What are five objectives that might be used when setting pricing strategies?

That's a tough one since I would imagine pricing objectives in today's world to be much more complicated procedure. A lot of factors need to be considered while pricing a product/service:

1. Gaining market share
2. Achieving financial targets
3. Product positioning
4. Stimulating demand
5. Influencing competition

The "Price" is the only one "P" in the marketing mix that generates revenue, all other "P´s" are associated with costs.

 

When setting prices we can consider, for example, these characteristics:

1. Should not be only "built" considering the costs but also with profits

2. Should vary for different items according their characteristics

3. The prices of the same product can be different for different market segments

4. Should vary according the market changes

 

About the five steps/objectives, that might be used to set pricing strategy, Mr Vikas gave the correct answer and it´s that plan that I follow.

 

 

Pricing is the most important element of the marketing mix, as price is the only element of the marketing mix, which generates a turnover for the organisation. The remaining elements of the4Ps cost firms money.

Marketing Mix Product - It costs to produce and design a product

Marketing Mix Place - It costs to distribute a product and

Marketing Mix Promotion - It costs to promote products.

Marketing mix Price must support the other three elements of the marketing mix. Getting Pricing correct can be tricky; pricing must reflectsupply and demand relationship and Pricing a product too high or too low could mean a loss of sales for the business.

Pricing Factors

Pricing strategies should take into account the following factors into account:

1.     Fixed and variable costs.

2.     Competition

3.     Company objectives

4.     Proposed positioning strategies.

5.     Target group and willingness to pay

An organisation can adopt a number of pricing strategies, the pricing strategy will usually be based on corporate objectives.

 

There are various strategies for pricing, there of them are below, most of already answered by other Professionals

 Promotional Pricing.

Pricing to promote a product is a very common application. There are many examples of promotional pricing including approaches such as BOGOF (Buy One Get One Free), money off vouchers and discounts. Promotional pricing is often the subject of controversy. Many countries have laws which govern the amount of time that a product should be sold at its original higher price before it can be discounted. Sales are extravaganzas of promotional pricing!

Geographical Pricing.

Geographical pricing sees variations in price in different parts of the world. For example rarity value, or where shipping costs increase price. In some countries there is more tax on certain types of product which makes them more or less expensive, or legislation which limits how many products might be imported again raising price. Some countries tax inelastic goods such as alcohol or petrol in order to increase revenue, and it is noticeable when you do travel overseas that sometimes goods are much cheaper, or expensive of course.

Value Pricing.

This approach is used where external factors such as recession or increased competition force companies to provide value products and services to retain sales e.g. value meals at McDonalds and other fast-food restaurants. Value price means that you get great value for money i.e. the price that you pay makes you feel that you are getting a lot of product. In many ways it is similar to economy pricing. One must not make the mistake to think that there is added value in terms of the product or service. Reducing price does not generally increase value.

Captive Product Pricing

Where products have complements, companies will charge a premium price since the consumer has no choice. For example a razor manufacturer will charge a low price for the first plastic razor and recoup its margin (and more) from the sale of the blades that fit the razor. Another example is where printer manufacturers will sell you an inkjet printer at a low price. In this instance the inkjet company knows that once you run out of the consumable ink you need to buy more, and this tends to be relatively expensive. Again the cartridges are not interchangeable and you have no choice.

Product Bundle Pricing.

Here sellers combine several products in the same package. This also serves to move old stock. Blu-ray and video games are often sold using the bundle approach once they reach the end of their product life cycle.  You might also see product bundle pricing with the sale of items at auction, where an attractive item may be included in a lot with a box of less interesting things so that you must bid for the entire lot. It’s a good way of moving slow selling products, and in a way is another form of promotional pricing.

Objectives which might be used for setting pricing strategy.

 

As an entrepreneur, setting a pricing strategy and policy for our products/services for the first time when you develop it or when we introduce our product / service into a new geographical area, can be a big head ache. Reason being, that price is not just a tag on the product or service, it communicates to our customers our business’s intended value positioning and also determines your profitability.

