How Can Price System Be Implemented?

Pricing of the products and the services is one of the major factors of Marketing Mix. There are various things which are considered for implementing a price system. From a business point of view the first major consideration is the cost per unit of the product which is calculated by adding direct material cost per unit, direct labor cost per unit and manufacturing overhead.

Once the company determines the cost per unit of product then the company has two pricing strategies which include penetrating pricing strategy or skimming pricing strategy. The company has to select one strategy out of the two strategies. If the company is offering a luxury product then it can directly go to premium prices and for this the competitors' pricing strategies are to be considered. On the other hand if the product is a normal good then penetration strategy can be good if the company wants to go for long term survival and profits.

However, if the company wants short-term profit gain in the market then it can go for skimming prices and in the start it will earn profit but not in the long run. If the firm is manufacturing a homogeneous product then prices are standardized by the government like prices of wheat, rice, cement etc. In this way the complete pricing process is carried out.