Page 192 - DMGT509_RURAL MARKETING

Unit 9: Pricing Strategies

9.9 Summary Notes

 Product pricing in highly competitive world has assumed unprecedented importance in
the management of rural markets for firms' profitability.

 There are usually three types of market situations and each gives pricing opportunities in
different ways.

 In case of monopoly, there is only one supplier of the product.
 In oligopoly situations, there are just a few suppliers, say four or five. Perfect competition
means having a large number of suppliers of the product.

 In most of these cases the price is negotiated between the seller and the buyer.
 The price of a new product, is based on the price of competitive product, cost to manufacture,
product position in the market place and product itself, its uniqueness as compared to
competition.
 Firms must understand the price, demand pattern for the product based on the selected
market segment.
 The demand and price ratio varies with products; in some the demand remains inelastic
irrespective of price while for some products even a slight change in product price changes
the demand pattern drastically.
 Rural markets have been shown to be highly price conscious markets.
 A key consideration is also the sources of income in the rural sector, which affect
consumption patterns.

9.10 Keywords

Experience Curve Effect: With experience in manufacture over a period of time, the workers
improve their skills and human error losses get reduced. This reduction directly reflects in
lowering of variable costs and this is known as the Experience Curve Effect.
Promotional Discounts: To stimulate channel members to make special efforts to promote
demand. Usually for a limited period.
Seasonal Discounts: To stimulate demand in lean periods and to smoothen wide fluctuations in
demand. Usually offered in periods preceding and following peak demand periods.
Trade Discounts: To motivate channel members to service customers effectively. Usually given
at the time of special schemes or product introduction or new model introduction.

Volume Discounts: To encourage consumer to buy larger volumes and avail of much lower
prices. May succeed at post harvest, festival or pre marriage seasons.

9.11 Review Questions

1. Explain the Economies of Scale of manufacture.

2. Describe the Finalization of price.
3. Explain the Promotional Pricing.
4. Explain the types of traders in periodic markets.

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