Pricing and its factors , physical distribution mix

MAY 8, 2020 

DAY 4

2nd period in XII A , 3rd and 6th period in XII B

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GOOD MORNING BOYS!

NOW WE ARE ON THE NEXT TOPIC WHICH IS PRICE MIX.

Learning Outcomes- At the end of the topic, students will be able to:
1) Explain price mix and its factors.
2) Comprehend the components of physical distribution mix.

WATCH A SMALL VIDEO FIRST TO UNDERSTAND THE TOPIC BETTER.

NOW TAKE DOWN THE NOTES:

Q.13 What is meant by pricing? Explain the factors determining the fixation of price of a product. (6)
Ans Pricing means to determine the price of a product or a service .

The factors determining fixation of price of a product are as follows-
1.Pricing objectives - Some of the pricing objectives are as follows:
a)Profit Maximisation- If the objective of a firm is profit maximisation in the short run, it will charge maximum price for its products but for long run profit maximization, it will charge lower price per unit so that it can capture a larger market share.
b) Obtaining market share leadership-
If the firm wants to capture big market share it has to keep its price low and vice versa.
c) Surviving in the competitive market- To survive in a competitive market the firm has to offer
discounts and set lower for its products.
d) Àttaining product quality leadership- Generally high prices are charged to cover the cost of
research and development. So if the firm wants to improve the quality of its product, it has to
increase the price of its product.
2. Product Cost-
One of the most important factors affecting the price is its cost .It includes the cost of producing, distributing and selling the product. Price should recover total costs plus a profit margin. They are of
three types-
i) Fixed Costs- They are those costs, which do not vary with the level of activity of a firm. For
example- Rent, Salary, etc.
ii) Variable Costs- They are those costs which vary in direct proportion with the level of activity. For example- Costs of raw material, labour and power, etc.
iii) Semi Variable Costs- They are those costs which vary with the level of activity but not in direct proportion with it. For example- Compensatiin of a sales person may include a fixed salary plus a commission on sales.
3. The Utility and Demand-
a) The utility provided by the product and the intensity of demand of the buyer sets the upper limit of price, which a buyer would be prepared to pay. There is inverse relationship between price and
demand.
b) When the demand of the product is inelastic, a firm can fix higher price. However, when the
demand is elastic, lower price should be fixed
4. Extent of competition in the market-
a)When firm does not face any competition it has complete freedom in fixing the price of the
product.
b) But when competition is more,the price of the product is fixed keeping in mind the competitors prices.
5. Government regulations-
a) In order to protect the interests of the consumers government has all the rights to control the
prices of important commodities and services. They regulate the prices of essential products.
b) For example- medicines. The government does not allow the firms to charge a higher price of the essential products.
6. Marketing methods used-
a) The price of product is also affected by the methods and techniques used to promote the product.
b) For example- distribution system, quality of salesmen employed, quality of advertising, the type of packaging, etc.

Q.14 What is physical distribution mix? What are the two major decisions taken under physical distribution? (3)
Ans- It is concerned with making the goods and services available at the right place, in right quantity and at the right time, so that consumers can purchase the same. The two major decision areas are as
follows:
1.Choice of channels of distribution or intermediaries to reach the customers.
2. Components of physical distribution are Inventory Management, Order Processing, Warehousing and Transportation.

GOD BLESS YOU ALL!