Gaining market position is important especially for new product. A lower price may be used to gain sales and market share of the company. Normally new buyers will be attracted by a lower price and try out the new product. This can increase the exposure, increase company sales, and gain market position against competitors.

            Furthermore, pricing can help to achieve company financial performance as well. Prices are set in order to contribute to financial objectives, such as profit contribution or a company cash flow. A good pricing able to attract consumers to spend and this will increase company sales and profits. The higher the profit obtained, the better the financial performance and it encourage company future development.

            Moreover, product positioning is also one of the pricing objectives. Prices can be used in promoting the product function, enhance the image of the product, raise and create customers awareness and many other positioning objectives. A good pricing will contribute to the effectiveness of other positioning components as well. Take for an instance, advertising. 

            Apart from that, a good pricing will stimulate demand and increase company sales. A good and attractive price able to attract customer attention to try out the product. They will also purchase the products during recession or promotion period. In addition, discounted price and discount coupon for new products may help in stimulating the demands as well.

            Last but not least, the objective of pricing may be to keep the competitors away. A good pricing able to prevent the entry of competitors. Prevention is always better than cure. Keeping away the competitors will benefits the company as they no need to compete with others to obtain customers loyalty. Company can keep their price low and reasonable in order to maximize the profits and minimize the cost. �w�?�׿validated by Dr

 

Objective 1: To Maximise Profits

 

Although the ‘maximisation of profits’ can have negative connotations for ‘the public’, in economic theory, one function of ‘profit’ is to attract new entrants to the market and the additional suppliers keep prices at a reasonable level. By seeking to differentiate their product from those of other suppliers, new entrants also expand the choice to consumers, and may vary prices as niche markets develop

 

Objective 2: To Meet a Specific Target Return on Investment (or on net sales)

 

Assuming a standard volume operation (i.e. production and sales) target pricing is concerned with determining the necessary mark-up (on cost) per unit sold, to achieve the overall target profit goal. Target return pricing is effective as an overall performance measure of the entire product line, but for individual items within the line, certain strategic pricing considerations may require the raising or lowering of the standard price.

 

Objective 3: To Achieve a Target Sales Level

 

Many businesses measure their success in terms of overall revenues. This is often a proxy for market share. Pricing strategies with this objective in mind usually focus on setting price that maximises the volumes sold.

Objective 4: To Maintain or Enhance Market Share

 

As an organisational goal, the achievement of a desired share of the market is generally linked to increased profitability. An offensive market share strategy involves attaining increased market share, by lowering prices in the short term. This can lead to increased sales, which in the longer term can lead to lower costs (through benefits of scale and experience) and ultimately to higher prices due to increased volume/market share.

 

Objective 5: To Meet or Prevent Competition

 

Prices are set at a level that reflects the average industry price, with small adjustments made for unique features of the company’s specific product(s). Firms that adopt this objective must work ‘backwards’ from price and tailor costs to enable the desired margin to be delivered.

1.    Gain Market Position 

In order to boost volume or market share, an organization may use low prices to attract customers. Limitation included encouraging price wars and reduction of profit contributions.

 

2.    Achieve Financial Performance

 

Prices are selected to contribute to financial objectives such as profit contribution and cash flow. Price has both direct and indirect effects on profit depends of sales unit. The primary profit-based objective of pricing is to maximize price for long-term profitability.

 

3.    Product positioning 

When a company aimed to enhance product image, create awareness or other product positioning objectives, the visibility of price may contribute to other positioning components such as advertising. 

 

4.    Stimulate Demand 

Price is an effective tools in encourage buyers to try new product or to purchase existing brands when sales down. Furthermore, buyers would back ta purchasing when the prices return to normal. Discount coupon for new products may help stimulate demand without actually lowering the listed prices.

 

5.    Influences Competition

Management may want to discourage market entry or price cutting by current competitors. When the price offer by competitors is lower, customers tend to compare and use the existing prices as a guide to what is normal or considered a good deal.

            First common objective of pricing is profits-related objectives. Profit has remained a dominant objective of business activities. One of the objectives of pricing is to maximize current profits. This objective is aimed at making as much money as possible. Company tries to set its price in a way that more current profits can be earned. However, company cannot set its price beyond the limit. But, it concentrates on maximum profits. Besides that, target return on investment is another objective of pricing. Most companies want to earn reasonable rate of return on investment. Target return may befixed percentage of sales, return on investment, and fixed rupee amount. Company sets its pricing policies and strategies in a way that sales revenue ultimately yields average return on total investment. For example, company decides to earn 20% return on total investment of 3 crore rupees. It must set price of product in a way that it can earn 60 lakh rupees.

            Secondly, common objective of pricing is sales-related objectives. The main sales-related objectives of pricing may include sales growth, target market share and increase in market share. Company’s objective is to increase sales volume. It sets its price in such a way that more and more sales can be achieved. It is assumed that sales growth has direct positive impact on the profits. So, pricing decisions are taken in way that sales volume can be raised. Setting price, altering in price, and modifying pricing policies are targeted to improve sales.A company aims its pricing policies at achieving or maintaining the target market share. Pricing decisions are taken in such a manner that enables the company to achieve targeted market share. Market share is a specific volume of sales determined in light of total sales in an industry. For example, company may try to achieve 25% market shares in the relevant industry.Sometimes, price and pricing are taken as the tool to increase its market share. When company assumes that its market share is below than expected, it can raise it by appropriate pricing; pricing is aimed at improving market share.

            Third, common objective of pricing is competition-related objectives. Competition is a powerful factor affecting marketing performance. Every company tries to react to the competitors by appropriate business strategies include to face competition, to keep competitors away, to achieve quality leadership by pricing, and to remove competitors from the market. Pricing is primarily concerns with facing competition. Today’s market is characterized by the severe competition. Company sets and modifies its pricing policies so as to respond the competitors strongly. Many companies use price as a powerful means to react to level and intensity of competition.To prevent the entry of competitors can be one of the main objectives of pricing. The phase ‘prevention is better than cure’ is equally applicable here. If competitors are kept away, no need to fight with them. To achieve the objective, a company keeps its price as low as possible to minimize profit attractiveness of products. In some cases, a company reacts offensively to prevent entry of competitors by selling product even at a loss.Pricing is also aimed at achieving the quality leadership. The quality leadership is the image in mind of buyers that high price is related to high quality product. In order to create a positive image that company’s product is standard or superior than offered by the close competitors; the company designs its pricing policies accordingly. The pricing policies and practices are directed to remove the competitors away from the market. This can be done by forgoing the current profits – by keeping price as low as possible – in order to maximize the future profits by charging a high price after removing competitors from the market. Price competition can remove weak competitors.

            Next common objective of pricing is customer-related objectives. Customers are in center of every marketing decision. To win confidence of customers and to satisfy customers, company needs suitable pricing policies and practices. Customers are the target to serve. Company sets and practices its pricing policies to win the confidence of the target market. Company, by appropriate pricing policies, can establish, maintain or even strengthen the confidence of customers that price charged for the product is reasonable one. Customers are made feel that they are not being cheated.To satisfy customers is the prime objective of the entire range of marketing efforts. And, pricing is no exception. Company sets, adjusts, and readjusts its pricing to satisfy its target customers. In short, a company should design pricing in such a way that results into maximum consumer satisfaction.

            Lastly, common objective of pricing is maintaining image and reputation in the market.Company’s effective pricing policies have positive impact on its image and reputation in the market. Company, by charging reasonable price, stabilizing price, or keeping fixed price can create a good image and reputation in the mind of the target customers.

1: One of the objectives of pricing is to maximize current profitsThis objective is aimed at making as much money as possible.

.To maximize profits while "profit maximization" may be "public" has negative connotations, but in economic theory, the "profit" of a function is to attract new entrants to the market, and suppliers to keep prices at a reasonable level. By seeking to distinguish their products from other vendors ' products, the new entrants is expanding consumer choice, and may change with niche market development goal

 

  Pricing objectives provide guidance to decision makers in formulating price policies, planning pricing strategies and setting actual prices. Pricing objectives are the overall goals that describe the role of price in organization long-range plans. Therefore, it is necessary that the marketing manager decide the objective of pricing before actually setting price. There are five common objectives of pricing which are to gain market position, product positioning, achieve financial performance, stimulate demand and influence competition. 

