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Fright absorption pricing policy is generally adopted when market for a product expands. In this policy, the sellers or producers bear a portion of freight. Hence the name freight absorption pricing policy. This pricing policy is found suitable only for such firms whose fixed cost or production is high but the marginal cost is low. It may also be adopted to protect the interest of the producers from the nearest rival Annamalai University
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121 competitors. This may also be followed by firms offering the same quality product at the same price being located at differing distance. Let us take an example. There are two cement factories A & B. A is located at the distance of say 250 Km. from customer C and B at the distance of say 350 Km. Here the customer will prefer naturally from factory A since the cost of freight is likely to be low. But if factory B agrees to pay excess freight on 100 Km, the customer in question would not have any objection to make purchase. 3.3. Psychological pricing Psychological pricing is based on customer price perceptions so as to have special appeal in certain target markets. It is used to create an illusion of a bargain. It is the practice of setting the prices at odd points e.g. Rs.99, Rs.199 Rs.190.95 etc. Bata shoe company adopts psychological pricing. Prices of consumer durables such a care, refrigerators, etc, are usually fixed in odd amounts. 3.4. Promotional pricing Under certain situations, companies price their products below the list price, of course, for a temporary period and sometimes even below the cost. Such pricing policy is known as promotional pricing. It takes various forms, viz. Loss-leader pricing. Special –Event pricing. Low –interest Financing etc. Loss-leader pricing policy helps in raising the sales volume or make possible the generation of profits at an increased scale. For example, if manufacturer has been able to create a positive image for its product(s). He may attempt at encasing the goodwill or reputation. He then brings down the prices of a particular product and takes help of advertising. Ultimately, the consumers realize that the producers have been showing their good gesture by minimizing the price. Supermarkets and department stores at time drop the price on well-known brands to stimulate additional store traffic. The notable examples of Special-event pricingare pricing followed when a new show room is opened, e.g. Titan show Room Bomaby Dying, or any other retail outlet. During exhibitions also, the stalls price their products at lower than the market price. Low-Interest Financing as a form of promotional pricing is being followed by some of the automobile manufacturers, e.g. Telco and Premier Automobiles, instead of lowering the price the companies offer customer low-interest financing.
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