Pricing strategy

2. . P=AVC +AVC(m) Standard output is computed for the fiscal year. MarkMark-up is added to the variable cost. 3. Total variable cost of the standard output is calculated.Cost plus pricing /mark-up /markpricing/full cost   1. Cost which includes variable and profit margin.

Thus a company producing differentiated products would have same MC cost curve but different revenue curves. Also each product has different demand curves Clemens have given the solution to the problem of fixing the prices of different products sold by the same firm.styles and sizes of products of the same company.Multiple product pricing     In reality there are different models . .



Pricing strategies Introduction stage Pricing of totally a new product would depend on the availability of its close substitutes. . first low prices and then prices are raised gradually. Penetration price policy.Skimmining price policy-skim the cream ie policymaximum prices initially. also heavy promotional expenditure. Where substituted are available 2. Advertising is crucial at this stage.  . No close substitute 1.

discounts. This is the boom time for any product.     The growth phase occurs when a product has survived its introduction and is beginning to be noticed in the marketplace.Pricing in growth stage. and advertising all play an important role in that process . Sales momentum builds Competition grows as awareness of the product builds. Sales. The goal for any company is to stay in this phase as long as possible. Production increases. leading to lower unit costs. Minor changes are made as more feedback is gathered or as new markets are targeted.

when the seller is the price taker and not the leader. 2.also called veblen effect. 3.Pricing above the existing market price. Also good for the innovative products.where the customers prefer to shop in posh areas . good for the new brands. .Three types of pricing during growth stage Pricing below the market price. price. Firms wants to expand its product mix. 1.Pricing at the market price. Incase of presitigious goods.

Maturity stage. sales growth has started to slow and is approaching the point where the inevitable decline will begin more competitors have stepped forward Can lead to price wars.      At the maturity stage. Seller prefers to reduce its cost of production to gain maximum profit. . Product improvement and cosmetic changes are required to stay in the market.

Investment is minimized. revenues will drop to the point where it is no longer economically feasible to continue making the product. . Eventually. The product can simply be discontinued.Decline stage  This occurs when the product peaks in the maturity stage and then begins a downward slide in sales. or it can be sold to another company.

Peak load pricing     Concerns the non-storable goods nonlike electricity. . Consumption of these types of goods are different during the noght and the day times. Therefore a double pricing system is adopted to charge higher during peak time and less during off-peak offsystem. Electricity consumption is highest during the business hrs and also during the festival times. telephones services.

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