Page 256 - DCOM302_MANAGEMENT_ACCOUNTING

Unit 13: Pricing Decisions

7. Geographical Pricing: This is a method in which the marketer decides pricing strategy Notes
depending on location of the customer like domestic pricing, international pricing, third

world pricing, etc. Multinational firms follow such a pricing strategy as they operate in
different geographic locations.
8. Discriminatory Pricing: This is a method is which the marketer discriminates his pricing
on certain basis like type of customer, location and so on. It occurs when a company sells
product or service at two or more prices that do not reflect a proportional difference in the

costs. One can sell at different prices in different segments. Different prices for different
forms of the same product can sell the same product at two different levels depending on
the image differences.

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Caution Factors Affecting Pricing Decisions
Before a decision on the pricing is made, certain factors need to be consider:

1. What are the objectives of the company—to maximize profit/to gain market share/
to penetrate the new market, etc.?
2. What are the existing economic conditions?
3. Any government regulations;

4. Cost structure of the organization;
5. Demand for the product which should includes a study of the price elasticity of
demand;

6. Infl ation;
7. Surplus production capacity;
8. Level of competition; and
9. Political scenario.

Self Assessment

Fill in the blanks:

5. Under ………………… method the marketer charges fairly low price for a high quality
offering.
6. Prices like ` 899.99 etc. are the example of ………………… strategies.

7. While evaluating products, buyers carry a reference price in their mind and evaluate the
………………… on the basis of this reference price.
8. Under going rate pricing the firm bases its price on the ………………… of the product in

the industry or prices charged by competitors.

13.3 Methods of Pricing

The various methods of pricing include the following:
1. Full cost pricing;
2. Variable/Marginal cost plus pricing;

3. Rate of return pricing;

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