Pricing method or strategy is the route taken by the
firm in fixing the price.
The method/strategy must be appropriate for achieving
the desired pricing objectives.
1. Cost Based Pricing
Types of cost based pricing
Mark-Up Pricing(cost plus pricing)
Absorption cost pricing (full cost pricing)
Target rate of return pricing
Marginal cost pricing
• The selling price is fixed by adding Mark-up or
Margin to its cost.
• Usually used by:
Distributers, Marketing firms etc..
• Slower the turnaround of the product larger the
margin and vice versa.
Absorption cost pricing
• Mainly used by manufacturing firms.
• It uses standard costing techniques.
• It includes :
– Fixed cost
– Variable cost + PAROFIT
– Selling and administering cost
– Advertisement cost
• It is also known as full cost pricing.
Target rate of return pricing
• Similar to Absorption cost pricing.
• The difference is in fixing the profit margin.
• The profit margin/ mark up is fixed by considering
• Firm will have return objectives, like 5% of invested
capital, or 10% of sales revenue.
• Then you arrange your price structure so as to achieve
these target rates of return.
• Market leaders or monopolists uses this pricing strategy.
Marginal Cost Pricing
• It takes cost and demand into consideration while
fixing the price.
• It aims at maximizing contribution towards fixed
• It gives flexibility to recover the fixed cost
depending on the market condition.
• It also gives flexibility in recovering a large portion
of cost from certain segment and a small portion
from some other segment.
Revenue / Cost (Rs)
2. Demand Based Pricing
The pricing decision is also depending on Demand and
supply of the commodity.
More realistic .
Types of cost based pricing are:
• What the traffic can bear pricing
• Skimming pricing
• Penetration pricing
“What the traffic can bear”
• The seller sets the maximum price the buyers are
willing to pay in giver circumstances.
• It will bring a high profit during this period.
• Chance of error in judgment are very high.
• Can be used in the following conditions.
– Shortage of goods
• Initially the products will be introduced in a high
price and subsequently settle down for a lower
• Example: Mobile Phones, Televisions etc.. Most
of the electronic items.
• Initially introduced at a lower price and increases
its price as its demand in the market increases.
• Good to capture new market.
• Opposite of skimming.
• Keep the product out of competition for longer
• Example: DTH Services, Magazines, TV channels
3. Competition Oriented Pricing
• It need not mean that pricing the commodity
matching its competitors, it can also be the
– Premium pricing
– Discounted Pricing
– Parity Pricing/going rate pricing
4.Product line pricing
• The products in a given product line are related to
• The manufacturing cost of these products also will
not be much different.
• The need not price the product optimally but it
may price the product line optimally.
• It is mainly indented to get optimum profit from the
Example: Pulsar 150, 180, 200, 220
• Industrial products
• The customers go by competitive bidding through
• The seller can only get the best possible price.
• He should thoroughly analyze the competitors.
6. Affordability based Pricing
• Essential commodities
• Social welfare pricing
• The idea of this pricing is to make the product
available to the targeted population at an
• Items usually distributed through public
• Subsidies may be involved
• Example: Chick shampoo , Akash, medicine etc.
7. Differentiated pricing
• Different price for the same product in different location.
(SanDisk cruzer balde Pen-drive, Petrol )
• The price difference may also be made in the case of
• Volume of purchase. ( Offer packs Lux soap, Colgate value
Jul. 30, 2021
Jul. 5, 2021
Jun. 25, 2021
Jun. 10, 2021
Jun. 5, 2021
May. 30, 2021
May. 26, 2021
Apr. 29, 2021
Apr. 17, 2021
Mar. 8, 2021
Feb. 24, 2021
Feb. 11, 2021
Jan. 20, 2021
Jan. 7, 2021
Jan. 2, 2021
Dec. 22, 2020
Dec. 2, 2020
Nov. 10, 2020
Oct. 30, 2020
Oct. 22, 2020
different types of pricing with example..
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