Q.Give the meaning of 'Price' as an element of marketing mix.
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Price Determination Factors
Think about the last time you bought something — a notebook, a plate of chole bhature, or a movie ticket. You paid a certain price. But why that price? Why not double, or half? The answer isn't random. Price is determined by the interaction of two forces: demand (what buyers want) and supply (what sellers offer). In economics, price determination factors are the elements that influence where this interaction settles.
The Core Idea: Demand and Supply Meet
At its simplest, price is the point where the quantity buyers are willing to buy equals the quantity sellers are willing to sell. This is called equilibrium price. But this equilibrium doesn't happen in a vacuum. Several factors push and pull both demand and supply, causing the price to change.
Price is not set by sellers alone, nor by buyers alone. It emerges from the market forces of demand and supply. No single person decides it — the market does.
Factors That Affect Demand (and Therefore Price)
Demand is not just "wanting" something. It means wanting it and having the ability to pay. The following factors shift demand:
- Price of the good itself: This is the most direct. Generally, when price rises, demand falls (and vice versa). But this is a movement along the demand curve, not a shift.
- Income of consumers: If people earn more, they tend to buy more of most goods (called normal goods). For inferior goods (like cheap staples), higher income might actually reduce demand.
- Prices of related goods:
- Substitutes (tea vs. coffee): If tea becomes expensive, demand for coffee rises.
- Complements (petrol and cars): If petrol prices shoot up, demand for cars may fall.
- Tastes and preferences: A new health trend can boost demand for organic food; a fashion change can kill demand for bell-bottoms.
- Expectations about future prices: If people expect prices to rise next month, they buy more today, pushing current prices up.
- Population and its composition: More people generally means more demand. An ageing population may demand more healthcare, less toys.
Factors That Affect Supply (and Therefore Price)
Supply is the quantity sellers are willing to offer at a given price. Key factors:
- Cost of production: If raw materials, wages, or electricity become cheaper, supply increases (sellers can profit at lower prices). If costs rise, supply shrinks.
- Technology: Better machinery or methods reduce costs and increase supply.
- Prices of other goods: A farmer deciding between wheat and sugarcane will supply more of whichever fetches a higher price.
- Government policies: Taxes (GST, excise) raise costs and reduce supply. Subsidies lower costs and boost supply.
- Natural factors: For agricultural goods, weather, floods, or droughts directly affect supply.
- Number of sellers: More firms in a market usually mean more supply.
How These Factors Interact to Determine Price
Imagine a sudden drought. Supply of wheat falls (factor: natural conditions). At the same time, demand remains the same (people still need bread). The result? The equilibrium price of wheat rises. Now imagine the government gives a subsidy to farmers. Supply increases, and if demand doesn't change, price falls. …
Part (b)Concept understanding — Sales Promotion Role
Let’s start with something you already know. Imagine you walk into a supermarket and see a bright yellow shelf-talker: “Buy 2, Get 1 Free” on your favourite chips. Or you open a new app and get a pop-up: “Use code STUDENT20 for 20% off your first order.” That’s sales promotion in action. It’s the short-term push that makes you act now — not later, not maybe.
What exactly is a Sales Promotion?
In marketing, sales promotion refers to short-term incentives or activities designed to encourage the immediate purchase of a product or service. Unlike advertising, which builds a brand’s image over time, or personal selling, which relies on a one-on-one conversation, sales promotion is a direct, temporary inducement that adds extra value to the offer.
The NCERT textbook (Class 12, Business Studies, Chapter 11 – Marketing) defines it clearly:
Sales promotion includes those marketing activities other than personal selling, advertising, and publicity that stimulate consumer purchasing and dealer effectiveness.
Think of it as the “extra push” at the point of sale — a free sample, a contest, a discount, or a gift with purchase. Its job is to break the customer’s inertia and convert a “maybe” into a “yes.”
Why does it matter? The role of sales promotion
Sales promotion plays three distinct roles, depending on who it targets:
1. For the consumer (you and me)
It creates urgency and trial. A limited-time offer makes you decide faster. A free sample lets you try a new shampoo without risk. Common tools: coupons, rebates, contests, free gifts, and price-off deals.
2. For the trade (retailers and wholesalers)
It motivates dealers to stock, display, and push the product. A retailer might get an extra discount for buying in bulk, or a bonus for giving the product prime shelf space. Tools: dealer discounts, free goods, cooperative advertising, and sales contests.
3. For the sales force (company’s own salespeople)
It energises the team to meet targets. Bonuses, prizes, or recognition programmes push salespeople to work harder during a slow season or a new launch.
Sales promotion is not a substitute for advertising or personal selling. It works alongside them. Advertising builds the brand; sales promotion closes the sale. If you use too many discounts, customers may stop buying at full price — that’s a real risk.
A simple way to remember the role …
Part (a)
Price as an element of the marketing mix is the amount of money that a customer pays, or is expected to pay, to obtain a product or service. It is the only element of the marketing mix that generates revenue (all the others involve cost), and it strongly influences the demand for the product. …
Part (a): Price is the amount of money a customer pays for a product — the only revenue-earning element of the marketing mix. Part (b): Public relations is managing communication with various publics to build a favourable image.
Part (a)
Price is one of the four elements of the marketing mix (product, price, place, promotion). It refers to the amount of money that customers have to pay to obtain a product or service. Price is a very sensitive element because it directly affects the demand for the product and the sales revenue of the firm. It is also the only element of the marketing mix that generates revenue — product, place and promotion all involve costs, whereas price brings in income. In fixing the price a firm must take into account its cost, the customers' expectations, the degree of competition and its own marketing objectives. …
Showing the 12 most recent of 38 on this concept.
