Page 255 - DCOM302_MANAGEMENT_ACCOUNTING

Management Accounting

Notes 3. Some companies adopt the main pricing objectives so as to maintain or to improve
the market share towards the product. A good market share is a better indication of
progress.
4. The pricing objectives may be to meet or prevent competition.

5. It also prevents price war amongst the competitors.

6. Product Line pricing to maximise long-term profits is another price objective.

Task Make a strategy for taking pricing decision for a organisation providing fi nancing
services.

Self Assessment

Fill in the blanks:
1. Pricing ties very closely with the various stages of a …………………

2. The aim of the fixer of prices is to sell the present and future capacity for the greatest
…………………

3. Marginal costing technique helps in determining the most profitable relationship between
costs, prices and ………………… of business.
4. Normally, the higher the ………………… means higher profit being attained but might

means lower market share.
13.2 Types of Pricing Decisions

The following are the key types of pricing decisions:
1. Perceived Value Pricing Method: In this method, prices are decided on the basis of
customer’s perceived value. They see the buyer’s perceptions of value, not the seller’s cost
as the key indicator of pricing. They use various promotional methods like advertising and
brand building for creating this perception.
2. Value Pricing Method: In this method, the marketer charges fairly low price for a high quality
offering. This method proposes that price represents a high value offer to consumers.

3. Going Rate Pricing: In this method, the firm bases its price on the average price of the
product in the industry or prices charged by competitors.

4. Sealed Bid Pricing: In this method, the firms submit bids in sealed covers for the price
of the job or the service. This is based on firm’s expectation about the level at which the

competitor is likely to set up prices rather than on the cost structure of the fi rm.
5. Psychological Pricing: In this method, the marketer bases prices on the psychology of
consumers. Many consumers perceive price as an indicator of quality. While evaluating
products, buyers carry a reference price in their mind and evaluate the alternatives on the
basis of this reference price. Sellers often manipulate these reference points and decide
their pricing strategy.
6. Odd Pricing: In this method, the buyer charges an odd price to get noticed by the consumer.
A typical example of odd pricing is the pricing strategy followed by Bata. Bata prices are
always an odd number like ` 899.99 etc.

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