L-20-PRICING
AND PHYSICAL DISTRIBUTION
A.
One Word to One Sentence Questions
Q.1. What is pricing or
price determination?
Ans. The process of determining the
price of a product is known as pricing.
Q. 2. What are pricing
policies or strategies?
Ans. Pricing policies or strategies
refer to such policies or strategies which help in determining a proper price
for the product.
Q. 3. What is cash discount?
Ans. If the buyer makes the payment
instantly then the extent to which less price is charged from him is known as
cash discount.
Q. 4. What are channels of distribution?
Ans. Channels of distribution refer
to such routes through which the product is transferred from the producers to
the consumers.
Q. 5. What is direct
channel of distribution?
Ans. Such a channel of distribution
under which producers sell their products directly to the consumers, is known
as direct channel of distribution.
Q. 6. What is indirect
channel of distribution?
Ans. That channel of distribution
under which intermediaries are functional between producers and consumers, is
known as indirect channel of distribution.
Q. 7. Name the components
of physical distribution.
Ans. Order processing, transportation,
warehousing, inventory.
Q. 8. Write any two points
of importance of physical distribution.
Ans. (i) Control over distribution
cost. (ii) Higher sales volume.
Q. 9. What is physical distribution?
Ans. The process of physical
maintenance of the products and their transfer from the place of production to
the place of consumption is known as physical distribution.
B.
Fill in the Blanks
1. Trade discount is generally given
to wholesellers.
2. Income and profit of the
organisation depend upon revenue.
3. Channels of distribution and
physical distribution are two components of place.
4. Channels
of distribution refer to the routes
of transfer of goods.
5. Warehousing is a component of physical distribution strategy.
C.
True or False Statements
1. A price is the exchange value of a
product or service. True
2. Cash discount is offered to both,
the buyer and the seller. False
3. Under penetration pricing, a firm
charges different price for different units of a commodity. False
4. Time pricing is a form of
discriminatory pricing strategy. True
5. Two level channel does not involve
agent or wholeseller. False
D.
MCQ
1. Which one of the
following is not a pricing strategy?
(a) Government policy (b) Price
skimming
(c) Penetration pricing (d) All
the above.
Ans. (a) Government policy
2. Product related factors
under channels of distribution do not include:
(a) Price of the product (b) Weight
and size
(c) Location of buyers (d)
Technical aspect.
Ans. (c) Location of buyers
3. Market related factors
under channels of distribution include:
(a) Size of the market (b) Nature
of customers
(c) Both (a) and (b) (d)
None of these.
Ans. (c) Both (a) and (b)
4. Which of the following
is a special pricing strategy?
(a) Two part pricing (b) Price
lining
(c) Odd-even pricing (d) All the
above.
Ans. (d) All the above.
5. Middlemen related
factors regarding channels of distribution do not include:
(a) Availability and
efficiency (b)
Financial position of the company
(c) Costs (d)
All the above.
Ans. (b) Financial position of the
company
Two
Marks Questions:-
Q. 1. Give the meaning of
price.
Ans. The exchange value of any
product expressed in terms of money is its price. In order to acquire the
product or service, the buyer pays the price to the seller in the form of
money.
Q. 2. What do you mean by
physical distribution?
Ans. The process of physical
maintenance of the products and their transfer from the place of production to
the place of consumption is known as physical distribution. It includes all
those activities due to which products get transferred from sellers towards
customers or consumers.
Q. 3. What is direct
channel of distribution?
Ans. Such a channel of distribution
under which producers do not avail the services of any intermediary and they
themselves sell their products directly to the consumers, is known as direct
channel of distribution. Under a direct channel of distribution, there is
direct and straight relation between producer and consumer. This channel of
distribution is the simplest and the shortest. This channel is also known as
'Zero Level Channel'.
Q. 4. What is competition
based pricing.
Ans. Under this strategy, the
enterprise determines the price of its product by keeping in mind the price
strategy of the competitor enterprises. Enterprise determines such a price for
its product which is either almost equal to or has a small difference in
comparison to the price of the substitutes produced by the competitor
enterprises.
Q. 5. What is time pricing?
Ans. Under this strategy, the
producer charges different price from the consumers at different points of
time. This discrimination for pricing can be done on the basis of hours, days,
weeks, months or seasons.
