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 ` 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 ` 80 to ` 120. To compete effectively, ‘Nat-Ayur’ decided to price the cream at ` 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.

Hint:

Pricing factor identification cues: - Total expenditures, fixed/variable costs, profit margins $\rightarrow$ Product Cost - Buyer preferences, willingness to pay, unique utility $\rightarrow$ Utility and Demand - Competitor products, alternative substitutes, market price ranges $\rightarrow$ Extent of Competition

Answer 1

Concept: Pricing is a crucial component of the marketing mix ($4$ Ps) and represents the exchange value of a product in terms of money. Determining the price of a product is a complex decision influenced by several internal and external factors, such as production expenses, target consumer demand, market competition, government regulations, and organizational objectives. Detailed Identification and Explanation (Any Two Factors): You can identify and explain any two of the following key pricing factors explicitly discussed in the case study:

• Product Cost

• Quoted Lines from Text: "The total cost of producing, packaging, distributing and selling the cream came to ` 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."

• Detailed Explanation: Product cost sets the absolute floor or the minimum boundary below which a firm cannot price its goods in the long run. It encompasses total fixed costs, variable costs, and semi-variable expenses incurred across production, packaging, logistics, and promotions. A sustainable organization must fix its price at a level that completely recovers these total costs and provides a reasonable, fair margin of profit to reward investors and fund future growth.

• Utility and Demand

• Quoted Lines from Text: "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... This uniqueness gives ‘Nat-Ayur’ a competitive freedom in fixing price of its cream."

• Detailed Explanation: While cost sets the lower pricing boundary, customer utility and market demand set the upper ceiling or maximum limit. If demand for a product is highly inelastic because of its unique benefits (such as being organic, chemical-free, or eco-friendly), buyers are willing to pay a premium price. Aditya leverage this deep utility and high demand intensity to enjoy greater pricing flexibility and strategic freedom.

• Extent of Competition in the Market

• Quoted Lines from Text: "They also found that many face creams with similar features are available in the market priced between ` 80 to ` 120. To compete effectively, ‘Nat-Ayur’ decided to price the cream at ` 99 to attract the customers while offering better benefits."

• Detailed Explanation: The pricing strategy of competitors heavily dictates how a new firm positions its product. When the market contains close substitutes, an enterprise cannot fix its price independently without assessing competitors' pricing benchmarks and quality offerings. ‘Nat-Ayur’ thoroughly analyzed rival products pricing range ($\text{\` }80 - \text{\` }120$) and strategically positioned its own premium herbal face cream at $\text{\` }99$ to gain a distinct competitive edge, maximizing customer acquisition.