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Market pricing refers to the process of deciding the prices according to the market value which means deciding the price of the product according to the thinking of the customers which they are willing to pay for that product. A very simple example of this is the auction in a art market where the bidders bid for the work piece and set a value for the work piece and the bidder who bids the highest amount owns that piece and sets the value of the piece in the market. Similar process is followed in the housing market where vendors decide the value of houses and then after bargaining the price of house is set in the market. So overall the customers decide the prices of products and which constitutes market pricing.

In today’s high competitive world the big and small companies are in a big fix of providing their products at lowest prices possible to attract the more number of customers and ultimately achieve their goal of making large profits. So now the question that comes to everyone’s mind is how to decide the low level of pricing which can help the companies in making profits. So the best approach which can be done is to do the calculation by marginal costing. Marginal costing can be interpreted as the price of producing just one more product.

Marginal costing in practical sense implies that the fixed costs of products are earned by a certain defined sale of the products that are priced. So the variable cost is affected by the thinking of producing the one extra product, which gives profit in the sense that is after producing extra unit of product we sell the product at very small profit per unit, then also we can have good profits leading to a good business.

Written by: Matt

We also suggest this relevant article if you have time: Expectancy Theory by Victor Vroom

Some other similar articles

• Variable Costing
• Industry Change by Anita M. McGahan
• Stakeholder Management
• Return on Investment or ROI
• Total Shareholder Return or TSR