            

  First pricing objective is to gain market position. Product may set as lower price may in order to gain sales and market share of the company. This objective normally is use on new product to attract more buyer buyers. By using this, it can increase company sales and gain market position against competitors. 

 

  Besides, product positioning can use to enhance the image of the product, raise customers awareness and other positioning objectives. The visibility of price may contribute to the effectiveness of other positing components such as advertising. When product charge in reasonable price especially daily use product or luxury product may keep customers retention and increase their awareness to the product.

 

 In addition,  achieve financial performance by increase sales growth and the profit of the company.  The primary profit-based objective of pricing is to maximize price for long-term profitability. In order to achieve the financial performance, company will set the product in high price but everyone still can afford with the price. This may help company generate more income and increase the company profit. 

 

  Moreover, stimulate demand objective is and effective price tools to encourage buyers to try new product or to purchase existing brands when the sales of product down. In order to implement this objective, company can provide discount coupon to customer which may help stimulate demand without actually lowering the listed prices.

 

 Lastly, influences competition is use to prevent the entry of competitors. Company may discourage market entry or price cutting by current competitors. Company can keep their price low compare to other competitor, so customers tend to compare and use the existing prices as a guide to what is normal or considered a good deal. This may help the company success to compete with competitor and maximize the profits and would not be easily eliminated by the market.

 

 

          First, gain market position is an aggressive strategy business owners use to strengthen their organizations while weakening competitors. Securing more customers for yourself means increasing revenues for your company and decreasing revenues for others. It can used by low prices to gain sales and market share. Limitations include encouraging price wars and reduction or elimination of profit contribution. Buyers always attract with the lower prices and it can make their purchasing power increase. This can increase the exposure, increase company sales, and gain market position against competitors.

          Second, achieve financial performance which means a subjective measure of how well a firm can use assets from its primary mode of business and generate revenues. Prices are set in order to contribute to financial objectives, such as profit contribution or a company cash flow. If the company can provide good pricing, it will attract customers to purchase at their company. This also can increase their growth sales and profits. They achieved financial performance based on the higher of profitability they get and it encourages company future development. This is one of strategies that can make company stay active in the market.

          Furthermore, product positioning is also one of the pricing objectives. Prices can be used in promoting the product function, enhance the image of the product, raise and create customers awareness and many other positioning objectives. A good pricing will contribute to the effectiveness of other positioning components as well. Take for an instance, advertising. Advertising is one of the messages that company used to give information to the customers. This can give information to customers about the product and attract them to trying the product when they see the advertisement. A good advertisement will make good first impression about the product. 

          Stimulate demand is the one of pricing objectives. Priced is used to encourage buyers to try a new product or to purchase existing brands during period when sales slow down during recession or inflation. A potential problem is that buyers may balk at purchasing when prices return to normal levels. It has been estimated that even for non-premium products, once discounting has been implemented, it takes 3 to 5 years to get consumers to pay full prices. Discount coupons for new products may help stimulate demand without actually lowering listed prices. 

            Lastly, influences competition is use to prevent the entry of competitors. This may influences existing or potential competitors. The company may discourage market entry or price cutting by current competitors. If company keeps their price low compare to other competitor, so customers tend to compare and use the existing prices as a guide to what is normal or considered a good deal. This may help the company success to compete with competitor and maximize the profits and would not be easily eliminated by the market. ��޷�h

The second objective is meeting a specific target return on investment which see through the net sales. Most companies want to earn reasonable rate of return on investment. Target return pricing is effective as an overall performance measure of the entire product line. The return on target may be including fixed percentage of sales, return on investment, and a fixed Ringgit Malaysia amount. Company sets its pricing policies and strategies in a way that sales revenue ultimately yields average return on total investment.

To achieve a target sales level also the objective of pricing. It can be measured by looking at the sales growth, target market share, and increase in market share. Maximize the volume of sold is important to target the sales level.

Next is competition-related objective. Competition is a powerful factor affecting marketing performance. Every company tries to react to the competitors by appropriate business strategies to become the competitive advantage in the market. 

Lastly is customer-related objective. Customer is the centre of decision to purchase the product or services. Therefore, company have to place the price with affordable to the customer and following the pricing policies. Besides they also should confident the customer and satisfying them the value that they get when they purchase the product or service with an appropriate of the price. �G���5

In addition, the price objective is to improve the image of the product on the market. Pricing on a product that is related to the quality of the product. If the product is expensive, the quality is much higher, while if the products are cheap, the quality may not. Therefore, the quality of goods is very important in this aspect as it pertains to valuation price according to the customer as a buyer and user of the product. Thus, the image of the product needs to perform better so easily lured customers with the products.

In addition, the price objective is to develop the business by improving financial of a company. Finance is very important in running a business as it relates to capital issued by the profits earned. Therefore, traders need to maximize the price of a product that does not give negative effects on the financial percentage growth. Traders should also provide a maximum price and promotions to customer loyalty can be maintained for doing business in the long run and could help the company generate revenue and increase profitability.

Next, the objective is to increase the price of market demand. Low prices on a product capable of stimulating an increase in demand in the market. This is because customers are more likely to buy cheap goods to avoid high taxes.

Finally, the objective is the impact of price competition in the market. Every business has a similar product obtained from the respective suppliers according to a predetermined cost. Therefore, a company should set the same price for that product to maintain good relationships with customers. The price of the products supplied by the market price to avoid strong competition, because as a buyer, they tend to evaluate the price of goods at the price set in the other shops. This can help the success of the company to compete with competitors and maximize profits and not easily eliminated by the market 

Survival is the first objective of pricing. Prices are flexible. Some company choose to lower the price in order to increase sales enough to keep the business going and survive. However, the company uses a survival based price objective must able and willing to accept short term losses for the sake of long term viability. 

Next, profit. Undeniable, the objective and goal for most of the company must be achieve the profit company set as a goal, so the pricing has a very close relative with the profit of the company. In this case, one of the objectives of pricing is maximize current profits. This objective is aimed at making as much money as possible. Company tries to set its price in a way that more current profits can be earned. However, company cannot set its price beyond the limit, when the price is beyond the limit, the company might face the losses even sales increase.

Besides, sales growth also one of the pricing objective. Company’s objective is to increase the sales volume. Usually company are likely to set its price that are capable to increase the sales till maximum. It is assumed that sales growth has direct positive impact on the profits. So, pricing decisions are taken in way that sales volume can be raised.

Other pricing objective is to keep competitor away. To achieve the objective, company keeps its price as low as possible to minimize profit attractiveness of products. In some cases, a company reacts offensively to prevent entry of by selling product even at a loss.

The last pricing objective is to maintaining image and reputation in the market. Company’s effective pricing policies have positive impact on its image and reputation in the market.  Researcher stated that, company that charging reasonable price, or keeping fixed price can create a good image and reputation in the mind of the target customers.  

Low price may be used to gain sales and market sales. Limitation include encouraging price wars and reduction (or elimination) of profit contribution. 

2. Achieve Financial Performance
Prices are selected to contribute to financial objective such as profit contribution. At the same time, it is also emphasize for cash flow.  Instead, prices that are too high may not be accepted by the buyer. As an example, Apple Iphone dilemma describe in the innovation application.

3. Product Positioning
Prices should be used in enhancing product image, promote product, create awareness, and positioning objectives. Th visibility of prices either in low or high may contribute to effectiveness and other component likely advertising.

4. Stimulate Pricing
Price is one of the crucial element to stimulate buyers to try new products and purchase when in economics recession. A potential customer will balk to the product when the price return back to normal price. For instance, discount coupon would be a good price strategy to stimulate demand that lower than the normal price.

5. Influence Competition
The main pricing objective is affect existing and potential competitor. Management expect the new entry market can raise up the price instead to lower down the price in the market. However, expectation always couldn't be apply. As an example, Intel employee an interesting strategy for inexpensive semiconductors that offered rapid graphics processing and posed to threat to Intel flagship Pentium Chip. Rather than lowering the Pentium price to appeal to the price-sensitivity market segment, Intel developed the Cirrus chip based on the Pentium platform, which eliminated design and tooling costs. Some of the Pentium capabilities were not active in the new chip which was priced to compete with another competitor in term of product. 

