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 were available in the market priced between ` 80 and ` 120. To compete effectively, ‘Nat-Ayur’ decided to price the cream at ` 99 to attract customers while offering better benefits. To add value to the product, ‘Nat-Ayur’ invested in eco-friendly packaging, free home delivery and online advertisements. This uniqueness gave ‘Nat-Ayur’ competitive freedom in fixing the 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 ` 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 were available in the market priced between ` 80 and ` 120. To compete effectively, ‘Nat-Ayur’ decided to price the cream at ` 99 to attract customers while offering better benefits. To add value to the product, ‘Nat-Ayur’ invested in eco-friendly packaging, free home delivery and online advertisements. This uniqueness gave ‘Nat-Ayur’ competitive freedom in fixing the 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.
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Remember: Product cost sets the minimum price floor (lowest boundary) , while the degree of utility, demand, and market competition sets the ceiling (highest boundary).
Updated On: Jun 25, 2026
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Correct Answer: 4
Solution and Explanation
Step 1: Concept
Factors Affecting Price Determination.
Step 2: Meaning
Several internal costs and external market factors simultaneously influence the final selling price of a product.
Step 3: Analysis
• Product Cost: The total cost of producing, packaging, and distributing the cream came to ₹60 per tube. This cost sets the lower limit (floor) of the price, ensuring the business recovers its basic expenses.
• Extent of Competition in the Market: The company observed that similar creams were priced between ₹80 and ₹120. To compete effectively and attract buyers, they used competitor pricing as a strategic benchmark and set their price at ₹99.
• Note: Utility and demand (expected demand was high) and Marketing methods used (eco-friendly packaging, free delivery) are also valid alternative factors present in the case.
Step 4: Conclusion
'Nat-Ayur' determined its pricing strategy by successfully balancing its internal product costs with the external competitive landscape.
Factors Affecting Price Determination.
Step 2: Meaning
Several internal costs and external market factors simultaneously influence the final selling price of a product.
Step 3: Analysis
• Product Cost: The total cost of producing, packaging, and distributing the cream came to ₹60 per tube. This cost sets the lower limit (floor) of the price, ensuring the business recovers its basic expenses.
• Extent of Competition in the Market: The company observed that similar creams were priced between ₹80 and ₹120. To compete effectively and attract buyers, they used competitor pricing as a strategic benchmark and set their price at ₹99.
• Note: Utility and demand (expected demand was high) and Marketing methods used (eco-friendly packaging, free delivery) are also valid alternative factors present in the case.
Step 4: Conclusion
'Nat-Ayur' determined its pricing strategy by successfully balancing its internal product costs with the external competitive landscape.
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