Pricing Objectives – BMS Notes
Pricing can be defined as the process of determining an appropriate price for the either it is the act of determining the product’s pricing. A lot of choices are made while determining a product’s price in the pricing process. Different goals are pursued by pricing policies. The company’s effective pricing strategies and policies will help it reach a number of its goals. Pricing choices are made in light of the goals that need to be met. The goals are to market shares, sales volume, profitability, and competitiveness. Pricing goals may be divided into five categories, as Figure 1 illustrates.
Goals pertaining to profits
One of the fundamental goals of corporate operations continues to be profit.
The company’s pricing strategies and policies are designed to achieve the following goals connected to profits:
(a) Maximum Earnings Right Now
Maximizing present earnings is one of pricing’s goals. Making as much money as possible is the goal here. The company attempts to determine its pricing so that it can make more money right now. The business is unable to raise its prices over the cap, however. However, it prioritises maximising profits.
The intended return on investment (b)
A respectable rate of return on investment is what most businesses aim to achieve.
Possible target return:
set proportion of sales
Income from investment
A certain sum of rupees
The company designs its price and strategy such that sales revenue eventually generates an average return on total investment. For instance, a corporation wishes to obtain a 20 percent return on their 3 crore rupee investment. It has to price the goods such that it may make sixty lakh rupees.
Goals pertaining to sales
The primary goals of pricing in relation to sales might be:
(a) Increased Sales
The company wants to boost the volume of sales. It sets its pricing so that it may make an increasing number of sales. Growth in sales is seen to directly and favourably affect earnings. Pricing selections are thus made with the goal of increasing sales volume. The goal of price setting, price adjustments, and pricing policy modifications is to increase sales.
(c) The intended market share
A business sets its price policies with the goal of reaching or keeping the desired market share. Pricing choices are made in a way that helps the business reach its desired market share. A specified amount of sales calculated in relation to the overall sales in an industry is known as market share. For instance, the business can aim for a 25% market share in the relevant sector.
(c) Gaining More Market Share
Pricing and price are sometimes used as instruments to grow a company’s market share. A corporation may increase its market share by setting suitable prices when it believes that it is less than anticipated. Pricing is done with the intention of increasing market share.
Objectives pertaining to competition
One important component influencing marketing performance is competition. Every firm seeks to respond to its rivals by implementing suitable business plans.
The following goals connected to competitiveness may take precedence over price:
(a) In the Face of Competition
Having to compete on price is the main problem. In today’s market, fierce rivalry is a defining feature. The company determines and adjusts its price strategies in response to aggressive competition. Price is a potent tool that many businesses employ to respond to the degree and ferocity of competition.
(a) To Drive Away Rivals
One of the primary goals of pricing may be to keep rivals from entering the market. This situation is one in which prevention is always preferable than treatment. It is not necessary to battle rivals if they are maintained at a distance. A corporation sets prices as low as feasible to limit profit attractiveness of items in order to accomplish the goal. Sometimes a business may offer merchandise even at a loss in an aggressive effort to keep rivals out.
(c) Using Pricing to Achieve Quality Leadership
Achieving quality leadership is another goal of pricing. Customers’ perception that a high price corresponds with a high-quality product is known as the quality leadership. The corporation develops its pricing strategies to project a good image that their product is on par with or better than that of its nearest rivals.
(c) Eliminating Rivals from the Market
The purpose of the pricing strategies and practises is to drive rivals out of the market. In order to maximise future profits by charging a high price after driving rivals out of the market, this may be accomplished by forgoing present earnings by keeping prices as low as feasible. Weak competitors may be eliminated via price competition.
Goals pertaining to customers
Every marketing choice starts with the customer.
The company seeks to accomplish the following goals via appropriate pricing methods and policies:
(a) Gaining the Trust of Clients
Serving customers is the goal. The purpose of the company’s pricing policy is to gain the trust of the intended market. Customers’ trust that the price they pay for a product is fair may be established, maintained, or even strengthened by the company via the implementation of suitable pricing strategies. The impression is given to customers that they are not being duped.
(c) To Please Clients
The primary goal of any marketing initiatives is to please consumers. Pricing is also not an exception. The business establishes, modifies, and re-modifies its prices in order to appease its intended clientele. To put it simply, a business should structure its prices to maximise customer happiness.
Additional Goals
In addition to the goals that have been covered so far, the organisation hopes to accomplish further goals via price.
They are listed below:
(a) Adherence to the Market
This goal focuses on penetrating the market deeply in order to draw in the greatest number of clients. Charging the lowest price in order to attract budget-conscious customers is the goal.
(a) Marketing a Novel Good
In order to effectively launch a new product, the firm first sets cheap prices for its goods in an effort to get customers to try them and make more purchases. The business may successfully launch a new product with the support of sensible pricing.
(c) Preserving Credibility and Image in the Industry
The company’s reputation and image in the industry are enhanced by its efficient pricing strategies. Companies may establish a positive reputation and favourable image in the eyes of their target market by setting a fixed pricing, stabilising prices, or charging fair prices.
(c) To Remove the Market’s Cream
This goal is to maximise profit throughout the first phase of a product’s life cycle. The product is new, thus the corporation may charge a comparatively high price since it offers new and improved benefits. Certain markets will purchase a product even at a higher cost.
(e) Stability of Price
In the market, a company with consistent prices is highly regarded. The company develops tactics and pricing plans to get rid of cyclical and seasonal variations. Pricing stability leaves a positive impression on consumers. Frequent price adjustments have a negative impact on the company’s reputation.
(f) Survival and Expansion
In the end, price is determined by the desire to maintain and expand the company’s operations and commercial ventures. It is an essential goal of pricing. Pricing strategies are chosen so as not to jeopardise the company’s viability