Profit has remained a dominant objective of business activities.

One of the objectives of pricing is to maximize current profits. This objective is aimed at making as much money as possible. Company tries to set its price in a way that more current profits can be earned. However, company cannot set its price beyond the limit. But, it concentrates on maximum profits.

Most companies want to earn reasonable rate of return on investment.

(1) fixed percentage of sales,

(2) return on investment, or

(3) a fixed rupee amount.

Company sets its pricing policies and strategies in a way that sales revenue ultimately yields average return on total investment. For example, company decides to earn 20% return on total investment of 3 crore rupees. It must set price of product in a way that it can earn 60 lakh rupees.

Company’s objective is to increase sales volume. It sets its price in such a way that more and more sales can be achieved. It is assumed that sales growth has direct positive impact on the profits. So, pricing decisions are taken in way that sales volume can be raised. Setting price, altering in price, and modifying pricing policies are targeted to improve sales.

A company aims its pricing policies at achieving or maintaining the target market share. Pricing decisions are taken in such a manner that enables the company to achieve targeted market share. Market share is a specific volume of sales determined in light of total sales in an industry. For example, company may try to achieve 25% market shares in the relevant industry.

Sometimes, price and pricing are taken as the tool to increase its market share. When company assumes that its market share is below than expected, it can raise it by appropriate pricing; pricing is aimed at improving market share.

Competition is a powerful factor affecting marketing performance. Every company tries to react to the competitors by appropriate business strategies.

Pricing is primarily concerns with facing competition. Today’s market is characterized by the severe competition. Company sets and modifies its pricing policies so as to respond the competitors strongly. Many companies use price as a powerful means to react to level and intensity of competition.

To prevent the entry of competitors can be one of the main objectives of pricing. The phase ‘prevention is better than cure’ is equally applicable here. If competitors are kept away, no need to fight with them. To achieve the objective, a company keeps its price as low as possible to minimize profit attractiveness of products. In some cases, a company reacts offensively to prevent entry of competitors by selling product even at a loss.

Pricing is also aimed at achieving the quality leadership. The quality leadership is the image in mind of buyers that high price is related to high quality product. In order to create a positive image that company’s product is standard or superior than offered by the close competitors; the company designs its pricing policies accordingly.

The pricing policies and practices are directed to remove the competitors away from the market. This can be done by forgoing the current profits – by keeping price as low as possible – in order to maximize the future profits by charging a high price after removing competitors from the market. Price competition can remove weak competitors.

Customers are in center of every marketing decision.

Customers are the target to serve. Company sets and practices its pricing policies to win the confidence of the target market. Company, by appropriate pricing policies, can establish, maintain or even strengthen the confidence of customers that price charged for the product is reasonable one. Customers are made feel that they are not being cheated.

To satisfy customers is the prime objective of the entire range of marketing efforts. And, pricing is no exception. Company sets, adjusts, and readjusts its pricing to satisfy its target customers. In short, a company should design pricing in such a way that results into maximum consumer satisfaction.

Over and above the objectives discussed so far, there are certain objectives that company wants to achieve by pricing.

This objective concerns with entering the deep into the market to attract maximum number of customers. This objective calls for charging the lowest possible price to win price-sensitive buyers.

To promote a new product successfully, the company sets low price for its products in the initial stage to encourage for trial and repeat buying. The sound pricing can help the company introduce a new product successfully.

Company’s effective pricing policies have positive impact on its image and reputation in the market. Company, by charging reasonable price, stabilizing price, or keeping fixed price can create a good image and reputation in the mind of the target customers.

This objective concerns with skimming maximum profit in initial stage of product life cycle. Because a product is new, offering new and superior advantages, the company can charge relatively high price. Some segments will buy product even at a premium price.

Company with stable price is ranked high in the market. Company formulates pricing policies and strategies to eliminate seasonal and cyclical fluctuations. Stability in price has a good impression on the buyers. Frequent changes in pricing affect adversely the prestige of company.

Finally, pricing is aimed at survival and growth of company’s business activities and operations. It is a fundamental pricing objective. Pricing policies are set in a way that company’s existence is not threatened.

Furthermore, the goal for major profit organization is to maximize their profit from the market. Therefore, achieve financial performance is a common pricing objective in a company. Price is selected to contribute to financial objective. Financial performance can be showed by referring to the profit contribution and cash flow. The higher in price, the company can gain higher profit contribution and cash flow liquidity. However, price is one of the considerations for buyers in making purchase decision. It may not be acceptable by buyers if the price is too high.

The next pricing objective is product positioning. Price is one of the elements that used to enhance product image, promote the use of the product, create awareness, and other positioning objective. For example, there has a concept which high quality product cannot charge in a low price because the cost of buying high material for producing the product is high. Hence, people will think the product is high in quality when the price of the product is high. Other than that, it also can represent the social level when using or enjoying the product. 

Moreover, stimulate demand can be the pricing objective of the company. Price is used to encourage buyers to try a new product or to purchase existing brands during periods when sales slowdown. It means reducing in price can stimulate the demand in the market. Price can be reduced by implementing promotion activity such as sales and discount. However, it can induce a potential problem which the buyers may balk at purchasing when prices return to normal levels. It has been estimated that even for non-premium products, it takes 3 to 5 years to get customers to pay full prices again after discounting has been implemented. Therefore, giving discount coupons is a good promotion strategy in helping stimulate demand without actually lowering listed priced. It is because people is fail to buy the product with discount price if the person does not have the discount coupon.

Last but not least, the objective of pricing actions may be influence existing or potential competitors. Management may want to discourage market entry or price cutting by current competitors. For example, if the company wish to monopoly its business in a market, the company will reduce the price and implementing promotion activity in order to reduce the profit of competitor. Competitors will reduce their price to compete in the market. However, if the financial of the competitor is to strong, the others will choose to exit from the market because they fail to cover the expenses by maintaining good quality and offer in low price. The company will return the price to normal levels when gaining success from the competition.

  Firstly, the pricing objective is to gain market position. Product of the company may set as low prices in order to gain sales and market share. This objective will attract new  customer to buy and try out the new product because the product price is low. Hence, this objective can increase the exposure and company sales as well as  gain market position against competitors. 

Secondly, financial performance is also one of the pricing objectives. Prices are selected to contribute to financial objectives such as profit contribution and cash flow. In order to achieve the better financial performance, company will set a good pricing such as everyone can afford with the price to attract customers to spend. At the same time, this will increase company sale and profit.   

In addition, the objective of pricing is product positioning. Prices may be used to enhance product image, create awareness, promote the use of the product, and other positioning objectives. A reasonable price my contribute to the effectiveness of other positioning components such as advertising.

Furthermore, the pricing objective is stimulate demand. Priced can be used to encourage buyers to try a new product or to purchase existing brands during periods when sales slow down. Besides, company can provide discounted price and discount coupon to the customers and these promotion can stimulate demand of the product. 

Lastly, influence competition is also one of the pricing objectives where it to prevent the entry of competitors. Company can keep their price low and reasonable compare to other competitor. So, customers tend to compare and use the existing prices as a guide to what is normal or considered a good deal. Hence, this objective may help the company success to compete with competitor. 

 

No. Matric: BB14110326

 

What are the five common objectives of pricing? Discuss

 

          There are five common objective of pricing. The first is gain market position. Low price may be used to gain sales and market share and limitation included encouraging price wars and reduction of profit contributions. Second objective is achieve financial performance. Price are selected to contribute to financial objective such as profit contribution and cash flow and price that are too high may not be acceptable to buyer. That why setting objective for the price is important. The third objective of pricing is product positioning. Price may be used to enhance product image, promote the use of the product, create awareness, and other positioning objective. The visibility of price may contribute to the effective of other positioning components such as adverting. The fourth objective is stimulate demand. In this objective, price is used to encourage buyers to try a new product or to purchase existing brands during periods when sales slowdown and the last but not lease is influence competition. The objective of pricing actions may be to influence existing or potential competitors. This could mean that a price leader may encourage members to raise price.

