This presentation mainly focused on principles and strategies which are majorly applied in the field of fisheries marketing with examples.

1. Principles and Methods of Price
Determination
Pugazhenthi P.
FEX-MB2-05
FEC 503- Fish Marketing Management
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2. Contents
 Price & Price Determination
 Principles and Strategies for Price
Determination
 Objectives and Importance
 Factors of Price determination
 Process
 Methods of Price determination
 Pricing Methods in Fish Markets
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3. Price
What is Price ?
 Price is the value or money customers give up in exchange for a
particular offering that would serve to satisfy their needs and
wants.
 Price is the measure of the value a customer exchanges to
purchases an offering.
What is Market Price?
 The current price at which a good or service can be purchased or
sold.
What is Theory of Price?
 An economic theory that states that price for a specific good or
service is determined by the relationship between its supply and
demand at any given point.
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4. Value vs Price vs Cost vs Worth
Olajide et al, 2016 4

5. Price Determination
 Price Determination : Determination of
Prices means to determine the cost of
goods sold and services rendered in the
free market. In a free market, the forces
of demand and supply determine the
prices.
 Equilibrium Price : The price where
quantity demanded equals quantity
supplied.
 Equilibrium Quantity : Where the
supply and demand curves intersect is
where the quantity demanded equals
the quantity supplied.
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6. Principles and strategies of Price Determination
 Cost-Based Pricing:
 Cost Recovery: Ensure that the selling price
covers all production and operating costs,
including variable and fixed costs.
 Value-Based Pricing:
Customer Perceived Value: Price according to the
perceived value of the product or service in the
eyes of the customer.
 Demand and Supply:
Supply and Demand Dynamics: Assess the
balance of supply and demand to determine
whether prices should be raised or lowered.
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7. Principles and strategies of Price Determination
 Elasticity of Demand:
 Price Elasticity: Analyze how responsive demand is to price
changes and adjust pricing accordingly.
 Psychological Pricing:
 Pricing Strategies: Employ psychological tactics, such as setting
prices just below a whole number (e.g., Rs.999) to make prices
appear more attractive.
 Skimming and Penetration Pricing:
 Skimming Pricing: Initially set high prices for new products,
targeting early adopters.
 Penetration Pricing: Introduce products with lower prices to gain
market share rapidly.
 Dynamic Pricing:
 Real-Time Adjustments: Adjust prices in real-time based on
factors like demand, time of day, or customer demographics. 7

