Objective 3.03A Employ Pricing Strategies to Determine Prices Part I   a. Identify types of pricing objectives. b. Explain reasons for setting pricing objectives. c. Describe ways in which pricing objectives are used. d. Demonstrate procedures for establishing pricing objectives.

Pricing objectives: 1. Survival Prices are flexible. A company can lower them in order to increase sales enough to keep the business going. The company uses a survival-based price objective when it's willing to accept short-term losses for the sake of long-term viability.

Pricing objectives: 2. Profit Price has both direct and indirect effects on profit. The direct effect relates to whether the price covers the cost of producing the product. Price affects profit indirectly by influencing how many units sell. The number of products sold also influences profit through economies of scale -- the relative benefit of selling more units. The primary profit-based objective of pricing is to maximize price for long-term profitability.

Pricing objectives: 3. Sales Sales-oriented pricing objectives seek to boost volume or market share. A volume increase is measured against a company's own sales across specific time periods. A company's market share measures its sales against the sales of other companies in the industry. Volume and market share are independent of each other, as a change in one doesn't necessarily spur a change in the other.

Pricing objectives: 4. Status Quo A status quo price objective is a tactical goal that encourages competition on factors other than price. It focuses on maintaining market share, for example, but not increasing it, or matching a competitor's price rather than beating it. Status quo pricing can have a stabilizing effect on demand for a company's products.

What is a pricing objective? A goal that guides a business in setting the cost of a product or service to potential consumers. A pricing objective underlies the pricing process for a product, and it should reflect a company's marketing, financial, strategic and product goals, as well as consumer price expectations and the levels of available stock and production resources.

6 Steps to Setting a Price Strategy for your Business 1. Select the pricing objective to decide where you want to position your market offering. 2. Determine the demand. 3. Estimate the costs. 4. Analyze competitor costs, prices, offers and possible reactions. 5. Select a pricing method. 6. Finally, select the price