What are the five common objectives of pricing.

                Price is the important term that will directly impact the financial performance of a firm. Is also influence the buyer’s intention of purchase toward the brand.  Thus, price play a dominant role in the marketing strategy. Once a suitable and effective pricing strategy was selected it can help to improve the financial performance of a firm. Pricing always use as an instrument of competition, it is the element that able to attack competitor quickly and directly especially direct competitors.  A strategic pricing was expected to achieve specific objectives. Pricing strategy must be guided by the objective set in order to make sure it avoid conflict among each other and work efficiency. 

          There have five common pricing objectives which are gain market position, achieve financial performance, product positioning, simulate demand and influence competition.  Gain market position can be achieve by using low prices strategy. It may gain sales and market shares as well. However, limitations were existing which obstruct gain market position to be achieved. Those limitations included encouraging price wars and reducing of profit contribution. While achieve financial performance means that price was selected to generated profit toward the company. Even though pricing strategy uses for profit contribution but it can’t be set extremely high because it will not be accepted by buyers. It should be a reasonable price in order to attract buyer to repurchase ultimately. 

          Furthermore, product positioning also considered as one of the objective for pricing strategy. This is because brand image, brand awareness and other positioning strategy can be built by price. For example, some of the buyer may remember particular brand or product due to its reasonable and acceptable price. Visibility of price may contribute to the effectiveness of the other positioning strategy and it can be classify as an advertising tools as well. Next objective for pricing is stimulate demand. Price is a crucial element to encourage buyers to try on a new product or an existing products. Most of the firm will set a low price as their strategy in the introduction stage. This is because new product with a lower price will increase the willingness of buyers to purchase on it rather than a high price. Discount coupon can also stimulate the demand without lowering the price listed. 

          Lastly, the objective of pricing is to influence the competition. Pricing is the criteria element to influence the competition because some of the consumer are price sensitive while some perceive the quality of product based on the price. Pricing leader may use pricing strategy to influence existing and potential competitors and try to gain the competitive advantage as well. Normally, creaming or skimming was used by first entrant company in the market. The pricing strategy are trying to take advantage form the competitors and replicating the product or service that has been offered before. Another pricing is psychological pricing which designed to appeal to specific consumer desires or fear by developing a distinction between the product that offering by the firms and the product that offering by its competitors. 

What are the five common objectives of pricing? Discuss.

Pricing objectives vary according to the situational factors present and management’s preferences. The five common objectives of pricing are gain market position, achieve financial performance, product positioning, stimulate demand, and influence competition.

Firstly, gain market position with a low price may be used to gain sales and market share. Limitations include encouraging price wars and reduction of profit contributions. For examples, In order to gain market position against your competitors, you must accomplish brand differentiation first especially in price of the product.

Secondly, the objectives is achieve financial performance were prices are selected to contribute to financial objectives such as profit contribution and cash flow. Prices that are too high may not be acceptable to buyers. When set a cost of the product in the market, the company need to know and stimulate the price with the buying power of their customers, where the customers can buy the product or not. So, when they are applicable to buy the product the cash flow if the company will have and in the good flow. Besides, they are going to get a profit from the product they sold.

Third, product positioning which the prices may be used to enhance product image, promote the use of the product, create awareness, and other positioning objectives. The visibility of price may contribute the effectiveness of other positioning components such as advertising. The price is divided into a some part in order to make the product into the market and getting an attention from the buyers. This are needed so the price of the product will or might become higher than usual price or their fix cost.

Fourth, the stimulate demand. The price is used to encourage buyers to try a new product or to purchase existing brands during periods when sales slowdown. A potential problem is that buyers may balk at purchasing when prices return to normal levels. For examples, when the product are less than the actual price, the product will get more buyers but when it in it actual prices, the numbers of buyers will be slow or decreases. So, to avoid this problem, the company needs to use discount coupons to the new product and to stimulate demand of the buyers without actually lowering listed prices. 

Fifth, the last common objectives of pricing are influence competition. This objective was the management may want to discourage market entry or price cutting by current competitors. Alternatively, a price leader may want to encourage industry members to raise prices. But, the competitors may not respond as predicted.  The management should always take the competition’s pricing into account when setting own pricing, unless when hold a monopoly. If consumers perceive your product and your competition’s as having equal value, you could lose out in a big way if your competitor’s price is lower than yours is.

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.

            The first objective of pricing is profit-based objective. 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 which is the relative benefit of selling more units. So, pricing is maximizing long-term profitability.

            Secondly, the objective of pricing is related with sales. This sales-oriented pricing objective seeks to increase the 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. When company assumes that its market share is below than expected, it can raise it by appropriate pricing. 

            Besides, the common objective of pricing is about competition related objective. Competition is a powerful factor affecting marketing performance. Today’s market is characterized by the severe competition. Company sets and modifies its pricing policies so as to respond the competitors strongly. Many companies use price as a powerful means to react to level and intensity of competition. Also, a company keeps its price as low as possible to keep the competitor away. The pricing strategies and policies are used to remove the competitor away from the market.

            The following common objective is about customer-related objective. Company wants to achieve the following objectives by the suitable pricing policies and practices to win the confidence of customers. Company, by appropriate pricing policies, can establish, maintain or even strengthen the confidence of customers that price charged for the product is reasonable one. Customers are made feel that they are not being cheated. Company sets, adjusts, and readjusts its pricing to satisfy its target customers.

            Last but not least, the pricing has its objective on the survival and growth. 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. Pricing policies are set in a way that company’s existence is not threatened.

            In conclusion, the pricing objective is important as it can help in gaining the market position of the product, achieve financial performance, position the product, and stimulate the demand.

          Price is very important to every companies because it able to give a great impact on financial performance of companies and also in influence on positioning of customers for the brands. Therefore, a company have to decide an appropriate pricing strategies for a products due to each pricing strategy will lead different impact to the companies and the positioning of customers for the brands will   also different. The following will be discussed several common objectives of pricing in order to implement an appropriate pricing strategy for a product.

          First of all, the common objective of pricing is assist the product to gain a market position. Nowadays, the market entry is getting more difficult to enter due to the strong competition. Hence, pricing strategy such as price level is lower than competitors will be implement by company which is the new entrée for that market. The low price will assist that company to gain market share and sales in the market. Moreover, there have some limitations to the company such as reduction or elimination of profit contributions and encourage price war in the market. 

          Achieve financial performance is the second common objective of pricing. Generally, most of the companies will choose a pricing strategy which assist them to improve or enhance their financial performance. Price of the product will be selected by management and it is directly contribute to financial objectives such as cash flow and profit contribution. Management have to choose the most appropriate price for their product because not every target customers are able to afford the price of product. If the price is too high, it will lead the company to loss the target customer. On the other hand, if the price is too low, the quality of product may doubt by target customer. 

          For the third common objective of pricing is product positioning. Product positioning is very important to every companies. If the product unable to position in the mind of customers, it means that customers will not choose and purchase the product because customers didn’t list the product as his/her selection product due to customers don’t remember the product. Thus, management have to choose the most suitable pricing strategy for their product because it will influence the product positioning of customers’ mind. 

          Next is the fourth common objective of pricing which is stimulate demand. Price is able to encourage customers to purchase and try a new products and some existing product but haven’t use before. For some of the price sensitive customers, they will choose and purchase the product if its price is lower than competitors. Hence, it will assist the demand of the product increase. For the new customers, price is an essential factor to influence them in order to choose and purchase it. 

          Influence competition is the last common objective of pricing. The price of product will influence the competition. For instance, a company is decided to lower their price of product in order to increase the sales and demand. It will give a great impact to its competitors because customers will go to their shop to purchase the things rather than go to its competitors. This because the price of product in its competitors’ shop is higher, therefore it lead its competitors’ profit be reduced.

 

  Firstly, the pricing objective is to gain market position. Product of the company may set as low prices in order to gain sales and market share. Due to the price of the product is relatively low compared to other product, it will attract new customer to buy and try out the new product. Hence, this objective can expose and increase the company sales beside  gaining market position against competitors. 

