MM/U4 Topic 1 Price: Meaning and Objectives
Pricing is the method of determining the value a producer will get in the exchange of goods and services. Simply, pricing method is used to set the price of producer’s offerings relevant to both the producer and the customer.
Every business operates with the primary objective of earning profits, and the same can be realized through the Pricing methods adopted by the firms.
Pricing is a process to determine what manufactures receive in exchange of the product. Pricing depends on various factors like manufacturing cost, raw material cost, profit margin etc.
Objectives of Pricing
The main objectives of pricing can be learnt from the following points:
- Maximization of profit in short run
- Optimization of profit in the long run
- Maximum return on investment
- Decreasing sales turnover
- Fulfill sales target value
- Obtain target market share
- Penetration in market
- Introduction in new markets
- Obtain profit in whole product line irrespective of individual product profit targets
- Tackle competition
- Recover investments faster
- Stable product price
- Affordable pricing to target larger consumer group
- Pricing product or services that simulate economic development