CHAPTER ONE

INTRODUCTION

1.0  BACKGROUND OF THE STUDY

Price is payment or compensation given by one party to another in return for goods or services. In modern economies, prices are generally expressed in units of some form of currency, although prices could be quoted as quantities of other goods or services a sort of barter exchange. The earliest record of the use of currency and prices is in 1200 BC. The earliest known written shopping list was by a roman soldier in 72-125 AD. A.T. Stewart established the first one-price system in 1846 establishing fixed prices for all of his goods and paving the way for the pricing tag. In 1861, John Wanamaker introduced the price tag in Philadelphia solidifying standard pricing as we know it.

The coupon was invented in 1895 and psychological pricing such as prices ending in .99 became popular. In 1952, the first bar code concept was patented and in 1966, the first U.K credit card was made available. In 1979, online transaction processing technology was invented by Michael Aldrich to enable online shopping. In 1991, the internet was commercialized and subsequently price intelligence was born.

Pricing is considered as an integral part of the marketing mix management. Price, cost and volume are intricately inter-related and all these affect profit. Price should be based on marketing or cost consideration. Pricing policy based on marketing considerations tend to be for short and medium-run and usually prevalent in a buyer’s market, where there is intensive competition. Approaches for marketing based pricing include high price, going-rate pricing, sealed bid pricing, FOB pricing, zone pricing, discount pricing, discriminatory pricing, penetration price, skimming price, pre-emptive pricing, PLC pricing, price warfare e.t.c. Pricing based on cost consideration are essentially cost-based which includes, full cost pricing, conversion cost method, marginal cost pricing.