 

Next, financial performance is also one of the pricing objectives. Setting of prices are mainly to achieve financial objectives such as profit contribution and cash flow. In order to achieve better financial performance, good pricing such as affordable price is essential. If everyone is afford to buy certain company product that met their need and wants, then customers will make purchasing and this will increase company sales and profits.    

 

In addition, the objective of pricing is product positioning. Prices may be used to enhance product image, create awareness, promote the use of the product, and other positioning objectives. A reasonable price may contribute to the effectiveness of other positioning components such as advertising. Good positioning of product through pricing create a strong brand in the market which eventually result in customers loyalty. 

 

Other than that, the pricing objective also include stimulating demand. Price can be used to encourage buyers to try a new product or to purchase existing brands during periods when sales slow down. Besides, company can provide discounted price and discount coupon to the customers and these promotion can stimulate demand of the product. 

 

Lastly, influence competition is also one of the pricing objectives to prevent the entry of competitors in the market by keeping their price low and reasonable compare to other competitor. So, customers tend to compare and use the existing prices as a guide to what is normal or considered a good deal. Hence, this objective may help the company success to compete with competitor.

First and foremost, gain market position is one of the price objectives. Low price may be gain sales and market share. Setting low price in the market can attract more consumers to purchase as it can increase the sales and market share. Low price will bring limitation towards the company such as encouraging price war and reduction of profit contribution. 

In addition, second price objective is to achieve financial performance. A company select the pricing strategy due to to improve their financial performance. Prices set should be acceptable by all level of consumer. The sales will be decrease when the price set too high and it will bring negative effects to the company’s financial performance.

Furthermore, product positioning is the third price objective. Prices set usually used to enhance the product image, promote the use of the product and create attention from the consumer and so on. The price of the product may not be set too high if compare to the competitors’ product, it will lose in gaining competitive advantage. The marketer should choose the right price for their product in order to create product positioning in consumer’s mind. 

Moreover, forth pricing objective is stimulate demand. Price is able encourage a buyer to try a new product or to purchase existing brands which never used before. Consumer who only depends on the price of the product will definitely move to another brands competitor’s product when the price of the product they always used increase. Therefore, it will lower the demand of the product purchase by the consumer. 

Lastly, influence competition is the fifth pricing objective. The objective of pricing action may be influence existing or potential competitors. A company which set their price lower than the competitors will definitely increase their sales. It is because the consumer nowadays is intelligent in comparing the price from different brands. When the price set is low, the competitors are force to change their price as well to gain competitive advantages. 

Firstly, gain market position. To gain market position is through brand differentiation and increased exposure. In order to gain market position against your competitors, you must accomplish brand differentiation first. This will separate you from the competition and clearly define who you are in the eyes of your potential target market. Brand differentiation could be achieved through logo and design development, creative in-store visuals, customer perception, pricing, target marketing demographics and selecting effective marketing vehicles. To increase brand exposure, should be taken only when brand differentiation is accomplished. Increasing your brand exposure is achieved by increasing your advertising, marketing and promotions schedule and this can include public relations. 

Secondly, achieve financial performance. Financial performance is a subjective measure of how well a firm can use assets from its primary mode of business and generate revenues. If  they want to gain the profits and sales, they will decrease the price of their products. Lower price will attract more buyers or customers to purchase their product and automatically will increase sales and profits.

Thirdly, product positioning. Product positioning is the process marketers use to determine how to best communicate their products' attributes to their target customers based on customer needs, competitive pressures, available communication channels and carefully crafted key messages. Effective product positioning ensures that marketing messages resonate with target consumers and compel them to take action.

Next, stimulate demand. If you want to increase the demand of buyers, you need to provide the lower price to the customers yet maintain the quality of the products to make sure that the customers will purchase their products frequently because lower price is the best strategy to stimulate the demand.

Lastly, influence competition. When there have too many competitors, the company should be optimistic to control the price because price is the most important thing in market to compete with each competitors. The market leader will increase the price to eliminate the other competitors. 

Some of the more common pricing objectives are:
Survival: Companies facing new and intense competition, over capacity, or changing consumer behavior may pursue a survival strategy. Survival is clearly a short run objective to make it through tough times. As long as price exceeds variable costs and covers some fixed costs, the company can carry on. In the long run, the company must adapt and find ways to add value.

Maximize current profits: Maximizing current profit is a common company objective. To do so, costs and consumer demand have to be estimated for different prices. The price point that generates the highest profit is then chosen. In practice, it's not always easy to estimate demand accurately (we discuss ways to do this in our article about determining demand and calculating costs). Additionally, focusing on current profits may mean reducing long run company performance.

Increase market share: A company may pursue an objective of increasing or maximizing market share. This makes sense especially if a company feels it can achieve lower unit costs with higher volumes, thereby increasing long-term profit. Many companies set a low initial price to achieve market penetration. This strategy can be advantageous in industries with consumers that are price sensitive, sales and production costs fall with production experience, and where a low price discourages the entry of possible competitors.

Skim the market: “Skimming” means setting high prices initially to target those that are willing to pay the high price, and then gradually lowering the price to attract the more price sensitive customers. Video game and other software producers often use this strategy. Die-hard fans are willing to pay the higher initial price, and as sales decline, the company reduces the price for more casual users. Intel is another prime example a company that successfully uses price skimming. It's latest computer chips are sold to those who can't wait for well over $1000 initially. A year later, the price drops and there is a new and more powerful $1000+ chip released.

Product-quality leadership: Companies that produce high quality products relative to the competition often try to position themselves as the product-quality leader. They charge more, but convince the customer that it's worth it because of the superior product experience, reliability, or other quality related benefits. Price sensitive customers need to be convinced that the higher price is worth it in the long run.

The main point is that using price as a strategic tool is better than simply letting costs determine price. If your product is superior to the competition, you'll be more profitable if you convey that to the market and charge a higher price.

The first pricing objective is the status quo. Status quo is a tactical objective to promote competition on factors other than price. It aims to keep the price of the products in line with the same or similar products offered by competitors to avoid starting a price war or to maintain a stable level of profits generated from certain products. For example, it is focused on maintaining market share, but not increasing it. Another example is the products are sold also is matching competitors' prices but not beating it. Demand of the company's products will be more stable if the company is using status quo.

The second pricing objective is survival. In the market, the price is flexible. Price is aiming for survival and growth of the business activities and operations of the company. It is the objective of the basic price. Prices are set by the existence of the company is not threatened. Some companies can lower prices to increase sales of their products to ensure continued business. The company uses price objective is based on the life, when he was willing to accept short-term losses for long-term viability. It is important in a situation where businesses need to price at a level that will only allow it to stay in business and to cover essential costs. The goal of making a profit is set aside for goals in life. Survival rates are intended only for use on short-term or temporary basis. After an initiate survival rate has pass, prices returned to previous levels or more convenient.

The third pricing strategy is maximizing the profit. Maximize profits seeking to achieve the greatest amount of dollars in profits. The objective is to make as much money as possible, but not necessarily tied to the objective of maximizing profit margins. Companies are trying to set prices in a way that is more current profit can be obtained. Price has both direct and indirect effects on profitability. The effect is directly related to whether the price includes the cost of producing the product. Price affects profit indirectly by influencing how many units sold. The number of products sold also affect profitability through economies of scale due to the relative merits sells more units. The main objective based on profit pricing is to maximize the price for long-term gain. However, companies can not set a price that exceeds the limit. However, it is focused on maximum profit.

The fourth objective is to increase sales. Sales-oriented pricing objectives seek to maximize the number of items sold or market share. Increasing the number of the company's own sales measured in a certain time period. Objectives have been if the company has an underlying goal of taking advantage of economies of scale that can be realized in the production or the sales arena. The market share of a company measures its sales to sales to other companies in the industry. It set the price in such a way that more and more sales can be achieved. It is assumed that the sales growth has a direct positive impact on profitability. Volume and market share independently of each other, a change in one does not necessarily stimulate changes in the other. So, the pricing decisions taken by a number of sales can be raised, such as pricing, price change, and modify policies aimed at increasing sales prices.

