300x Filetype PPTX File size 0.13 MB Source: www.caldwellschools.com
Pricing objectives
Survival
Prices are flexible. A company can lower
them in order to increase sales enough
to keep the business going. The
company uses a survival-based price
objective when it's willing to accept
short-term losses for the sake of long-
term viability.
Profit
Price has both direct and indirect effects on
profit. The direct effect relates to whether the
price covers the cost of producing the product.
Price affects profit indirectly by influencing how
many units sell. The number of products sold
also influences profit through economies of
scale -- the relative benefit of selling more
units. The primary profit-based objective of
pricing is to maximize price for long-term
profitability.
Sales
Sales-oriented pricing objectives seek to boost
volume or market share. A volume increase is
measured against a company's own sales
across specific time periods. A company's
market share measures its sales against the
sales of other companies in the industry.
Volume and market share are independent of
each other, as a change in one doesn't
necessarily spur a change in the other.
Status Quo
A status quo price objective is a tactical
goal that encourages competition on
factors other than price. It focuses on
maintaining market share, for example, but
not increasing it, or matching a
competitor's price rather than beating it.
Status quo pricing can have a stabilizing
effect on demand for a company's
products.
What is a pricing objective?
A goal that guides a business in setting the cost
of a product or service to potential consumers.
A pricing objective underlies the pricing process
for a product, and it should reflect a company's
marketing, financial, strategic and product goals
, as well as consumer price expectations and
the levels of available stock and production
resources.
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