Introduction:

Pricing policy is nothing but a pricing of a new product. In production of a product, a distinction is made between perishable and non perishable products .a perishable product does not long for a long period. Where as a non perishable product has durability. There is different way of pricing a new product. Either the product can be charged a high price or low price. The types of pricing policy are skimming and penetrating.

“Pricing in Practice” refers to the actual implementation and determination of prices in real-world markets. While economic theory provides various models and principles for understanding how prices are set in competitive markets, the practical application of these concepts in the business world can be influenced by a range of factors like

1. Market Structure: The structure of the market plays a crucial role in determining how prices are set. In perfectly competitive markets, prices are often determined by the forces of supply and demand. In contrast, in imperfect or monopolistic markets, firms may have more control over prices due to reduced competition.
2. Costs and Margins: Businesses need to consider their production costs, overhead expenses, and desired profit margins when setting prices. The goal is often to cover costs while ensuring a competitive yet profitable position in the market.
3. Consumer Behavior: Understanding consumer preferences, elasticity of demand, and willingness to pay is essential for effective pricing strategies. Businesses often conduct market research to gather insights into consumer behavior and adjust prices accordingly.
4. Competition: The level of competition in an industry can significantly impact pricing decisions. In highly competitive markets, businesses may engage in price wars, while in less competitive markets, companies may have more flexibility in setting prices.
5. Regulatory Environment: Government regulations and policies can also influence pricing. For example, price controls, antitrust laws, and consumer protection regulations can impact how businesses set and change prices.

TYPES OF PRICING POLICY:

1. High skimming price: a skimming price is that where the initial price is high whenever a company introduces a new product, it spends a huge sum of money on advertisement the company may put the product attractive packages therefore to cover all these costs, the company fixes a high prices. If the new product which has no substitute also has a good wage, the product can be sold at high price. The company is quite sure that in course of time the substitutes are going to enter into the market. When it has no rivals, a high price is fixed for the product. When the substitutes enter into the market then the price is reduced and there by the challenge is posed. However, by the time the substitutes enter the market. it is not certain that this product will command a market value. It may lose to the product of the competitors therefore; an initial high price is suggested for a new product when it is introduced for the first time. A high initial price may be useful if the production of the product requires high technical skill and it is difficult and time consuming for competitors to enter on an economical scale.

2. Penetration price: a low penetration price pertains to charging a low price in the beginning itself. If the price is low, it can penetrate into the market quickly. It is due to the fact that the consumer may buy the product at a low price. Before fixing the low price for the new product, a market research is necessary. In the high skimming price situation, the firm gets profit which may arise in the short run quickly but in the case of low penetration price, profits may arise in the long run. one way this is advantage, for it is possible for the product to establish itself firmly in the market. If the price is raised afterwards, the demand is not going to fall. The objective of low penetrating pricing is to keep the rivals away from entering into the market with substitute products.

also read: explain the wage differentials.