Marketing Paper 1, May/June 2014  
Questions: 1 2 3 4 5 6   Main
General Comments

Question 4

Question  4

  1. State four determinants of price.
  2. Explain the following pricing method:
  1. Competitive pricing;
  2. Cost-plus pricing;
  3. Demand oriented pricing.



Majority of the candidates attempted this question and performed poorly.  The expected answers included:



          (a)      The determinants of price:

  1. Cost of the production – This is the most important in pricing a product.
  2. Ability and willingness of customers to pay – Sellers are always conscious of customers’ purchasing power and their willingness to pay the prices charged for the products on sale.
  3. Competition – The extent of competition among sellers has huge impact on pricing of products.
  4. Company objectives – The objectives of the company has a considerable impact on the price of a product.
  5. Government legislation /policy – Sometimes, the pricing of products is subjected to government legislation especially in government controlled economies.
  6. Marketing intermediaries – Middlemen often have a say in determination of the price of a product.
  7. Demand for the product – Sellers will always consider levels of demand for their goods in fixing prices for products.
  8. Seasonal product – Producers tend to reduce price during off-season period.
  9. Cost of distribution: This is the cost of moving a product from the producer to the customers.
  10. Cost of promotion -  This is the cost incurred in creating awareness for the product.

          (b)     Pricing methods:

                   (i)       Competitive pricing  -  This is a method of pricing where the company                               determines the price taking into consideration what their competitors                                 charge for the same product.                                                                             
                      (ii)      Cost Plus  -  This is a method which the final selling price is the cost of                              material and labour services in addition to a proportion representing the                                      client’s profit/mark up. The addition to the cost is meant to be made up                                     completely of profit/mark up.     
(iii)     Demand Oriented Pricing – Firms aimed at influencing consumer perceptions or behaviours through their needs for product based on perceived value pricing, price-quality relationship, loss leader pricing, odd price lining.  

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