that the company needs to face this intense cutthroat competition of market and introduce the products which people like and think are worth buying. But along with a good product or service, promotional schemes such as discounts, and extra product coupons are also important. Another important objective can be to attain quality product leadership. In this case, the price is set high to cover a large amount of the cost of production and research and development. This will have a limited market share but will have the loyalty of the customers.
Marketing methods used
Other elements in the marketing mix such as branding, packaging, the channel of distribution used, promotional schemes used etc. will also affect the price of the product. Along with the elements mentioned above, the uniqueness of the product is also an element which gives an organization leverage to fix a little higher price. For example: if a mobile phone comes with a new and unique feature then the price can be set higher.
Factors affecting price of a product class 12 are given and they conclude that a single factor can’t determine the price of a product there are various factors whiles influence the price of a product in the market.
BST Chapter 11 – Marketing
- Marketing Management
- Marketing Management Philosophies
- Functions of marketing
- Marketing mix
- Products – Classification of Products
- Branding
- Packaging – Levels , Functions & Importance
- Labelling
- Pricing – Factors affecting Price of a Product or Service
- Components of Physical Distribution
- Channels of Distribution
- Advertising – Benefits, Limitations, Objections
- Personal selling
- Sales promotion
- Publicity – Characteristics and Objectives