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Pricing Objectives and Policies

August 7, 2009

Pricing Objectives and Policies :

Pricing objectives or goals give direction to the whole pricing process .When deciding on pricing objectives the following things to be considering,

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

4) The resources you have available.

There are several different “Objectives” a company may orient themselves towards in order to obtain a profitable business situation.

Profit Oriented :

This type objectives target is to achieve the high profit, having the below two major technique to reach,

Target Returns: The vendor specifies a specific dollar amount or percentage amount that the price will be offered at in order to make a profit which has been calculated for a specific purpose.

Maximize Profits: The Competitive Market is not intense may charge the highest price the market will bear because sometimes and may have an advantage for reasons based on the geographic advantage

>> Special features not available on other competitors’ products.
>> Very famous brand


Sales Oriented :

This type objectives target is to achieve the high sales, having the below two major technique to reach,

Sales Maximization:

>> Short-term objective to maximize sales of the product

>> Ignores profits, competition, and the marketing environment

>> Used to sell off excess inventory in some case.

Market Share: To increase the market of shares of the particular industries product.

Status Quo Oriented:

Status Quo meets most of the competitions in industries and to get the pricing level of the particular product.

Meet the Competition: Customer has many choices, and the vendor have resources to stay in the market, then just charge the same price. If the vendor doesn¬タルt have the resources to survive a price war and vendor don’t have the ability to claim better quality.

Some other pricing objectives are related with pricing strategies to be considered in the pricing objectives preparation.
Skimming Policies:

>>        A Skimming policy is more attractive if demand is there are no close substitutes.

>>        Products that people will pay a high price for because there is nothing else they can buy there is close to the item.

Penetration Pricing:

>>        To make it too intimidating for competition to follow.

>>        To enter the market in a competitive environment.

>>        Part of a brand building unique.

Discount Pricing:

>>        This may be occurred seasonal.

E.g. . 50 % discount in textile stores at the festival time.

>>        This based on the buyer purchase volume or amount bought.

E.g. Buy more than 10,000 get any free gift

Allowances:

>>        This will cutting customers a break due to their cost of advertising

>>        The advertising push to the promotion of the pricing products

Trade-in allowance:

>>        Price reductions granted when purchasing a new one

>>        Provides low interest financing.

>>        Allow longer payment terms

Geographic Pricing :

>>        F.O.B (Free On Board ) => basically, this is the price out the door at our factory – buyer come and get it.

>>        Zone The customer live close, it is cheaper, if live farther away, we add in shipping costs

Some of the more common pricing objectives are:

Maximize long-run profit

Maximize short-run profit

Increase dollar sales

Obtain a target rate of return on sales

Maintain price leadership

Match competitors prices

Enhance the image of the firm, brand, or product

Create interest and excitement about a product

Discourage competitors from cutting prices.

Digramic view Click Here

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