Discuss the various types of pricing objectives.

a) Profit objectives: Satisfactory profit levels vs. profit maximization. Expressed in shilling amount or percent change from the previous period. Firms estimate demand and cost associated with alternative prices and choose the price that is going to produce the desired level of profits.
b) Market share, Pricing objectives used to increase or maintain market share.
c) Cash flow: recover cash as fast as possible, especially with products with short life cycles.
d) Status Quo: maintain market share, meeting competitors prices, achieving price stability or maintaining public image. Primarily for non price competition and price only acts as a stabilizer of market share occupied by the firm.
e) Survival: accept short term losses necessary for survival especially in the face of fierce competition, overcapacity or change of customer wants. The organization may set low prices hoping that the market is price sensitive because prices are less important than survival. Prices are set just to cover costs
f) Leadership or positioning: where corporate strategy is concerned with the organization’s position in the market compared with the competitors .This may be reflected in market share-leadership, product quality leadership or price leadership. In market share leadership , the organization’s objective is to achieve a dominant market share through low price in the hope of achieving low production costs and high profits. Quality leadership position in the market will be to produce and sell superior quality products .This will mean high prices to cover high quality product quality and high R & D costs. This will target consumers who are willing to pay premium price for quality.
g) Product portfolio: the portfolio of products in different market segments will require different pricing (differentiated pricing) to suit the needs the needs and priorities of each segment. In this case the other elements of the marketing mix are used to support the price .
h) Product lifecycle stage: Pricing strategy varies with the stage in the life of the product: introduction may involve a lower price to encourage trial. The price may then be raised after acceptance and adoption in the growth stage. Price reductions could be used during the late maturity and decline stages.
i) Costs: In the long run, the firm cannot survive by selling at or below cost. There is need to take into account all costs, costs associated with product, with total product line etc. Types of Cost:
Fixed cost :do not change with change in # units produced
Variable cost :vary directly with the change in the # units produced JHb) Buyers Perceptions: Different market segment may react to price levels and price changes differently depending on the nature of the product’s desirability and level of loyalty established by the customers .Thus the marketer sets prices within the segment bounded by the what the market is willing to accept .

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Lellah answered the question on November 5, 2021 at 12:40