Pricing objectives could be referred to the objective that drives how the organization sets prices for its product or service. These objectives could and should apply to pricing for both new as well as existing customers. The guidance offered by pricing objectives is exceptionally critical to adjust prices over time in order to address and meet the objectives. Every pricing objective requires a different pricing strategy in order to meet goals of business. Hence, specific pricing methods work well for addressing a certain objective of organization, while other integrations might contradict one another. Therefore, it is significantly imperative to ensure the pricing objectives and strategies are closely cohesive. Turning a profit is prime and most common pricing objective for every organizational business.
The four types of pricing objectives include profit oriented pricing, competitor based pricing, market penetration as well as skimming.
Profit-Oriented Pricing: This type of pricing objective can either aim to accelerate profit per unit relative to the entire cost of goods sold along with the other operating costs, or it might also aim to enhance the overall profitability of business by benchmarking a particular price that is more and sufficiently competitive to improve the number of associated units within the organization.
Competitor Based Pricing: pricing based on Competitors utilizes the price organization set for appealing to the existing customers and accordingly defining the niche relative towards the current competitors. Hence, this method do not primarily rely on establishing a lower price than other available alternatives, even though this pricing strategy certainly makes the products more appealing to customers shopping based on price.
Market Penetration Pricing: A pricing strategy based on market penetration is accelerated towards obtaining a foothold within a competitive market, generally by providing an initial price that is relatively low. If any individual starts out by attracting customers based on price, organization could avail more customer to try the new products, and accordingly start developing a reputation along with a clientele that allows the organization to gradually charge more.
Skimming Pricing Strategy: A pricing strategy based on skimming utilizes the alternative rational from the one that is based on market penetration. This is because, skimming pricing strategy uses a reputation that has already been established or developed in order to charge extra prices from early adopters. If the customers are exceptionally passionate about the products and are willing to pay extra to be the first to have them, then organization could accordingly charge high prices initially while making a new innovation, and then reduce the prices once the organization is successful in attracting the people (specifically who are okay and willing to pay more).
Pricing in simple terms could be referred as the process of fixing the overall value that an organization will obtain in the exchange of its products and services. Therefore, pricing method is also responsible for adjusting the total cost of the offerings made by producers that is appropriate to both the organization along with the customer. Therefore, in other words, pricing objective or method is a specific technique that an organization applies to handle the cost of its products. Hence, pricing process is the most complex process for an organization, as the price must match the current structure of the market and must also compliment the overall expenses of the organization along with its gain profits. In addition to this, the organization requires to take the product pricing of the competitor’s into consideration. Therefore, choosing the correct or suitable pricing method is crucial and imperative. While setting the cost of any product or services the following points must be considered:
The prime objectives of pricing include:
: (i) attaining a Target Return on Investments (ii) Stability in Price (iii) attaining a better Market Share
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