After acquiring the necessary knowledge and skills on starting an Aloevera Farm, Ashok wanted to be the leading manufacturer of Aloevera products worldwide. He observed that the products were expensive as the demand of the products was more than the supply. He was also keen to promote was more than the supply. He was also keen to promote methods and practices that were economically viable, envirnomentally sound and at the same time protecting public health.
Ashok's main consideration was about the amount of money paid by the consumers in consideration of the purchase of Aloevera product. He also though that competitors prices and their anticipated reactions must also be considered for this.
After gathering and analysing information and doing correct marketing planning, he came to know that the consumers compare the value of a product to the value of money they are required to pay. The consumers will be ready to buy a product when they perceived that the value of the product is at least equal to the value of money which they would pay.
Since he was entering into a new market, he felt that he may not be able to cover all costs. He knew that in the long run the business will not be able to survive unless all costs are covered in addition to a minimum profit.
He examined the qualit and features of the products of the competitors and the anticipated reactions of the consumers. Considering the same he decided to add some unique features to the packaging and also decided to provide free home delivery of the products.
The above case relates to a concept which is considered to b e an effective competitive marketing weapon. In conditions of perfect competition most of the firms compete with each other on this concept in the marketing of goods and services.
`(a)` Identify the concept.
`(b)` Explain briefly, any four factors discussed in the above case related to the concept so identified.

Explanation

`(a)` Pricing It refers to the process of determining the price of a product. Price of a product refers to the amount of money that the customer has to pay to obtain a product from the market. Pricing is considered as a regulatior of demand of a product, because , when the price of the product, because, when the price of the product is increased, demand falls, and vice-versa.
Under Perfect Competition, most firms compete with each other on the basis of this factor. Therefore, firms give great importance to the fixation of price for their goods and services.
`(b)` 'Factors affecting price determination
`(1)` Product Cost
The total cost of product includes production, selling and distribution costs. In the long run the firm strives to cover all their costs. The costs sets the minimum level or floor price for a product. In addition to that firm aims to earn profit margin over and above the costs.
Costs can be broadly divided into three categories :
`(i)` Fixed costs, which do not vary with change in production.
`(ii)` Variable costs, which vary at all level of production.
`(iii)` Semi-variable costs, which vary with production, but not in direct proportion with it.
Total cost is the sum total of fixed, variable and semi variable cost, at a specific level of activity. Price is determined by adding a profit to the average cost of a product.
`(2)` The utility and Demand
It is necessary to anticipate the utlity and demand of a product, while fixing the price, as if a product is offering higher utility, one can easily charge high price from the customer.
Whereas, if utility is low, one cannot charge high price for such products. On the other hand , if the demand is elastic, price should be set a lower level and if the demand is less elastic or inelastic price can be set a higher level.
`(3)` Extent of Competition in the Market
The price of a product can be set upto the higher limit, if the extent of competition is low in the market, and vice-versa. Competitors' price, their reactions, their product, quality and features must be considered before fixing the price.
`(4)` Government and Legal Regulations
To protect the interest of general public, the government has all the rights to control the prices of various products and services by including the products in the category of essential commodities such as drugs, some food items, LPG, etc. With government intervention, there can be a check on the activity of monopolist as they cannot charge unfairly high price for essential commodities.
`(5)` Pricing objectives
If the objective of the firm is to maximise sales, price will be set at a lower level, whereas, if the firm's objective is profit maximisation, price will be set at a higher level. Apart from this, the firm's other pricing objectives may be.
`(i)` Obtaining market share leadership by setting the price at lower levels.
`(ii)` Surviving in a competitve market by setting price at lower levels, in order to face intense competition efficiently.
`(iii)` For attaining product quality leadership higher prices are set to cover high quality and cost of research and development.
`(6)` Marketing Methods Used
The price of the product also gets affected by various techniques and methods of marketing used to promote the products. If the company is using intensive advertising to promote the sale of product, then it will charge high price.
Other marketing methods, which affect price of a product are type of packaging, distribution system, salesman employed, customer support services, etc.