How to Set-Up an Enterprise


In India, price is often affected by excise duty, sales tax and local taxes like octroi, thereby making it difficult to maintain a uniform price throughout the country. You may opt for any of the following policies or modify and combine them depending upon your objective or you can have your own pricing policy :

"Return on Investment" pricing

The price is fixed after taking into consideration the financial aspect. 'Amount spent and return expected' is the key factor in deciding the price. This has relation with the sales forecast too.

"Penetrating the Market with a Low Price"

This involves selecting the lowest yet profitable price per unit so that you can sell a maximum number of units. Once your product is in demand or is accepted in the market, you can increase the price of your product.

Introducing A Product At A Premium" Price Policy

When a product is innovative and competition is low or non existent, this policy can be applied. You can make optimum profit. When you face competition later, you can lower the price.

"Ethical" Pricing

Price is fixed keeping the welfare of the society in mind. For many life saving drugs, this particular policy is used. The product is sold at the lowest possible price with either a very reasonable margin or no profit at all. Profit may be earned from other products.

"Full Line" Pricing

If you are selling a range of particular product for example pickles, then you price the product in a particular range, this way you may earn more profit in one flavour and less on the other. But, you cannot sell only the one that gives you maximum profit, or else a customer may switch over to another brand where he would be able to exercise an option for other flavours.

"Pricing On The Basis Of Competition"

In this case, you follow the leader for fixing the price. "Rasna" is the leader in the area of synthetic sherbets. Pricing of a similar product will have to be decided based on the price of "Rasna".

Before fixing the price of product, ask yourself is the price reasonable, would you buy the product at the price you have decided upon if you were a customer.

You must also ascertain:

  • the retail prices of competing brands
  • the commission offered to traders/distributors/stockists by competitors
  • the ex-factory price (including taxes) of the competing brands
  • the pricing strategy you want to adopt
  • the special features of your product that would not hinder the customers from buying your products
  • if you are charging higher price than that of your competitor.