Objective of pricing decision, Marketing Management

Objective of pricing decision: a firm may choose its pricing objectives from any of the following:

1. To maximize the profits: the primary objective of the pricing decision is to maximize profits for the concern and therefore pricing policy should be determined in such a way so that the company can earn the maximum profits.

2. Price stability: as far as possible the prices should not fluctuate too often. A stable price policy above can win the confidence of the consumers. It will also add to the goodwill of the firm. For this purpose the concern should consider long run and short run elements.

3. Competitive situations: one of the objectives of the price decision is to face the competitive situation in the market. Prices of the commodities should be fixed keeping in the mind the competitive situation. Sometimes the management likes to fix a reactively low price for its product to discourage potential competitors.

4. Achieving a target return: this is a common objective of well established and reputed firm in the market (either for the companies name or its brand or the quality of the product) to fix a certain rate of return on investment. The prices of the product are so calculated as to earn that rate of return on investment. Different target return may be fixed for different product but such returns should be related to a single overall return target.

5. Capturing the market: one of the objectives of pricing decision may be capturing the market. A company especially a big company, at the time of introducing the product in the market fixes compatibly lower prices for its products, keeping in view the competitive position with an objective of capturing a big share in the market.

6. Ability to pay: price decision is sometimes taken according to the ability to customers to pay; more prices can be charged from persons having a capacity to pay. Capacity to pay is determined on the basis of the purchasing power of the consumers for which the product is made.

7. Long run welfare of the firm: the main aim of some concerns is to fix the price of the product which is in the best interest of the firm in the long run keeping the market conditions and economic situation in mind.

8. Margin of profit to middle men: pricing of the product should be made keeping in view that middle man get a fair return on the sale of company's product. Otherwise they will lose interest in selling company's products.

Posted Date: 9/19/2012 6:56:27 AM | Location : United States






Your posts are moderated
Related Questions
marketing is a science for the management of a value delivery system

Explain about the overall objective of Marketing Information System. The overall objective of MIS is to give inputs by target markets, marketing channels, publics, competitors

Question 1: How and to what extent should management recognize social responsibility extending beyond the boundaries of the organization. Question 2: Public Relations (

Natural Environment: (1) Natural Resources: Business depends on natural resources. Raw material is one main part of these resources and firms are concerned with their availa

Question: "If a decade ago, we had had a greater understanding of the business and organizational dynamics of technology, I think we would now have an even greater payback from

what is test marketing and various approcehes that are followed by FMCG companies in test marketing

Looking for an expert to help with market segmenation process

This is a practice where one firm sells the similar product at several prices in several markets.

Q.   Described different levels of market segmentation? Ans.: The beginning point for segmentation is mass marketing. In mass marketing,  the  seller  engages in  mass produc

music2GOmulti-player marketing strategy review