The last pricing objective is to achieve quality leadership. Leadership is used to signal the quality of products to consumers by putting a price on a product that they deliver quality. Price also aims to achieve quality leadership. Leadership is a quality image in the minds of buyers that high prices are associated with high quality products. In order to create a positive image that the company's products are standard or higher than those offered by competitors closely; designed by the company's pricing policy accordingly. .w��>S�K{

          Pricing strategy aimed to gain market position. For example, the low prices strategy may be implemented in order to gain sales and also the market share. However, this may have some limitation such as encouraging the price wars and reduction of profit contribution. 

          Achieve financial performance also represent the objective of pricing. Basically, a price is selected with the purpose to contribute to the financial objective of a company which include the profit contribution and also the cash flow. However, the price may not be acceptable to the buyers or consumers if the price is too high or too expensive. 

          The other objective of pricing is product positioning. Generally, an effective and relevant pricing can brings a positive impact in enhancing the product image, increase awareness towards the product, encourage or promote the use of the particular product besides achieve the other positioning objectives. 

          Another objective of pricing is to stimulate the demand of a particular product. For example, an effective pricing is used to encourage or increase the intention of buyers to try or purchase a new launched product besides encourage the consumers to buy the existing product which the sales of the product has decreased or slow down. 

          Influence competition also is the objective of pricing. The pricing may play an important role in influencing the existing or potential competitors in the market. The management team may want to discourage the new market entry or forcing the current competitors to implement price cutting

In marketing there are several objectives in price can give good effects. Among others in seeking a beneficial effect in marketing a product and service is gain market position. Using these objectives we will be able to increase sales and market share where there limited in the price in the market to be able to give a better change in price wars.

          Secondly, achieve financial performance. The price that has been selected and could contribute to in order to achieve financial objectives of a company such as contributing to the profitability and cash flow.   

Third is product positioning where prices can use to enhance product image, promote the use of the product, create awareness among customers and achieve other positioning objectives. In product positioning, price can effectiveness of the other positioning components such as advertising where the visibility of price high or low.

          Fourth, it can stimulate demand where it can encourage buyers to try a new product or to purchase existing brands during periods when sales slow down like recession. 

Last but not least, pricing objective can influence competition where it can influence existing or potential competitors. The management may want to discourage market entry or pricing cutting by current competition in market but there are one problem where the competitors may not respond as predicted.  MfX�]

Pricing can be defined as the process of determining an appropriate price for the product, or it is an act of setting price for the product. Pricing involves a number of decisions related to setting price of product. Pricing policies are aimed at achieving various objectives. Company has several objectives to be achieved by the sound pricing policies and strategies. Pricing decisions are based on the objectives to be achieved. There are several example of pricing objectives.

The first objectives of pricing is to gain the market position. Company or retailer can gain the market position by keeping price as low as possible in order to maximize the future profits by charging a high price after removing competitors from the market. Low prices used to gain sales and market share. When company assumes that its market share is below than expected, it can raise it by appropriate pricing; pricing is aimed at improving market share to gain market position. 

Second objectives is to stimulate demand. Price is used to encourage buyers to try a new product or purchase existing brands during periods when sales slow down. A potential problem is that buyers may balk at purchasing when prices return to normal levels. It has been estimated that even for non-premium products, once discounting has been implements. Discount coupon for a new products may help stimulate demand without actually lowering listed prices.

Third objectives is to achieve financial performance. Prices are selected to contribute to financial objectives such as profit contribution and cash flow. Prices that set too high may not be accepted by the buyers. Consumer tend to seek for goods that the price is affordable. 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 objective of pricing actions may be to influence existing or potential competitors. Management want to discourage market entry price cutting by current competitors. The phase ‘prevention is better than cure’ is equally applicable here. If competitors are kept away, no need to fight with them. To achieve the objective, a company keeps its price as low as possible to minimize profit attractiveness of products. In some cases, a company reacts offensively to prevent entry of competitors by selling product even at a loss.

The final objectives is product positioning. Prices may use to enhance product image, promote the use of the product, and create awareness and other positioning objectives. To promote a new product successfully, the company sets low price for its products in the initial stage to encourage for trial and repeat buying. The sound pricing can help the company introduce a new product successfully. Company, by charging reasonable price, stabilizing price, or keeping fixed price can create a good image and reputation in the mind of the target customers. \K�u�

Firstly, achieve financial performance. The price that has been selected and could contribute to in order to achieve financial objectives of a company such as contributing to the profitability and cash flow. 

Secondly, pricing strategy aimed to gain market position. For example, the low prices strategy may be implemented in order to gain sales and also the market share. However, this may have some limitation such as encouraging the price wars and reduction of profit contribution.

Next,  product positioning  where the prices set usually used to enhance the product image, promote the use of the product and create attention from the consumer and so on. The price of the product may not be set too high if compare to the competitors’ product, it will lose in gaining competitive advantage. The marketer should choose the right price for their product in order to create product positioning in consumer’s mind. 

Furthermore, stimulate pricing where price is one of the crucial element to stimulate buyers to try new products and purchase when in economics recession. A potential customer will balk to the product when the price return back to normal price. For instance, discount coupon would be a good price strategy to stimulate demand that lower than the normal price.

Lastly, influence competition is also one of the pricing objectives to prevent the entry of competitors in the market by keeping their price low and reasonable compare to other competitor. So, customers tend to compare and use the existing prices as a guide to what is normal or considered a good deal. Hence, this objective may help the company success to compete with competitor. 1

The first, based on Profits-related Objectives. Policy and pricing strategy of the company is focusing on profitability based on the objective to maximize profits while. It aims to generate money / profit as much as possible. The company will set prices in a way that more profits. However, they can not set price limits. In this aspect, the company focuses on the target return on investment. Where they will set the price based on the percentage return on their investment.

sales-related objectives. This objective is related to the sales growth in which the company's objectives are intended to increase the number of sales. The company will set prices in a way that more sales can be achieved. This is assuming that sales growth had a positive impact on profits. Thus, whether the price, price change, and modify the target prices to boost sales. In this aspect, it also involves a target market share A company in which its pricing policies aims at achieving or maintaining the target market share. Pricing decisions are taken in such a manner that enables the company to achieve targeted market share. Market share is a specific volume of sales determined in light of the total sales in an industry. For example, the company may try to achieve a 25% market shares in the relevant industry.

The Competition-related Objectives. competition is a major factor affecting performance and very strong marketing and company. generally, many companies cubba respond and compete with competitors with the price. In this aspect, the company will use pricing objectives with how to set and change prices to respond with a strong contender. Some companies also use pricing objectives by setting prices at a very low rate. This is to keep competitors out of them. Despite the loss, the company still sells it to prevent the entry of competitors by selling products at low price rates. Usually, the company will charge a low rate in a short time. When competitors are far from them, then the company will raise prices to offset their profits and losses at earlier times. Sometimes, companies will also charge high rates. In this aspect, it is usually associated with quality. A fixed price must be in accordance with the image quality for the buyers mind that high prices are associated with high quality products.

Customer-related objectives. These objectives are aimed at winning the confidence of the customers towards the product being sold. States, through appropriate pricing policies, may establish, maintain or strengthen the confidence of customers that the prices charged for these products is a reasonable one. Customers are made to feel that they are not cheated. Companies set, adjust, and readjusts pricing for customer satisfaction targets.

finally, other objectives. Market Penetration where this objective requires impose the lowest possible price to win price-sensitive buyers. Also Maintaining Image and Reputation in the Market. States, by charging reasonable prices, stable prices, or maintain a fixed price can make a good image and reputation in the minds of the target customers.

 

Price is the value that is put to a product or service and is the result of a complex set of calculations, research and understanding and risk taking ability. A pricing strategy takes into account segments, ability to pay, market conditions, competitor actions, trade margins and input costs, among others.It is targeted at the defined customers and against competitors.  The pricing of a product is one of the most important aspects of your marketing strategy, which also includes product, promotion, placement (or distribution) and people. The term pricing method in the context of compiling price indicates would probably be regarded by most price statisticians as a common concept. However when one attempts to find a definition for this concept, or indeed a definition for various types of pricing methods the inadequacy of the current literature becomes apparent. 

