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Home » What are the Major Pricing Objectives in Business?

What are the Major Pricing Objectives in Business?

By Richard Daniels Reading Time: 4 mins
Updated September 26, 2020

We always need to set the pricing objectives first. We can never set a price blindly on this hope to earn a profit. Without a proper pricing strategy, no business can expect to survive in the competitive market today. And what leads to that strategy? Well! That’s no other than the accurate identification of pricing objectives. Identifying the purposes of setting up the pricing is the first step towards a robust pricing strategy.

Pricing Objectives

Although survival is not the only goal, the business people have in their minds about their businesses, but also to prosper by generating a lot of income from it. Therefore, pricing objectives may vary significantly from business to business depending upon the current situations that the brand is facing, the mindset of the management team, rise, and downfall in supply and demand, etc.

Pricing up the product is one of the most vital P’s for any brand and deals, both, directly and indirectly to the resulting progress. It can either make your business or break it. You set the price too high, and all of your potential customers will prefer your competitors and if you set it too low, then there are limited chances for your business to survive, except if it’s a part of your strategy (or even if you are in the mood of losing your business)!

Major Pricing Objectives Of Business

  1. Maximizing the Profits

Generating a profit is one of the ultimate pricing objectives of businesses, but is under the effect of the pricing, either directly or indirectly. In a direct manner, it depends whether your pricing is capable of covering the costs as well as, putting some bucks in your pocket.

And in an indirect way, it depends on the number of units sold, where those extra sold units will cover up that profit. For the achievement of the purpose, they shape up their strategies while keeping an eye on the trends in the past. They set their prices in such a way that the maximum amount of profits can be ripped up while staying inside some limits. Because outside these, it is very likely that they can quickly lose most or nearly their entire customers.

  1. Targeting a Particular Return on Investment (ROI)

Targeting return is one of the most interesting pricing objectives for most of the investors. As its name suggests, Return On Investment is the amount of return (either as a fixed percentage of sales or profit) generated by a particular degree of investment. A high return due to the high pricing of the product with the low cost of production and promotion is what all the investors strive for. But again, they also need to care for their customer base.

  1. Increase in Sales

In the sales-oriented pricing objectives, the knowledge gained from the experience curve is put to some good use in predicting a strategy that’s capable of decreasing long-term costs while ensuring a long-run profit, by increasing the number of units sold. For this purpose, companies may alter the prices or even whole pricing policies to improve their chances of getting a greater number of sales.

Furthermore, brands can use the objective for the purpose of increasing the market shares also, which is a measure of the sales comparison with another brand’s or in the whole industry. Aside from achieving a definite target of market share, companies can also use pricing to boost up their shares.

  1. When Survival is the Only Priority

Although good and bad times are part of life and business too and that’s why we do the planning, hoping for the best and getting ready for the worst. In times of overcapacity or market decline, strategists can decrease prices to an extent that could still cover up the costs and let the business up and running. That’s the case where survival gets higher priority as compared to profits and sales.

  1. Making your Product a Trendsetter

Quality is what determines how much a product should cost. When a product is new in the market, people are very much interested in it. But when it gets a thorough mixture of high quality and affordable prices, it is referred as to be the trendsetter in the market. The primary goal of the companies, setting such pricing objectives, is making a product visible in the market by price, especially if it’s a new one. Companies set their prices low so as to attract people, and if guys like it, it works as a trigger to a repetitive chain reaction of purchases that people make.

  1. Stabilizing an Old Business

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.

  1. Competition Based Objectives

One of the major factors that determine the marketing policies of any company is its competitor base. As competition gets stronger the easier, it becomes for the company to get kicked out of business. That’s where pricing comes to be a powerful weapon to attract customers while facing that fierce competition. Some brands also use the pricing for preventing any further brand from entering this race. It works on the principle of keeping the prices low enough so that customers prefer you before going to anyone else.

Well! It just does not end here. Sometimes, situations get bad! Real bad! And you have to go offensively. In this case, companies sacrifice a lot of their current profits by decreasing the prices as low as just to cover cost prices. But this strategy secures significant benefits too in the long run. Once the competition runs out of business, they grow their prices up again, but this time, it comes with a huge boost in the number of sales.

Author at Business Study Notes
Richard DanielsAuthor at Business Study Notes

Hello everyone! This is Richard Daniels, a full-time passionate researcher & blogger. He holds a Ph.D. degree in Economics. He loves to write about economics, e-commerce, and business-related topics for students to assist them in their studies. That's the sole purpose of Business Study Notes.
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