5 PRICING GOALS EVERY BUSINESS SHOULD KNOW ABOUT
Pricing goals are essential in the process of determining the cost of a product or service. They should reflect the marketing strategy, product or service attributes, and customer pricing expectations. Each pricing goal has different built-in pricing strategies that are designed to accomplish tasks. It's important to make sure your goals and pricing strategies are exactly aligned. When setting prices, companies can (and should) have a specific goal in mind.
There are many factors that can ultimately influence the formation of a company's goals. In this article, we will talk about those that are most important and relevant today.
This pricing objective is used in situations where a company is going through bad times. The main goal is to stay in business and cover basic expenses. For a short time, the goal of making a profit is set aside and the survival goal becomes the primary goal. Once the situation improves, the prices of products and services will return to previous or more acceptable levels.
2. Increasing profits.
Any entrepreneurial activity pursues the goal of making a profit. However, profit-oriented pricing makes profit a priority in determining the ideal price.
Profit-focused pricing objectives are determined to maximize the margin on each sale and the long-term profitability of the business. Simply put, profit-oriented pricing objectives are to make as much money as possible.
3. Maximizing the size of sales.
When companies are in financial trouble, they sometimes try to get money quickly to pay off their debts. To achieve this goal, a company can sell its products or services at lower prices.
Sales maximization is usually a short-term goal because profitability is not considered. However, this does not indicate a complete disregard for profit. Rather, it suggests that increased sales will have a positive impact on the company's bottom line. In such a case, the company is willing to face short-term losses in order to reap long-term gains.
4. Overcoming competition.
A low price for your product can deter competition - some companies even decide to sell their products at a loss to prevent new players from entering the market. On the other hand, a high price can signal to potential customers that your product is high quality, making them more likely to choose you over your competitors.
Such a pricing objective completely fails to take into account the value of the product to the consumer compared to the value of competitive products. As a result, the price of a product may be too low or too high.
5. Increasing market share.
Pricing can also be used to increase market share. Some organizations try to set their prices in such a way as to influence certain market segments. Capturing a larger market share does not necessarily mean that the firm will earn higher profits. Despite this, many companies believe that capturing as much market share as possible is absolutely essential to their survival.
Every company has its own pricing goals. Look carefully and determine if there are those that are present in your pricing policy among those listed by us. Be sure to remember that the pricing goal must be clearly defined as it has a direct impact on the pricing methods and process. This is the only way to achieve long-term success!