Many organization have established corporate pricing objectives which provide strong direction for pricing decisions. The clearer a firm’s objectives it is to set price.
Objectives of Pricing
A company can pursue may any of the following objectives through its pricing:
Profits are less important than survival.
Companies adopt survival as their major objective if they are facing the trouble of intense competition or changing consumer wants.
To keep the plan running, firms can cut prices.
2. Maximum Current Profit
Many firms try to set the price that will maximize current profits.
Although followed by a large number of companies, profit maximization is actually a dubious goal for an organization.
In a competitive market, it is not possible to know exactly what price will yield profits maximization.
The government also regulates the amount of profit received.
3. Target Margin
Many firms establish a profits target the desired level of profits that is considered acceptable as a profit goal.
There are two types: a target margin or a target return on investment.
A target margin is usually stated as a target percentage reflecting the ratio of profits to sales.
4. Increases Sales Volume
This pricing goal establishes a percentage increase in sales volume over some period of the time.
Firms pursue maximum have realized that sales growth does not necessarily lead to higher profits.
5. Increase Market Share
Market share may be a better indicator of corporate health.
Hence, the pricing policy of some firms is geared towards maximizing the firm’s market share.
6. Image Building
Image building may be achieved, in part, through pricing.
Hence, some businesses set high prices to build or maintain a prestige image, while others use low prices to build an “image of value“.
7. Stabilize Prices
Some firms prefer to keep prices stable because they wish to avoid the unpredictable consequences of changes.
This goal is also followed where a larger firm is the price leader and the product is highly standardized.
8. Meet Competition
Most of the firms consciously price their products simply to meet the competition.
They may adopt a policy of meeting competitor’s prices as rather a passive pricing strategy.
9. Recovery of Costs
A non-profits firm may ai for full or partial cost recovery in its pricing.
A social service agency may set a social price geared to the varying income situations of different clients.
10. Product Quality Leadership
A firm might aim to be the product quality leader in the market.
Thus, now you know the objectives of pricing.