PRICING: POLICIES AND METHODS

PRICING: POLICIES AND METHODS

PRICING: POLICIES AND METHODS

The primary purpose of any business is to make a profit and it is, therefore, the primary duty of the ONLINE MARKETING Manager to formulate and implement policies which will maximize that profit per unit of capital employed in the business.

Profitability depends, among other things, on a suitable price policy which itself is influenced by two major factors-costs and the market situation.

COSTING

The cost of manufacturing any product can be established mathematically. Average cost is the total of all costs divided by the quantity actually produced or which it is anticipated will be produced. In arriving at their selling price many firms still take their average cost of making the product and add a margin of profit. The following is a fairly typical method of approach:

Material cost �5,000

Labour cost �3,000

Packing cost �2,500

Transport cost �1,500

Total �12,000

Total number of units produced = 6,000 Therefore, average cost per unit = �2

If the producer decides to apply a profit of 15 per cent he will arrive at a selling price of �230. This he will have achieved by taking the average cost plus his margin of profit. This method of pricing is known as the cost-plus approach, that is to say, cost plus margin.


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Please Note

The Trade is, of course, a major source of product ideas. All manufacturers examine, with avid interest, the new products of their competitors.

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