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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 methods and practices that were economically viable, environmentally 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 products. He also thought 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 which 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 mininum profit. He examined the quality 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 be 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. 

1. Identify the concept. 

2. Explain briefly any four factors discussed in the above case related to the concept so identified.

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1. The given case relates to “Pricing” as a component of marketing mix. 

2. Following factors related to pricing have been discussed :

Product cost – The product cost sets the minimum level or the floor price at which the product may be sold. As far as possible, price of the product should cover his cost and a reasonable profit. However, in case of a new product or new market, price may be fixed below cost.

Utility and demand – Utility provided by the product and the intensity of the demand of the buyer sets the upper limit of the price. A consumer will not pay price more than the utility of the product. When demand of the product is inelastic, the firm can charge higher price.  

Competition – Competitors’ prices and their anticipated reactions must be considered before fixing the price of the product. In case of intense competition the firm will keep the price low. 

Objectives – Pricing policy of a firm is influenced by the objectives of setting the price. The objectives may be to capture a large market share, to increase profits, to increase sales or to survive only. 

For example, if the objective is to maximise sales or have a bigger market share, a low price will be fixed.

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