Pricing Objectives

Pricing strategies are expected to achieve specific objectives.More than one pricing objective is usually involved and sometimes the objectives may conflict with each other.If so,adjustments may be needed on one of the conflicting objectives.Several examples of pricing objectives follow:

1.Gain Market Position:

Low prices may be used to gain sales and market share.Limitations include encouraging price wars and reduction of profit contributions.Even though buyers may have been responsive to a price for MACH 3 that was 45 percent about SensorExcel,Gillette's management used a 35 percent price increase that was more likely to gain market position.

2.Achieve Financial Performance:

Prices are selected to contribute to financial objectives such as profit contribution and cash flow.Prices that are too high may not be acceptable to buyers.A key objective for Dell Inc.in the consumer market segment was pricing to achieve financial performance in combination with holding market position.

3.Product Positioning:

Prices may be used to enhance product image,promote the use of the product,create awareness and positioning objectives.The visibility of price may contribute to the effectiveness of other positioning components such as advertising.

4.Stimulate Demand:

Price is used to encourage buyers to try a new product or to purchase existing brands during periods when sales slow down.A potential problem is that buyers may balk at purchasing when prices return to normal levels.

5.Influence Competition:

The objective of pricing actions may be to influence existing or potential competitors. Management may want to discourage market entry or price cutting by current competitors.

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