Category: 

What Are Pricing Objectives?

Article Details
  • Written By: Sheri Cyprus
  • Edited By: Heather Bailey
  • Last Modified Date: 20 April 2014
  • Copyright Protected:
    2003-2014
    Conjecture Corporation
  • Print this Article
Free Widgets for your Site/Blog
Annual microwave sales in the US are down about 40% since 2004.  more...

April 20 ,  1864 :  Louis Pasteur performed his first pasteurization tests.  more...

Pricing objectives are goals that a business hopes to achieve when deciding on the cost of its products or services. In order to be effective, the pricing process must be connected to the overall marketing mix. A marketing mix is known as the 4 Ps: product, price, place/distribution and promotion. All of the decisions made on the price points, or costs of goods or services to buyers, has to fit in with the marketing strategy or plan that relates to the value of the product — as well as distribution and promotion expenses. The company has to make a profit, or a profitable return on investment (ROI), to stay in business, yet its pricing objectives must also be competitive to attract customers.

One type of pricing objective is to create a "buzz" about a business by making news. For example, a new bread company may base a marketing campaign around the concept of supplying quality grain products at low prices to help people during an economic recession. Since the marketing angle and pricing objectives would be different than competitors', a positioning that can attract the target market's attention through what is known as a unique selling proposition (USP) results. USPs are strong, persuasive marketing messages that pull in large numbers of new customers by giving them a hard-to-resist reason for buying that particular brand over competitors' offerings.

Ad

Other more common pricing objectives involve matching techniques. For instance, a company's pricing strategy, and marketing communications message to potential customers, may be "We will match all competitors' prices." Many businesses that use this type of price point strategy add a tag line message such as "You get true value with Smith's Flooring." Price matching objectives must be based on a strong knowledge of competitors' pricing, as well as the cost and overhead to the company to ensure that a good ROI will still be made.

"Survival pricing" is an objective used when a business isn't doing well. In this situation, ROI isn't considered in the pricing process; rather, just having the business survive is the main goal. Survival pricing can't ever be used as a permanent marketing mix strategy, but only as a temporary means of staying in business.

"Skimming" is one of the pricing objectives that may be used when a company is targeting customers who aren't highly motivated by the cost of a product or service. Luxury items are often priced in this way; if the product is "the cream of the crop," it's considered worth it at almost any price as evident by its demand. This type of pricing objective skims the cream, or highest value, from the marketplace by providing premium, much-in-demand products to an exclusive target audience.

Ad

Discuss this Article

Glasis
Post 1

A lot of time is spent by companies doing research into the areas they are trying to selling in. There are some companies even dedicated to doing this market research for various other businesses. Companies sometimes need a specific demographic in an area before launching a product or store into an area.

The famous saying, 'he could sell ice makers to the Eskimos' is a simple example of this type of marketing thinking. Eskimos generally live in cold regions so it's silly to think of them buying ice makers. It becomes necessary to see if the type of product you are selling is wanted or needed in a certain area.

Post your comments

Post Anonymously

Login

username
password
forgot password?

Register

username
password
confirm
email