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 dollar 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
- 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"
- build store traffic
- help prepare for the sale of the business (harvesting)
- social, ethical, or ideological objectives
See also: marketing, pricing, strategic planning, price