Price is a very important element in marketing mix. It makes the difference in competition.It is a direct source of revenue. Covers costs and generates profits.
Pricing is the factor that very much influences the buyers purchase decision.

Pricing strategy is determined by
Demand for a product
Cost for a product
Competition of the product. (among other factors)

Cost plus or Full cost Pricing
Common Method, price set to cover the costs with a profit percentage.

Pricing for a Rate of Return
Firms face changes in costs and that is difficult in adjusting price accordingly.
Also known as target pricing
This is the redefined version of full cost pricing, does ignore competition, and the demand structures.
Though based on costs, plays with overheads and fixed costs and capital employed.

The policy is constantly revised on terms of percentages in mark up costs, total sales, and ROI Capital.

Marginal Cost Pricing

While other pricing structure is based on Fixed and Variable costs, Marginal cost pricing ignores fixed costs, and determines prices based on marginal costs.  The firm only uses those costs that are directly attributed to the output of a specific product.

Advantages:

• Competitive pricing, controllable while fixed costs are not.
• Aggressive pricing policy, swings from full cost pricing to rate of return pricing.
• Influences sales volume which influences the costs in production to reduce.
• Best practice when it comes to changing product lifecycle. Fusing short run marginal cost and separable fixed cost data relevant to each stages of product lifecycle, not a long rung full cost but more stage wise.

Going Rate Pricing

The emphasis is on the market than the cost. Price is adjusted to the prevailing prices in the market. Cost is difficult to measure; logically rational pricing policy will be to follow the going/prevailing rate scene of the market.

Price leadership can be established, however the consequences of loosing customer (High Price) to acquiring customer and seller backlash (Lowered Price) must be kept in mind. The safest course is confirming the prices of others.

Customary Pricing

Price of certain goods becomes more or less fixed due to the prevailed structure for a long period of time. This is not via any attempt of the seller to do so.

Customary Price is maintained even when the product is changed. The basic rule here: Maintaining the existing price for as long as possible.

Pricing is important element of the marketing mix. Pricing is affected not only by the cost of manufacturing but also the :
– Objective of  the company in relation to market share and sales
– The nature and intensity of the competition
– Stages of product Life Cycle, at the product’s current position.
– Nature of the product.

There are various pricing method that one may follow to be the able to charge the maximum with basic market survival in terms of costs and competition. It also is the representation of quality of product. Pricing strategy are either in Penetrative model or Skimming model, one is focused to acquire market shares while the other is towards generating maximum from the small but premium customer segment.

Indepth Pricing Theory: (Wikipedia)