Determining what your objectives are is the first step in pricing. When deciding on pricing objectives must consider:
1) The overall financial, marketing, and strategic
objectives of the company; 2) The objectives of your product or brand;
3) Consumer price elasticity and
price points; and
4) The resources you have available.
Some of the more common pricing objectives are:
·
Maximize long-run profit
·
Maximize short-run profit
·
Increase sales volume (quantity)
·
Increase monetary sales
·
Increase market share
·
Obtain a target rate of return on investment (ROI)
·
Obtain a target rate of return on sales
·
Stabilize market or stabilize market price
·
Company growth
·
Maintain
price leadership
·
Desensitize customers to price
·
Discourage new entrants into the industry
·
Match competitors prices
·
Encourage the exit of marginal firms from the industry
·
Survival
·
Avoid government investigation or intervention
·
Obtain or maintain the loyalty and enthusiasm of
distributors and other sales
personnel
·
Enhance the image of the firm, brand, or product
·
Be perceived as "fair" by customers and
potential customers
·
Create interest and excitement about a product
·
Discourage competitors from cutting prices
·
Use price to make the product "visible"
·
Help prepare for the sale of the business (harvesting)
·
Social, ethical,
or ideological objectives