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Pricing methods:-
1. COST-BASED PRICING
Under cost based pricing the marketer primarily looks at production costs as the key factor in
determining the initial price.

This method offers the advantage of being easy to implement as long as costs are known. But
one major disadvantage is that it does not take into consideration the target markets demand for the
product.

This could present major problems if the product is operating in a highly competitive market
where competitors frequently alter their prices.
2. MARKUP ON COST
Using this method price is determined by simply multiplying the cost of each item by a
predetermined percentage then adding the result to the cost.
A major general retailer, may apply a set percentage for each product category (e.g.,
womens clothing, automotive, garden supplies, etc.) making the pricing consistent for all like-
products. Alternatively, the predetermined percentage may be a number that is identified
with the marketing objectives (e.g., required 20% ROI). The calculation for markup on cost is:

Item Cost + (Item Cost x Markup Percentage) = Price 50 + (50 x .30) = Rs 65
3. COST-PLUS PRICING
Cost-plus pricing also adds to the cost by using a fixed monetary amount rather than
percentage.
For instance, a contractor hired to renovate a office owners office will estimate the
cost of doing the job by adding their total labor cost to the cost of the materials used in the
renovation. The homeowners selection of carpet to be used in is likely to have little effect on
the labor needed to install it whether it is a low-end, low priced tile or a high-end, premium
priced carpet. Assuming most material in the office project are standard sizes and
configuration, any change in the total price for the renovation is a result of changes in
material costs while labor costs are constant.
4. ) BREAKEVEN PRICING
Breakeven pricing is associated with breakeven analysis, which is a forecasting tool used by
marketers to determine how many products must be sold before the company starts realizing
a profit.

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The formula for determining breakeven takes into consideration both variable and
fixed costs as well as price, and is calculated as follows:

Fixed Cost = Number of Units to Breakeven
Price Variable Cost
5. TARGET RETURN PRICING
In this method marketer sets price to achieve a target return-on-investment (ROI). For
example, let's assume that marketer have invested Rs.10,000 in the company. Expected sales
volume is 1,000 units in the first year. Marketer want to earn all his investment in the first
year, so he need to make Rs.10,000 profit on 1,000 units, or Rs. 10 profit per unit, giving a
price of Rs. 60 per unit.
6. VALUE-BASED PRICING
Companies price their product based on the value it creates for the customer. This is usually
the most profitable form of pricing, if one can achieve it.

In this method it is the buyers perception of value and not the sellers cost which is the key to
the product pricing.
Let's say that a tube light manufactured by Mahamaya Electric Devices saves the typical
customer Rs.1,000 a year in, say, energy costs. In that case, price tag of Rs.60 seems too
cheap. If the product reliably produced that kind of cost savings, company could easily charge
Rs.150, Rs.200 or more for it, and customers would gladly pay it, since they would get their
money back in a matter of months.
7. PSYCHOLOGICAL PRICING
This method takes into consideration the consumer's perception of price.
Odd-Even Pricing: a product priced at Rs. 299.95 may be perceived as offering more value than
a product priced at Rs. 300.00.
Prestige Pricing: The higher the price the more likely customers are to perceive it has being
higher quality compared to a lower priced product. marketers, looking to present an image of
high quality, may choose to price products at even levels (e.g., Rs. 100 rather than Rs.99.99).
8. MARKET PRICING
Under the market pricing method cost is not the main factor driving price decisions; rather
initial price is based on analysis of market research in which customer expectations are
measured.

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The main goal is to learn what customers in an organizations target market are likely to
perceive as an acceptable price.
9. COMPETITION BASED PRICING
When setting price it makes sense to look at the price of competitive offerings. For some,
competitors price serves as an important reference point from which they set their price.

Below Competition Pricing: A marketer attempting to reach objectives that require
high sales levels (e.g., market share objective) may monitor the market to insure their
price remains below competitors.
Above Competition Pricing: Marketers using this approach are likely to be perceived
as market leaders in terms of product features, brand image or other characteristics
that support a price that is higher than what competitors offer.

Parity Pricing: A simple method for setting the initial price is to price the product at
the same level competitors price their product.