Question:
Aditya owned a skincare company named ‘Nat-Ayur’. In July, 2025, he decided to launch a new herbal face cream in the market using traditional herbs like turmeric, sandalwood, neem, aloe vera, saffron etc.
The total cost of producing, packaging, distributing and selling the cream came to \( \text{₹} 60 \) per tube. ‘Nat-Ayur’ decided that this would be the minimum price to cover the cost. They wanted to earn a fair margin of profit too. For this ‘Nat-Ayur’ conducted a survey and found that the expected demand would be high. Customers were ready to pay more for herbal and chemical free products. They also found that many face creams with similar features are available in the market priced between \( \text{₹} 80 \) to \( \text{₹} 120 \). To compete effectively, ‘Nat-Ayur’ decided to price the cream at \( \text{₹} 99 \) to attract the customers while offering better benefits.
To add value to the product ‘Nat-Ayur’ invested in eco-friendly packaging, free home delivery and on-line advertisements. This uniqueness gives ‘Nat-Ayur’ a competitive freedom in fixing price of its cream.
Identify and explain any two factors that were taken into consideration by ‘Nat-Ayur’ for determining the price of their herbal face cream.
Aditya owned a skincare company named ‘Nat-Ayur’. In July, 2025, he decided to launch a new herbal face cream in the market using traditional herbs like turmeric, sandalwood, neem, aloe vera, saffron etc.
The total cost of producing, packaging, distributing and selling the cream came to \( \text{₹} 60 \) per tube. ‘Nat-Ayur’ decided that this would be the minimum price to cover the cost. They wanted to earn a fair margin of profit too. For this ‘Nat-Ayur’ conducted a survey and found that the expected demand would be high. Customers were ready to pay more for herbal and chemical free products. They also found that many face creams with similar features are available in the market priced between \( \text{₹} 80 \) to \( \text{₹} 120 \). To compete effectively, ‘Nat-Ayur’ decided to price the cream at \( \text{₹} 99 \) to attract the customers while offering better benefits.
To add value to the product ‘Nat-Ayur’ invested in eco-friendly packaging, free home delivery and on-line advertisements. This uniqueness gives ‘Nat-Ayur’ a competitive freedom in fixing price of its cream.
Identify and explain any two factors that were taken into consideration by ‘Nat-Ayur’ for determining the price of their herbal face cream.
The total cost of producing, packaging, distributing and selling the cream came to \( \text{₹} 60 \) per tube. ‘Nat-Ayur’ decided that this would be the minimum price to cover the cost. They wanted to earn a fair margin of profit too. For this ‘Nat-Ayur’ conducted a survey and found that the expected demand would be high. Customers were ready to pay more for herbal and chemical free products. They also found that many face creams with similar features are available in the market priced between \( \text{₹} 80 \) to \( \text{₹} 120 \). To compete effectively, ‘Nat-Ayur’ decided to price the cream at \( \text{₹} 99 \) to attract the customers while offering better benefits.
To add value to the product ‘Nat-Ayur’ invested in eco-friendly packaging, free home delivery and on-line advertisements. This uniqueness gives ‘Nat-Ayur’ a competitive freedom in fixing price of its cream.
Identify and explain any two factors that were taken into consideration by ‘Nat-Ayur’ for determining the price of their herbal face cream.
Show Hint
Product cost sets the minimum price (floor), while utility and demand set the maximum price (ceiling).
Differentiation through value-added services (like free delivery) allows for higher pricing flexibility.
Market surveys help in understanding the 'price sensitivity' of the target audience.
Updated On: Jul 18, 2026
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Solution and Explanation
Concept:
• Price Determination: Pricing is a crucial element of the marketing mix. It is influenced by internal and external factors that dictate the maximum and minimum price levels.
• Factors: Key factors include product cost, utility and demand, extent of competition, and government regulations.
Step 1: Identify and explain the factor: Product Cost
The first factor identified is Product Cost.
Quote: “The total cost of producing, packaging, distributing and selling the cream came to \( \text{₹} 60 \) per tube. ‘Nat-Ayur’ decided that this would be the minimum price to cover the cost.”
Explanation: Product cost includes the total cost of production, distribution, and selling. It acts as the "lower limit" or "floor price" below which a firm cannot sell in the long run. In this case, the company used its unit cost of \( \text{₹} 60 \) as the base for its pricing decision.
Step 2: Identify and explain the factor: Extent of Competition in the Market
The second factor identified is Extent of Competition in the Market.
Quote: “They also found that many face creams with similar features are available in the market priced between \( \text{₹} 80 \) to \( \text{₹} 120 \). To compete effectively, ‘Nat-Ayur’ decided to price the cream at \( \text{₹} 99 \)...”
Explanation: The presence of competitors and their pricing strategies significantly impact a firm's freedom to fix prices. If competition is high, the price usually settles near the competitors' prices. ‘Nat-Ayur’ analyzed the competitive price range (\( \text{₹} 80 \)-\( \text{₹} 120 \)) to position its product competitively at \( \text{₹} 99 \).
• Price Determination: Pricing is a crucial element of the marketing mix. It is influenced by internal and external factors that dictate the maximum and minimum price levels.
• Factors: Key factors include product cost, utility and demand, extent of competition, and government regulations.
Step 1: Identify and explain the factor: Product Cost
The first factor identified is Product Cost.
Quote: “The total cost of producing, packaging, distributing and selling the cream came to \( \text{₹} 60 \) per tube. ‘Nat-Ayur’ decided that this would be the minimum price to cover the cost.”
Explanation: Product cost includes the total cost of production, distribution, and selling. It acts as the "lower limit" or "floor price" below which a firm cannot sell in the long run. In this case, the company used its unit cost of \( \text{₹} 60 \) as the base for its pricing decision.
Step 2: Identify and explain the factor: Extent of Competition in the Market
The second factor identified is Extent of Competition in the Market.
Quote: “They also found that many face creams with similar features are available in the market priced between \( \text{₹} 80 \) to \( \text{₹} 120 \). To compete effectively, ‘Nat-Ayur’ decided to price the cream at \( \text{₹} 99 \)...”
Explanation: The presence of competitors and their pricing strategies significantly impact a firm's freedom to fix prices. If competition is high, the price usually settles near the competitors' prices. ‘Nat-Ayur’ analyzed the competitive price range (\( \text{₹} 80 \)-\( \text{₹} 120 \)) to position its product competitively at \( \text{₹} 99 \).
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