 

1. Cost Plus Pricing

Cost-plus pricing is a pricing strategy in which the selling price is determined by adding a specific dollar amount markup to a product's unit cost. Mark ups are when you add % to the cost to set the price. An alternative pricing method is value-based pricing. Cost plus pricing is a cost-based method for setting the prices of goods and services. Under this approach, you add together the direct material cost, direct labor cost, and overhead costs for a product, and add to it a markup percentage (to create a profit margin) in order to derive the price of the product. Cost plus pricing can also be used within a customer contract, where the customer reimburses the seller for all costs incurred and also pays a negotiated profit in addition to the costs incurred. Cost plus pricing is a more valuable tool in a contractual situation, since the supplier has no downside risk. However, be sure to review which costs are allowable for reimbursement under the contract; it is possible that the terms of the contract are so restrictive that the supplier must exclude many costs from reimbursement, and so can potentially incur a loss. 

The following are advantages to using the cost plus pricing method:

i ) Simple. It is quite easy to derive a product price using this method, though you should define the overhead allocation method in order to be consistent in calculating the prices of multiple products.

ii ) Assured contract profits. Any contractor is willing to accept this method for a contractual agreement with a customer, since it is assured of having its costs reimbursed and of making a profit. There is no risk of loss on such a contract.

iii ) Justifiable. In cases where the supplier must persuade its customers of the need for a price increase, the supplier can point to an increase in its costs as the reason for the price increase.

2) Premium pricing: high price is used as a defining criterion. Such pricing strategies work in segments and industries where a strong competitive advantage exists for the company. Example: Porche in cars and Gillette in blades.

3) Penetration pricing: price is set artificially low to gain market share quickly. This is done when a new product is being launched. It is understood that prices will be raised once the promotion period is over and market share objectives are achieved. Example: Mobile phone rates in India; housing loans etc.

4) Economy pricing: no-frills price. Margins are wafer thin; overheads like marketing and advertising costs are very low. Targets the mass market and high market share. Example: Friendly wash detergents; Nirma; local tea producers.

5) Skimming strategy: High price is charged for a product till such time as competitors allow after which prices can be dropped. The idea is to recover maximum money before the product or segment attracts more competitors who will lower profits for all concerned. Example: the earliest prices for mobile phones, VCRs and other electronic items where a few players ruled attracted lower cost Asian players.

By the time as a company grows old, it starts seeking stabilization in the market while maintaining a suitable and stable profit base with a growing customer base and at the same time, avoiding the price wars with their competitors. Furthermore, it is also a fact that a stable pricing policy leads to a customer base that looks up to your brand with an attractive prestige and has a good impression in mind. That’s how big brands keep up their image and reputation.

One of the objectives of pricing is to maximize current profits. This objective is aimed at making as much money as possible. Company tries to set its price in a way that more current profits can be earned. However, company cannot set its price beyond the limit. But, it concentrates on maximum profits. Most companies want to earn reasonable rate of return on investment.Company sets its pricing policies and strategies in a way that sales revenue ultimately yields average return on total investment. 

Second objectives is to stimulate demand. Price is used to encourage buyers to try a new product or purchase existing brands during periods when sales slow down. A potential problem is that buyers may balk at purchasing when prices return to normal levels. It has been estimated that even for non-premium products, once discounting has been implements. Discount coupon for a new products may help stimulate demand without actually lowering listed prices.

Third objectives of pricing is product positioning. generally, an effective and relevant pricing can bring a positive impact in enchanging the product image. increase awareness towards the product, encourage or promote the use of the particular product besides achieve the other positioning objectives.

next is the fourth, common pricing objectives of pricing which is stimulate demand. price is able to encourage customers to purchase and try a new products and some exisiting product but haven`t use before. for some of the price sensitive customer, they will choose and purchase the products if its pride its lower than competitors. hence, it will assist the demand of the product increase. for the new customers, price is an essential factor to influence them in order to choose and purchase it

Profit has remained a dominant objective of business activities.

One of the objectives of pricing is to maximize current profits. This objective is aimed at making as much money as possible. Company tries to set its price in a way that more current profits can be earned. However, company cannot set its price beyond the limit. But, it concentrates on maximum profits.

Most companies want to earn reasonable rate of return on investment.

(1) fixed percentage of sales,

(2) Return on investment, or

(3) Fixed rupee amount.

Company sets its pricing policies and strategies in a way that sales revenue ultimately yields average return on total investment. For example, company decides to earn 20% return on total investment of 3 core rupees. It must set price of product in a way that it can earn 60 lakh rupees.

Company’s objective is to increase sales volume. It sets its price in such a way that more and more sales can be achieved. It is assumed that sales growth has direct positive impact on the profits. So, pricing decisions are taken in way that sales volume can be raised. Setting price, altering in price, and modifying pricing policies are targeted to improve sales.

A company aims its pricing policies at achieving or maintaining the target market share. Pricing decisions are taken in such a manner that enables the company to achieve targeted market share. Market share is a specific volume of sales determined in light of total sales in an industry. For example, company may try to achieve 25% market shares in the relevant industry.

Sometimes, price and pricing are taken as the tool to increase its market share. When company assumes that its market share is below than expected, it can raise it by appropriate pricing; pricing is aimed at improving market share.

Competition is a powerful factor affecting marketing performance. Every company tries to react to the competitors by appropriate business strategies.

Pricing is primarily concerns with facing competition. Today’s market is characterized by the severe competition. Company sets and modifies its pricing policies so as to respond the competitors strongly. Many companies use price as a powerful means to react to level and intensity of competition.

To prevent the entry of competitors can be one of the main objectives of pricing. The phase ‘prevention is better than cure’ is equally applicable here. If competitors are kept away, no need to fight with them. To achieve the objective, a company keeps its price as low as possible to minimize profit attractiveness of products. In some cases, a company reacts offensively to prevent entry of competitors by selling product even at a loss.

Pricing is also aimed at achieving the quality leadership. The quality leadership is the image in mind of buyers that high price is related to high quality product. In order to create a positive image that company’s product is standard or superior than offered by the close competitors; the company designs its pricing policies accordingly.

The pricing policies and practices are directed to remove the competitors away from the market. This can be done by forgoing the current profits – by keeping price as low as possible – in order to maximize the future profits by charging a high price after removing competitors from the market. Price competition can remove weak competitors.

Customers are in center of every marketing decision.

Customers are the target to serve. Company sets and practices its pricing policies to win the confidence of the target market. Company, by appropriate pricing policies, can establish, maintain or even strengthen the confidence of customers that price charged for the product is reasonable one. Customers are made feel that they are not being cheated.

To satisfy customers is the prime objective of the entire range of marketing efforts. And, pricing is no exception. Company sets, adjusts, and readjusts its pricing to satisfy its target customers. In short, a company should design pricing in such a way that results into maximum consumer satisfaction.

Over and above the objectives discussed so far, there are certain objectives that company wants to achieve by pricing.

This objective concerns with entering the deep into the market to attract maximum number of customers. This objective calls for charging the lowest possible price to win price-sensitive buyers.

To promote a new product successfully, the company sets low price for its products in the initial stage to encourage for trial and repeat buying. The sound pricing can help the company introduce a new product successfully.

Company’s effective pricing policies have positive impact on its image and reputation in the market. Company, by charging reasonable price, stabilizing price, or keeping fixed price can create a good image and reputation in the mind of the target customers.

This objective concerns with skimming maximum profit in initial stage of product life cycle. Because a product is new, offering new and superior advantages, the company can charge relatively high price. Some segments will buy product even at a premium price.

Company with stable price is ranked high in the market. Company formulates pricing policies and strategies to eliminate seasonal and cyclical fluctuations. Stability in price has a good impression on the buyers. Frequent changes in pricing affect adversely the prestige of company.

 

Finally, pricing is aimed at survival and growth of company’s business activities and operations. It is a fundamental pricing objective. Pricing policies are set in a way that company’s existence is not threatened.

Profit has remained a dominant objective of business activities.

One of the objectives of pricing is to maximize current profits. This objective is aimed at making as much money as possible. Company tries to set its price in a way that more current profits can be earned. However, company cannot set its price beyond the limit. But, it concentrates on maximum profits.

