Briefly describe the pricing policies to be followed at different stages of the life cycle of a commodity.

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Answer: Different price policies are adopted at different stages of the life cycle of a commodity. Their description is given below. I. Pricing at Presentation Stage

Creating a demand for a new commodity by inventing it and bringing it in the market is a difficult task because the market demand for such a commodity is not known. The marketing costs of such a commodity also cannot be accurately predicted. Therefore, determining the price of such a commodity is an important problem. There are usually two main methods for determining the price of a new commodity.

(1) Initial ceiling price policy or scrubbing technique Under this price strategy, the producer of a new commodity fixes a high price of the commodity until the competition comes in the market. When new competitors start coming in the market, the price of the commodity is reduced. This is called the rubbing technique. This policy is based on the fact that a lot of expenditure is incurred on the research of the commodity and initially there are no competitors in the market. Therefore, a higher price can be determined in the initial stage of the commodity. The reasons for adopting this policy may be the following:

(i) Less Elastic Elasticity of Demand – In the early stage of the commodity life cycle, the price of the commodity can be set higher because the demand for the good is less elastic, because in such a situation the commodity is new, hence the customer gives more importance to the price of the good. Do not give

(ii) Lack of competition – There is a lack of competition in the initial stage of the object. In other words, there is a monopoly-like situation. Therefore, in such a situation a higher price of the commodity can be determined.

(iii) Market segmentation on the source of income – The market can be divided on the basis of income by setting the price high. Due to the high price of the commodity, the customers of higher income group, who are not very price sensitive, are motivated to buy the commodity.

(iv) Possibility of correction of price error – If there is an error in pricing, then due to high price, there is a possibility of correction, because high price can be easily reduced.

(v) More Revenue and Profit – By setting a higher price in the initial stage of the commodity, more total sales revenue can be obtained, as a result of which more profit starts coming in the beginning itself.

(vi) Demand according to the production capacity of the firm The firm is able to produce demand according to its available production capacity at a higher price, because in the beginning the production capacity is often less.

(2) is. Under this policy, a low price is fixed in the initial stage of the new commodity so that the market commodity can be developed and the dominance of the institution can be established over most of the market. This strategy is based on the assumption that low price can lead to rapid penetration into the wider market with less marketing effort. This policy is more flexible in respect of such goods. The main advantage of this policy is that due to the low price, the potential competition is less. The following may be the reasons for adopting this custom

(i) More Elastic Demand- If the demand for the good is more elastic then in such a situation the commodity can be sold in more quantity at a lower price.

(ii) Policy of Discouraging Competition – The main objective of this policy is to discourage possible competition, because the amount of profit is less due to low price of the commodity. Because of this there is not much competition.

In order to achieve the economies of scale – due to the low price of the commodity, an increase in demand can lead to mass production, thereby reducing production and marketing costs.

(iv) Insufficiently high income group customers – If the market in which the commodity is presented, there are a small number of buyers of high income group, then by keeping the high price, a large quantity of the article cannot be sold. Hence the lower price of the commodity is determined.

(v) Less expenditure on invention – If less expenditure is incurred on the invention of the article, then the low price of the article is determined.

(vi) Intense competition- If the same type of product is being produced by other producers only after the entry of the commodity into the market, then this methodology should be used.

(vii) Low cost of production of the commodity – This method can be adopted even if the cost of production of the commodity is low.

II. pricing in growth stage

The growth phase in the life cycle of a commodity is a situation in which there is a rapid increase in sales volume. The commodity is well settled in the market and the producer gets an opportunity to make profit. Therefore, at this stage, attention should be paid to the pricing policy of the competitors. If the highest price policy has been adopted in the initial stage of the commodity, then a lower price should be fixed at this stage and if the lower penetrative price policy is adopted then it can be continued or if the situation is favorable then some higher price of the commodity should be fixed. May go. Apart from this, efforts should be made to increase the sales by adopting various promotion programs at this stage.

III. Maturity Pricing

In this stage, the rate of growth in sales of the commodity starts decreasing gradually. The main reason for this is that the object starts losing its uniqueness. Due to the extent of improvement in the design and quality of the product, the difference between the different items available in the market becomes very less. In such a situation, the producer should reduce the price of his commodity, but the decision to reduce the price should be taken only after making a proper study of the elasticity of demand of the commodity. In this situation competition should also be taken into account.

IV. Pricing at the point of fullness

In this stage the sales quantity of the commodity becomes constant, i.e. in such a state no new demand arises, only because of replacement demand, the sale of the commodity continues. In this stage the sales volume is at its peak. In such a situation, the producer should maintain such condition for a long time. At this stage all possible efforts should be made to increase the sales. In this stage, if considered necessary, the price of the commodity should be fixed and if war is expected, the price should not be reduced, but more attention should be paid to advertising and sales promotion programs.

V. Pricing in Fall Stage

In this stage, the sale of the commodity starts decreasing. The reason for this is the loss of the uniqueness of the commodity and new items start taking their place in the market. The popularity of the item wanes. In such a situation, the producer should fix such a price of his commodity so that the commodity must be sold so that the producer does not suffer loss in production. In such a situation, if the commodity has a good right over some part of the market, then the price may be charged a little more than the cost. In this case, marginal price can be recovered. In such a situation, marginal price policy can also be adopted. In the obsolescence stage there is no need to fix the price because it is not profitable to produce in this stage.

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