Meaning and Types of Selling Costs in Economics.
Here Information help us to understand the Meaning and Types of Selling Costs in Economics.
Meaning and Types of Selling Costs:
Selling costs have been defined as the costs necessary to persuade a buyer to buy one product rather than another or to buy from one seller rather than from another. The cost incurred on advertisements, publicity, propaganda, salesmanship etc. are known as selling costs.
If Everyone had a perfect knowledge of the qualities of every variety or brand of the product, there would be no need of any kind of salesmanship or selling costs.
Under Perfect Competition, all the firms produce homogeneous product and there is perfect knowledge of the market both on the parts of the buyers and the sellers. Hence under perfect competition, a firm is not required to incur any selling costs.
Same way, Under Monopoly, there is only one firm in the industry producing a product which has no close substitutes and therefore, here selling costs are unnecessary in such a situation.
It is only Under Monopolistic Competition where the firms produce differentiated products which are close subsitutes for each other and the buyers's knowledge is less than perfect and he lacks the objective standard by which to judge the quality of the products that selling costs are necessary to incur.
It can be said that the selling costs are an important characteristic of Monopolistic Competition.
Now we will Discuss about the Forms and Types of Selling Costs:
Forms of Selling Costs:
There are two important forms of selling costs:
- Selling costs may take the form of Expenditure on advertisement in newspaper and magazines, radio and television etc., salaries and allowances of salesmen, window-display, free samples and gift coupons etc.
- Selling costs may also take the form of facilities given to the wholesale and retail traders such as credit facilities higher commissions, acceptance of the unsold stock, etc.
There are two types of Advertisements. They are as follows:
- Informative Advertisement: This type of advertisement gives information to the prospective buyers about the existence of the product, its price and quality, its availability and method of using it etc. Such information help buyers to make a rational choice.
- Persuasive Advertisement: This type of advertisement persuades the buyers to purchase a particular product instead of other products available in the market. This type of advertisement attempts to impress upon the minds of the people that the advertised product is superior to the products of the rival firms.
Economics- Monopolistic Competition- Selling Costs.
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