Page 177 - DMGT509_RURAL MARKETING

Rural Marketing

Notes There are usually three types of market situations and each gives pricing opportunities in
different ways:
1. Monopoly market

2. Oligopoly market
3. Perfect competition
In case of monopoly, which are a rarity today in the country, there is only one supplier of the
product and in such cases the firm has the following options:
1. Charge premium or skimming price
2. Keep cost plus, pricing, where the company adds its planned profit margin to the unit cost
of sales.
In oligopoly situations, there are just a few suppliers, say four to five. In such cases, customer's
purchasing power governs the price. In some cases, the firms join hands to form price cartels
with a view of keeping prices high for all the firms. In many countries, including India, cartel
formation is considered illegal.

Perfect competition means having a large number of suppliers of the product. These could be of
same type and size or could belong to different categories like the small scale unorganized
sector or large scale organized sector. In between there are medium scale sectors, government
companies, multinational companies, and joint ventures. Unorganized sector have much lower
overheads, for at times they avoid paying taxes and hence can price their products quite low.
However, compared to monopoly's skimming prices, perfect competition usually brings about
penetrating prices.
Hence, the first price formula could be shown as follows:
Selling price =  (manufacturing cost + profit), where is the effect of competition on price and
f denotes function.
With competition becoming severe, its role in pricing has increased which can be shown as
given below.

Selling price =  (competition), where represents the manufacturing cost and f denotes
function.
Let us consider bulk sale of product. In most of these cases the price is negotiated between the
seller and the buyer. For products for mass consumption, with mass production techniques,
costs can be brought down and lower price can be the result. Products for mass consumption are
becoming brand managed and customers and brand conscious. Firms can put higher prices on
their products than competition and still keep their market share mostly in urban markets, for
the following reasons:
1. Better brand equity
2. Better distribution network

3. Loyal customers
4. Complete range of products
5. Better service to customers
6. Differentiated product

7. Better delivery periods

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