Most companies want to earn reasonable rate of return on investment.

(1) fixed percentage of sales,

(2) Return on investment, or

(3) Fixed rupee amount.

Company sets its pricing policies and strategies in a way that sales revenue ultimately yields average return on total investment. For example, company decides to earn 20% return on total investment of 3 core rupees. It must set price of product in a way that it can earn 60 lakh rupees.

Company’s objective is to increase sales volume. It sets its price in such a way that more and more sales can be achieved. It is assumed that sales growth has direct positive impact on the profits. So, pricing decisions are taken in way that sales volume can be raised. Setting price, altering in price, and modifying pricing policies are targeted to improve sales.

A company aims its pricing policies at achieving or maintaining the target market share. Pricing decisions are taken in such a manner that enables the company to achieve targeted market share. Market share is a specific volume of sales determined in light of total sales in an industry. For example, company may try to achieve 25% market shares in the relevant industry.

Sometimes, price and pricing are taken as the tool to increase its market share. When company assumes that its market share is below than expected, it can raise it by appropriate pricing; pricing is aimed at improving market share.

Competition is a powerful factor affecting marketing performance. Every company tries to react to the competitors by appropriate business strategies.

Pricing is primarily concerns with facing competition. Today’s market is characterized by the severe competition. Company sets and modifies its pricing policies so as to respond the competitors strongly. Many companies use price as a powerful means to react to level and intensity of competition.

To prevent the entry of competitors can be one of the main objectives of pricing. The phase ‘prevention is better than cure’ is equally applicable here. If competitors are kept away, no need to fight with them. To achieve the objective, a company keeps its price as low as possible to minimize profit attractiveness of products. In some cases, a company reacts offensively to prevent entry of competitors by selling product even at a loss.

Pricing is also aimed at achieving the quality leadership. The quality leadership is the image in mind of buyers that high price is related to high quality product. In order to create a positive image that company’s product is standard or superior than offered by the close competitors; the company designs its pricing policies accordingly.

The pricing policies and practices are directed to remove the competitors away from the market. This can be done by forgoing the current profits – by keeping price as low as possible – in order to maximize the future profits by charging a high price after removing competitors from the market. Price competition can remove weak competitors.

Customers are in center of every marketing decision.

Customers are the target to serve. Company sets and practices its pricing policies to win the confidence of the target market. Company, by appropriate pricing policies, can establish, maintain or even strengthen the confidence of customers that price charged for the product is reasonable one. Customers are made feel that they are not being cheated.

To satisfy customers is the prime objective of the entire range of marketing efforts. And, pricing is no exception. Company sets, adjusts, and readjusts its pricing to satisfy its target customers. In short, a company should design pricing in such a way that results into maximum consumer satisfaction.

Over and above the objectives discussed so far, there are certain objectives that company wants to achieve by pricing.

This objective concerns with entering the deep into the market to attract maximum number of customers. This objective calls for charging the lowest possible price to win price-sensitive buyers.

To promote a new product successfully, the company sets low price for its products in the initial stage to encourage for trial and repeat buying. The sound pricing can help the company introduce a new product successfully.

Company’s effective pricing policies have positive impact on its image and reputation in the market. Company, by charging reasonable price, stabilizing price, or keeping fixed price can create a good image and reputation in the mind of the target customers.

This objective concerns with skimming maximum profit in initial stage of product life cycle. Because a product is new, offering new and superior advantages, the company can charge relatively high price. Some segments will buy product even at a premium price.

Company with stable price is ranked high in the market. Company formulates pricing policies and strategies to eliminate seasonal and cyclical fluctuations. Stability in price has a good impression on the buyers. Frequent changes in pricing affect adversely the prestige of company.

 

Finally, pricing is aimed at survival and growth of company’s business activities and operations. It is a fundamental pricing objective. Pricing policies are set in a way that company’s existence is not threatened.

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In order to set the pricing, a firm has divided the way to set it in several aspect to achieve their goals such as to maximum the current profit, competition-relation, customer-relation, sales-related, and others. As the objective there a several common objective of pricing. Firstly, to maximize current profits. This objective is aimed at making as much money as possible. Company tries to set its price in a way that more current profits can be earned. However, company cannot set its price beyond the limit but it will concentrates on maximum the profit. For example, if the company already achieved the maturity stage in product line, it will set the price to maximum its profit.

Besides that, the objective or pricing is to gain sales-related objectives. For the sales-related objective, there a sub-objective that company need to achieve which is sales growth and target market share. In sales growth, company’s objective is to increase sales volume. It will set its price in such a way that more and more sales can be achieved. It is assumed that sales growth has direct positive impact in profit. Addition, for the target market share, a company aims its pricing policies at achieving or maintaining the target market share. Pricing decisions are taken in such a manner that enables the company to achieve targeted market share. For example, company may try to achieve 27% market shares in the relevant industry.

 

Other than that, competition-related objective. Competition is a powerful factor affecting marketing performance. Every company tries to react to the competitors by appropriate business strategies. With reference of price, there a several competition-related objectives may be priories which is to face competition. Pricing is primarily concerns with facing competition. Many company use price as a powerful means to react to level and intensity of competition. For example, company A put a lower price than company B to compete and attract more customer to buy their product or services. To achieve quality leadership also the sub-objective of competition-related objective. Through pricing, the quality leadership is image in mind of buyers that high price is related to high quality product. For example, company A has a great leadership than company B, so the customer assume that company A has a good productivity in firm. As a result customer prefer to choose company A and company A already beat its competitors.

Market penetration also the common objective of pricing. This objective concerns with entering the deep into market to attract maximum number of customers. This objective calls for charging the lowest possible price to win price-sensitive buyers. To promote new product successfully, the company sets low price for price for its products in initial stage o encourage for trial and repeat buying. The sound pricing can help the company introduce a new product successfully. 

Lastly, the common objective of pricing is to satisfy customers. Satisfying customers is the prime objective of the entire range of marketing efforts. And, pricing is no exception. Company sets, adjusts, and readjusts its pricing to satisfy its target customers. In short, a company should design pricing in such a way that result into maximum customer satisfaction. As example, even company B has a slightly high of production than company A, but its price is higher than company A, so the customers are willing to buy in company A products or services. 

 

Survival

Maximize current profits

Increase market share

“Skim” the market

Seek “product-quality leadership”

Survival: Companies facing new and intense competition, over capacity, or changing consumer behavior may pursue a survival strategy. Survival is clearly a short run objective to make it through tough times. As long as price exceeds variable costs and covers some fixed costs, the company can carry on. In the long run, the company must adapt and find ways to add value.

 

Maximize current profits: Maximizing current profit is a common company objective. To do so, costs and consumer demand have to be estimated for different prices. The price point that generates the highest profit is then chosen. In practice, it's not always easy to estimate demand accurately (we discuss ways to do this in our article about determining demand and calculating costs). Additionally, focusing on current profits may mean reducing long run company performance.

 

Increase market share: A company may pursue an objective of increasing or maximizing market share. This makes sense especially if a company feels it can achieve lower unit costs with higher volumes, thereby increasing long-term profit. Many companies set a low initial price to achieve market penetration. This strategy can be advantageous in industries with consumers that are price sensitive, sales and production costs fall with production experience, and where a low price discourages the entry of possible competitors.

 

Skim the market: “Skimming” means setting high prices initially to target those that are willing to pay the high price, and then gradually lowering the price to attract the more price sensitive customers. Video game and other software producers often use this strategy. Die-hard fans are willing to pay the higher initial price, and as sales decline, the company reduces the price for more casual users. Intel is another prime example a company that successfully uses price skimming. It's latest computer chips are sold to those who can't wait for well over $1000 initially. A year later, the price drops and there is a new and more powerful $1000+ chip released.

 

Product-quality leadership: Companies that produce high quality products relative to the competition often try to position themselves as the product-quality leader. They charge more, but convince the customer that it's worth it because of the superior product experience, reliability, or other quality related benefits. Price sensitive customers need to be convinced that the higher price is worth it in the long run.

 

The main point is that using price as a strategic tool is better than simply letting costs determine price. If your product is superior to the competition, you'll be more profitable if you convey that to the market and charge a higher price.