Different Kinds of Pricing

Different types of pricing are as follows:

Monopoly Pricing: Monopolistic conditions exist when a product is sold exclusively by one producer or seller. When a new product moves to the market, its price is monopoly price. There is no competition or no substitute. Monopoly price will maximize the profits, as there is no pricing problem.

Mark up Pricing: This method is also known as cost plus pricing. This method is generally adopted by wholesalers and retailers. When they set up the price initially, a certain percentage is added to the cost before making the price. For example, the cost of an item is Rs. 10 and is sold at Rs. 14, the mark up is Rs. 4 or 40%.

Oligopolistic Pricing: Oligopoly is a competitive situation and the presence of a few large sellers who compete for larger market share. None has control over the price it charges. Any firm may take initiative in fixing the price of a product and others will follow. For example Tyres, Watches etc.

Competitive Bidding Pricing: Big firms or the government calls for competitive bids when they want to purchase certain products or specialized items. The probable expenditure is worked out. Then the offer is made quoting the price, which is also known as contract price. The lowest bidder gets the work.

Negotiated Pricing: It is also known as variable pricing. The price is not fixed. The price to be paid on sale depends upon bargaining. In certain cases, the product may be proponed on the basis of specification or design by the buyer. In such cases, the price has to be negotiated and then fixed.

Discount Pricing: Discounts are reductions from final selling price that are available to channel members and final consumers for performing certain functions. It can be done in following ways:

  • Functional discounts: They are offered by the seller to the channel members to compensate them for the distribution task they perform.

  • Cash discounts: These are the reductions to buyers who purchase the item in cash.

  • Quantity discounts: It is a price reduction to buyers who buy large volumes.

  • Seasonal discounts: These are price reduction to buyers who buy merchandise or services in off season. It helps the manufacturer to keep up the production steady.

  • Allowances: Allowances are the type of reductions from the list price. These are of two types (a) trade in allowances (b) promotional allowances.

Trade in allowances is the price reductions given to the buyer for purchasing the new item and selling the old one of any brand to the company. This type of allowances is common in case of scooter, television, audio system, refrigerator etc. Promotional allowances are the price reductions to reward middleman for participating in promotional and sales support program.

Learn more about different types of pricing policy only at the University Canada West.


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