Price fixation is affected by the factor ‘marketing methods used’. Which of the following decisions of a firm falls under this factor?
Answer & explanation
Correct answer: option 2
The correct answer is Option (2) → Employing better quality salesmen and spending more on advertising
Option (1) Studying the prices of rival products and how the rivals may react — Incorrect. This belongs to the factor extent of competition in the market. A firm studies what rivals charge and how they may react before it fixes its own price.
Option (2) Employing better quality salesmen and spending more on advertising — Correct. The factor marketing methods used means the other elements of marketing that affect the price. They include the quality of salesmen, the quality and amount of advertising, sales promotion and packaging. Strong or unique elements of this kind give the firm more freedom in fixing its price.
Option (3) Studying the benefit buyers expect and how strongly they want the product — Incorrect. This is the factor utility and demand. The benefit buyers expect and how strongly they want the product set the upper limit of the price.
Option (4) Working out the cost of producing, distributing and selling the product — Incorrect. This is the factor product cost. The cost of producing, distributing and selling sets the lowest price at which the product may be sold.
NCERT (2026-27 Edition): “6. Marketing Methods Used: Price fixation process is also affected by other elements of marketing such as distribution system, quality of salesmen employed, quality and amount of advertising, sales promotion efforts, the type of packaging, product differentiation, credit facility and customer services provided. For example, if a company provides free home delivery, it has some of flexibility in fixing prices. Similarly, uniqueness of any of the elements mentioned above gives the company a competitive freedom in fixing prices of its products.” |