Q. 6. What is price
bundling?
Ans. Under this strategy of pricing,
the marketing of two or more than two products is done jointly in a single
package. This enhances the demand for and sale of both the products and hence
the producer gets the profit.
Four
Marks Questions: -
Q. 1. Write any four
internal factors influencing pricing.
Ans. 1. Objectives of Enterprise: The objectives of any
enterprise influence the price of the products of that enterprise. If the
objective of the enterprise is to earn maximum profit in the long run, then low
price is fixed. But, if more profit has to be earned in the short period, then high
price is fixed.
2.
Cost of Product: Cost of the product also influences
the price of the product. The higher the cost, the higher is the price On the
contrary, the lower the cost, the lower is the price.
3.
Distribution Channel and Distribution Policy: If the enterprise
adopts a long distribution channel for the distribution of its product, even
then higher price is determined. In the circumstances contrary to this, lower
price is determined.
4.
Stage in the Life Cycle of Product: The stage in the life
cycle of the product also influences the price determination of that product.
In the initial stage or in the decline stage, low price is fixed. But, in the
growth stage or the maturity stage, high price is fixed.
Q. 2. Discuss important
promotional pricing strategies.
Ans. 1. Loss Leader Pricing: This strategy is adopted
by super bazaars and departmental stores. Under it, the price of some products
of famous brands is reduced with the purpose of attracting the customers to the
purchase centres with this, the sale of all the products increases.
2.
Special Event Pricing: Under this strategy of pricing,
producers and sellers determine specific prices for their products on some
special occasions. Its objective is to enhance the sale.
3.
Low Interest Financing: Under this strategy, producers and
sellers make available finance at low rate of interest to the consumers. By
doing so, customers are motivated to purchase the product.
4.
Longer Payment Terms: Under this pricing strategy,
producers and sellers determine a longer payment period for the repayment of
loans advanced to consumers. As a consequence; the EMI, falls and the consumer
gets encouraged to buy the product.
Q. 3. Explain briefly
discounts and rebates.
Ans. 1. Cash Discount: If the buyer makes the payment
instantly at the time of purchase or within a specified period of time, then
the extent to which less price is charged from him is known as cash discount.
2.
Trade Discount: The discount in price offered by the
producers of the product to the traders or the wholesellers, is known as trade
discount.
3.
Quantity Discount: The discount which a buyer gets for
buying more quantity, is known as quantity discount. This discount promotes the
buyer to buy more quantity.
4.
Rebates: The discount offered on written
price is known as rebate. Rebate is offered when there is any fault in the
product or there is delay in executing the delivery of the product.
5.
Seasonal Discount: The discount offered on seasonal
products is called seasonal discount. This type of discount is offered when
there is off-season for the sale of the product.
Q. 4. Write any four points
of role of physical distribution.
Ans. 1. Control over Distribution Cost: Under physical
distribution, efficient methods are adopted to accomplish various tasks such as
transportation, storage, care etc. With this, physical distribution system
works with efficiency and its cost is reduced.
2.
Higher Sales Volume: Under physical distribution, better
transportation facilities, warehousing facilities and inventory management help
to ensure regular supply of products to the consumers. With this, sale of the
product increases.
3.
Price Stability: Physical distribution brings
stability in the supply of the products in the market As a result, there
remains a balance between demand for and supply of the product which in turn
ensures price stability.
4.
Effect on Product Planning: Physical distribution also
influences the product planning. While carrying out product planning, decisions
about important aspects such as transportation of the product, storage or
warehousing, order processing, inventory etc. are also taken.
Q. 5. Explain important
external factors influencing the pricing of a product.
Ans. 1. Competition in the Market: The existence of
competitors and competition in the market influence the price determination of
a product. If there is more competition in the market, then low price is fixed.
But, if there is less competition in the market, then high price can be fixed.
2.
Goodwill of Enterprise: If the goodwill of the enterprise is
better in the market, a high price can be determined very easily but, in the
contrary circumstances, a low price has to be determined.
3.
Demand for the Product: If demand for the product is high,
then high price can be fixed for that product. But, if demand for the product
is low, then low price has to be fixed for that product.
4.
Economic Conditions: In the situation of boom, high price
can be fixed. But, in the situation of depression, low price has to be fixed.
This is so because during boom demand is high, while during depression demand
is low.