8. Principles and strategies of Price Determination
 Promotions and Discounts:
 Sales Promotions: Use discounts, coupons, and special offers to
attract customers or boost sales during specific periods.
 Geographic Pricing:
 Location-Based Pricing: Adjust prices based on geographic location,
considering factors like shipping costs and regional income levels.
 Price Discrimination:
 Customized Pricing: Offer different prices to different customer
segments based on their willingness to pay.
 Government Regulations:
 Price Controls: Comply with legal regulations that may limit price
adjustments in certain industries.
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9. Objectives of Price Determination
 Maximize long-run and short-run
profit.
 Increase sales.
 Increase market share.
 To obtain the target of return of
investment.
 Company growth
 To obtain or maintain the loyalty
and enthusiasm of distribution and
other sales personnel.
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10. Role and Importance of Price Determination
• Profitability depends on pricing
• Price is determinant of buying decision
• Price influences customer perception
• Price is a weapon to fight competition
• Price is an important part of sales and marketing promotion.
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11. Price Determining Factors
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12. SWOT analysis for fish price determination
Strengths:
Market Information: Access to data on
fish supply, demand, and market trends can
help make informed pricing decisions.
Regulatory Support: Government
regulations can provide a framework for
price determination, ensuring fairness and
sustainability.
Industry Expertise: Knowledgeable
experts can assess market conditions and
make accurate price predictions.
Technology: Advanced tools and software
can aid in data analysis and pricing
strategies.
Weaknesses:
Market Volatility: Fish prices can be highly
volatile due to factors like weather,
seasonality, and global economic events.
Data Accuracy: Reliance on data accuracy,
which may not always be precise, can lead to
incorrect pricing decisions.
Complexity: Determining fish prices often
involves intricate calculations and
considerations.
Overregulation: Excessive government
intervention can hinder market flexibility.
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13. SWOT analysis for fish price determination
Opportunities:
Sustainability: Growing consumer demand
for sustainable fishing practices can create
opportunities for premium pricing.
Emerging Markets: Expanding into new
markets or export opportunities can boost
profitability.
Technology Advancements: Utilizing data
analytics and machine learning can improve
price forecasting.
Partnerships: Collaborating with other
players in the industry can lead to more
informed price decisions.
Threats:
Environmental Factors: Climate change
and natural disasters can disrupt fish
populations and impact pricing.
Competition: Intense competition among
suppliers can lead to price wars and reduced
profit margins.
Global Trade Policies: Changes in trade
agreements and tariffs can affect the cost of
imported and exported fish.
Consumer Preferences: Shifting consumer
preferences and dietary trends may impact
demand for certain fish species.
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14. Process of Price Determination
Setting the Pricing Objectives
Determining Demand
Estimating Costs
Analyzing competitors pricing
Selecting Pricing Methods
Selecting Final Price
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15. Methods of Price Determination
Pricing
Methods
Cost - based
Pricing
Cost-plus
pricing
Markup
Pricing
Demand –
based Pricing
Competition -
based Pricing
Other Pricing
Methods
Going Rate
Pricing
Transfer
Pricing
Value Pricing
Target Return
Pricing
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16. Cost based Pricing Methods
 Cost-Based pricing (or mark-up pricing) is
a method to set the price of the goods or
services based on the cost.
 Under this, we add a percentage of the
total cost to the cost itself to get the
selling price of the product. We can add
an absolute amount to the cost as well.
 This method generally uses
manufacturing or production costs and
distributing and selling costs for setting
the price
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17. Cost based Pricing Methods
 Example :
Total Cost of 4 kg of Tuna: Rs. 1000
– Purchase of Tuna: Rs.800
– Transportation: Rs. 100
– Packaging: Rs.50
– Labor: Rs. 50
• Desired Markup: 30%
• Calculation:
– Total Cost = Rs.100
– Markup (30% of Rs.1000) = Rs.300
– Selling Price = Total Cost + Markup = Rs.100 + Rs.30 =
Rs.1300
• Profit margin – 30%.
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18. Types of Cost based Pricing
• .
Break-Even Pricing:
• Break-even pricing is used to determine the selling price required to cover all fixed and
variable costs, along with a markup to achieve profitability
• Selling Price = (Total Fixed Costs + Total Variable Costs) / Total Units Produced + (Markup
per Unit)
Cost-Plus Pricing:
• This strategy involves adding a predetermined markup to the total cost, which includes
both variable and fixed costs. The markup represents the desired profit margin.
• Selling Price = Total Cost + (Markup)
Markup Price:
• Markup pricing is a straightforward pricing strategy where a company sets the selling
price by adding a fixed amount or a percentage (the markup) to the cost of acquiring or
producing a product. Here's the formula for markup pricing:
• Selling Price = Cost + (Markup)
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19. Value Based Pricing Methods
 Value-based pricing : Pricing strategy in which the product’s price is based on
perceived value delivered to the customer instead of the actual cost of the product or
service.
 This type of pricing is most commonly used by niche industries and those that
provide customer-oriented customized products.
Good Value Pricing
 The product is priced as per the quality
of the product and service provided to
the customers concerning the product.
 The pricing depends mainly on the
quality and service associated with the
product.
Value-Added Pricing
 The product/service is priced as per the
value-added products for the customer to
use.
 From the customer’s perspective, how
much ever the value of a particular feature
in the product is worth is studied, and
accordingly, the price is decided for the
whole creation.
Types
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20. Cost based pricing Vs Value based Pricing
Aspects Cost-Based Pricing Value-Based Pricing
Basis for Pricing Primarily based on production
costs, including direct and
overhead costs.
Based on the perceived value of
the product or service to the
customer.
Profit Margin Profit margin is added to cover
costs and achieve a specified
profit level.
Profit is a secondary consideration;
prices are set to maximize
perceived customer value.
Customer Value Customer value is not the
primary consideration; pricing is
cost-focused.
Customer value is the primary
consideration; prices align with
what customers are willing to pay
for the benefits received.
Complexity Relatively simple and easy to
calculate.
Can be more complex, involving
market research, customer surveys,
and ongoing adjustments based on
customer preferences.
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21. Demand Based Pricing
What is Demand Based Pricing?
 Demand Based Pricing is a pricing method based on the customer’s
demand and the perceived value of the product.
 The customer’s responsiveness to purchase the product at different
prices is compared and then an acceptable price is set.
 Demand is rarely consistent across products and markets. Consumer
behavior and demand keeps changing based on various parameters so
the pricing methods based on demand are used.
Types of Demand Based Pricing:
 Price Skimming
 Price Discrimination
 Price Penetration
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22. Price Skimming:
 Gradual reduction targets price-sensitive customers.
 Eventually settles at a profitable operating price.
 Set initial high price for exclusive customers.
Price Discrimination:
 Vary prices based on customer demand.
 Example: Airline ticket prices rise closer to travel date.
 Different prices for the same product in different markets.
 Maximizes revenue by capturing various consumer segments.
Price Penetration:
 Set initial low price to attract a broad customer base.
 Focus on increasing market share.
 Opposite strategy to price skimming.
 Commonly employed to quickly establish a product in the market
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23. Pricing methods in Fish Markets
 Weight-Based Pricing: Fish priced by weight (e.g., per kilogram or pound).
 Per-Unit Pricing: Small fish or specific types priced per unit (e.g., per fish or
per dozen).
 Auction Pricing: Buyers bid on fish, highest bidder gets the fish.
 Grade-Based Pricing: Fish categorized by quality, size, and freshness, each
grade with a different price.
 Seasonal Pricing: Prices vary based on seasonal availability.
 Location-Based Pricing: Prices influenced by the abundance of certain fish
in a region.
 Negotiated Pricing: Prices determined through buyer-seller negotiation.
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24. References
• https://www.studysmarter.co.uk/explanations/microeconomics/supply-
and-demand/price-determination-in-a-competitive-market.
• https://smallbusiness.chron.com/price-determination-economics-
3884.html
• http://ecoursesonline.iasri.res.in/mod/page/view.php?id=145683#:~:text=
The%20minimum%20price%20is%20determined.
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