prices are also available for sale and as a matter of fact the intention is

Prices are also available for sale and as a matter of

This preview shows page 76 - 79 out of 203 pages.

prices are also available for sale, and as a matter of fact the intention is basically to sell those products. Example of these can be found in apparel, leather goods, personal use retail outlets where big signage announcing messages such as 'Upto 50 percent off' or 'Big reduction in price' are put up boldly in the shop front, whereas regular products are displayed more prominently inside the store. 7. Keystone Pricing In certain fashion items, particularly ladies wear, where styles may change very fast, depending upon the demand for any particular fashion based on the popularity of the celebrity, endorsing the style, the marketer can take a very high markup, even at hundred percent, for a short duration, knowing very well that the opportunity may last only for a short while. Marketers must be very careful in this type of pricing, because if it back fires then the marketer will be left with unsold stocks. 76
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PRICING 8. Penetration Pricing This is a pricing method, where deliberately a lower price is kept to increase consumption. Example- Coca-cola coming with a 5 rupee bottle to increase consumption of soft drink. Though not exactly a lower price, 2 rupee sachets for products such as shampoos and high end detergents are also examples of penetration pricing. 9. Snob-value Pricing Sometimes very exclusive items such as designer clothes designer watches, ladies handbags, club membership etc. are deliberately priced very high to ensure that the customers can derive their ego satisfaction through these high prices. 10. Cartels At times some marketers get together and somehow come to a common pricing strategy for their product. Examples are Cement, Tyre, Cell phone rates etc. where all the competitors price their products in a similar band. Sometimes government has to intervene to break such cartels to protect consumer interest. Cost Based Pricing 1. Full Cost Pricing Vis a Vis Pricing Based on Marginal Cost Lets take a very simple example of a marketer of soap. The manufacturing set up consists of a workshop where monthly rental is Rs. 50000. The workshop has a manager, a clerk and two security persons- whose salaries all put together comes to Rs. 20000 per month. Soap being a very low technology product, the machinery and equipments are quite simple. However their annual depreciation is Rs. 48000 which translates to Rs. 4000 per month. Some electricity and water charges are incurred by the factory which amounts to Rs. 1000 per month. All the above charges are incurred per month, irrespective of whether any soap is manufactured or not. Now, the marketer decides to manufacture and sell 50000 pieces of soap a month. 77
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PRICING For this, the variable cost of producing soap would be as under: To this would have to be added an additional Rs. 1.50 (based on total of salaries Rs. 20000, depreciation Rs. 4000, rental Rs. 50000 and water, electricity Rs. 1000 i.e., total Rs. 75000 apportioned to 50000 units of soap).
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