- CBSE 2026Set MARCH1 markQ.What is sales promotion?
›Reveal solutionSolution
Sales promotion = short-term incentives to increase sales.
In this GSEB Class-12 Commerce marketing question, sales promotion refers to the temporary incentive schemes offered to customers and dealers - such as discounts, free samples, gifts, coupons, exchange offers and contests - to stimulate immediate demand and support adv …
- CBSE 2026Set ANNUAL1 markQ."Dazzle Cosmetics was distributing small pouch in a shopping mall for free for customers to try out their newly launched cosmetic products." Identify the sales promotion technique adopted by the above company.
›Reveal solutionSolution
The technique is Free sampling.
Among sales promotion techniques (short-term incentives to boost sales):
- Rebates — temporary price reduction on existing stock.
- Discounts — reduction from the list price.
- Free samples/sampling — giving away a small trial quantity of the product free of cost so new or hesitant customers can try it and get convinced of its quality, often used while launching a new product. …
- CBSE 2025Set MARCH1 markQ.__________ is an unpaid form of Communication.
›Reveal solutionSolution
The blank is filled by 'Publicity'.
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- CBSE 2025Set ANNUAL1 markMCQQ.Marketing expenditure is a burden on (A) industry (B) businessmen (C) customers (D) all of these
›Reveal solutionSolution
Marketing expenditure is ultimately borne by customers, since it is built into the selling price.
Whatever a firm spends on marketing (advertising, promotion, distribution and so on) becomes part of its total cost, and this cost is recovered through the price charged for the product. Because the price is paid by the buyers, the marketing expenditure is finally passed on to and borne by the customers. The industry …
- CBSE 2025Set ANNUAL1 markMCQQ.Costliest means of sales promotion is (A) Advertisement (B) Personal selling (C) Sales promotion (D) Public relations
›Reveal solutionSolution
Personal selling is the costliest tool of promotion because it relies on individual, face-to-face contact.
The promotion mix includes advertising, personal selling, sales promotion and public relations. Personal selling uses a salesforce to deal with customers individually, which means high cost per contact in terms of salaries, training and time. Advertising reaches large audiences at a low cost per head, and sales promotion and public relations are comparatively …
- CBSE 2025Set ANNUAL1 markMCQQ.The element of marketing mix are involved in 'Price' is - A) Price level B) Advertisement C) Public relation D) Packaging
›Reveal solutionSolution
'Price level' is the component of the Price element of the marketing mix.
The marketing mix has four Ps. Decisions under Price relate to how much the customer pays — the price list, the price level, discounts, credit terms and payment period.
…
- CBSE 2025Set ANNUAL1 markQ.Answer in one word/sentence: Free samples product distribution is a technique of -
›Reveal solutionSolution
Free sample distribution is a sales-promotion technique.
Sales promotion consists of short-term incentives offered to buyers to boost sales. Distributing free samples lets customers try a product and encourages them to buy it, so it is a tool of sales promotion (like discou …
- CBSE 2025Set ANNUAL1 markQ.Name any two techniques of sales promotion.
›Reveal solutionSolution
Sales promotion uses short-term incentives such as discounts and free samples to boost immediate sales.
Sales promotion covers short-term, non-recurring incentive activities designed to spur quick purchase or trial of a product. Commonly used techniques include: Rebates/discounts (temporary price cuts to clear stock or attract buyers), free samples or gifts (letting customers try a product at no cost), contests offering prizes, premiums (an e …
- CBSE 2025Set ANNUAL1 markQ.'Customers are given an offer of "buy 2 and get 1 free", on the purchase of a product'. Name the sales promotional technique highlighted in the above statement.
›Reveal solutionSolution
"Buy 2 and get 1 free" is a Product combination (buy-X-get-Y-free) sales promotion technique.
Sales promotion uses short-term incentive tools to encourage immediate purchase. Common techniques include:
- Rebate — offered when stock needs to be cleared.
- Discount — a reduction in the price for a limited period.
- Refunds — part of the price is returned on proof of purchase.
- Product combinations — giving an extra item free, or several items packaged together at a price lower than if bought separately (e.g., "buy 3, pay for 2," or "buy 2 get 1 free"). …
- CBSE 2025Set ANNUAL1 markQ.Fill in the blank: ‘Buy one, get one free’ is an example of one of the techniques of _________.
›Reveal solutionSolution
'Buy one, get one free' is a sales promotion technique.
Sales promotion refers to short-term, non-personal incentives used to boost sales quickly, as a supplement to advertising and personal selling. Common sales-promotion tools include discounts/rebates, 'buy one get one free' or other quantity offers, free samples, contests, coupons, and premium/gift offers. 'Buy one, get one free' works by giving the customer extra value for the same price, which prompts an immediate purchase decision — exactly the quick, temporary, incentive-driven nature of sales promotion, as opposed to advertising (which builds long-term …
- CBSE 2024Set MARCH1 markQ.What is sales promotion?
›Reveal solutionSolution
Sales promotion = short-term incentive schemes to increase sales.
Sales promotion refers to those marketing activities, other than advertising and personal selling, that provide short-term incentives to stimulate quick buying. Examples include discounts, coupons, free samples, gifts, exchange offers, contests and demonstrations. Its purpose is to attract new customers, clear stock, meet competition and give a …
- CBSE 2024Set MARCH1 markQ.Offering products at less than list price is ————
›Reveal solutionSolution
The blank is 'Rebate' — selling at a special price below the list price.
…
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