Pricing objectives

Pricing objectives or goals give direction to the whole pricing process. Determining what your objectives are is the first step in pricing. When deciding on pricing objectives you must consider: 1) the overall financial, marketing, and strategic objectives of the company; 2) the objectives of your product or brand; 3) consumer price elasticity and price points; and 4) the resources you have available.

Some of the more common pricing objectives are:

maximize long-run profit
maximize short-run profit
increase sales volume (quantity)
increase monetary sales
increase market share
obtain a target rate of return on investment (ROI)
obtain a target rate of return on sales
stabilize market or stabilize market price: an objective to stabilize price means that the marketing manager attempts to keep prices stable in the marketplace and to compete on non-price considerations. Stabilization of margin is basically a cost-plus approach in which the manager attempts to maintain the same margin regardless of changes in cost.
company growth
maintain price leadership
desensitize customers to price
discourage new entrants into the industry
match competitors prices
encourage the exit of marginal firms from the industry
survival
avoid government investigation or intervention
obtain or maintain the loyalty and enthusiasm of distributors and other sales personnel
enhance the image of the firm, brand, or product
be perceived as “fair” by customers and potential customers
create interest and excitement about a product
discourage competitors from cutting prices
use price to make the product “visible"
help prepare for the sale of the business (harvesting)
social, ethical, or ideological objectives

Pricing objectives

Topic: Finance

See also