 

When setting a pricing strategy we have to consider the following 6 factors;

 

1. Select the pricing objective to decide where we want to position our market offering. The five major objectives that we can pursue are a) survival, b)  maximum current profit, c)  maximum market share, d)  maximum market skimming or product – e)    quality leadership. Having a clearer objective makes it easier to set a price.
2. Determine the demand. The price we set will affect the demand level and impact our business objectives differently. In normal situations, price and demand are inversely related, in that the higher the price the lower the demand and vice versa.
3. Estimate the costs. While doing this, we want to charge a price that covers our cost of production, distribution and selling of the product plus a decent return for our efforts and risks.
4. Analyze competitor costs, prices, offers and possible reactions. We should consider our nearest competitor’s price, product features and evaluate them to check their worth to the customers. We can then decide to charge more, same as competitor or less.
5. Select a pricing method. When selecting, consider the cost of the product or service, competitor prices and the customer’s assessment of the unique features. The pricing method we decide should include one or more of these considerations.
6. Finally, select the price. Here, we must consider the following: 1) Impact of other marketing activities like brand quality and advertising in relation to competition.2) Companies pricing policy, 3) Impact of the price on other parties like the distributors and dealers.

 

 

Price is not just a number on our product or service, it produces revenue and can determine if we reap in huge profits or suffer losses. Effective designing and implementation of a pricing strategy is thus important for our profitability.

well, the5 types are without going into details, it is an approach to maximize the profit while setting the directive of company's approach to the market.

Premium Pricing

Penetration Pricing

Economy Pricing

Price Skimming

Psychological Pricing

 

and it is when entering the market,there is an airline that provide low cost tickets very known for that, just like Ajazeera, other companies that provide better service and high price tried to make some of its operation similar that, which end up failing, so changes during the develop will be hard to accomplish, its can be done, but there hasn't been good rate of success.

Profit-Oriented Pricing Objectives

Profit-maximization pricing means setting prices so that total revenue is as large as possible relative to total costs. This is the prime pricing strategy to use if you are in a monopoly. The farmer is the only major farm in town selling certified organic produce, so maybe this would be an excellent option for him to use.

There are some other ways that the farmer can maximize profits. He can increase customer satisfaction, which can improve revenue, and he also can reduce costs. Some ways for the farmer to reduce costs would be to lay off employees and improve his product efficiency by minimizing loss of crops and implementing more effective mass distribution of his product line.

Sales-Oriented Pricing Objectives

Sales-oriented pricing objectives are based on either market share or unit/dollar sales. Market share is a company's product sales as a percentage of total sales for that industry, and it can be shown via revenue or units. For example, our farmer has 70% of the local organic produce market in revenue. The farmer can have an increase of market share to 80% as a company goal. He can achieve this through aggressive pricing to steal away his competition.

Instead of deciding to increase his market share, the farmer could also pursue a sales maximization strategy. The farmer would not be concerned with increasing market share but instead would be concerned with maximizing sales. This method means that the farmer would not worry about the competition, the market or even profits - just sales!! Large discounts can result in a huge increase in sales. The cash infusion philosophy should only be a short run objective since it can hurt profits in the long run because products are so heavily discounted.

 

Generally , pricing strategies might include the following:1. Cost-plus pricing—simply calculating your costs and adding a mark-up.2. Competitive pricing—setting a price based on what the competition charges.3. Price skimming—setting a high price and lowering it as the market evolves.4. Penetration pricing—setting a price low to enter a competitive market and raising it later.5. Price bundling—combining products and/or services to increase value, and therefore price. However, your pricing strategy should be part of both the marketing mix and the general business strategy. If yours is a new company, you must establish yourself in the marketplace, and so would likely want to generate cash flow through some form of penetration pricing.If you are established, you probably already have built up some trust in the marketplace, so you can apply one of the other strategies, such as premium pricing, or bundling. Either way, you must use a strategy appropriate to your target market.

Thanks

I am with answer given by Mr. Pedro

I agree with the rest of the answers

I fully agree with the answers been added by EXPERTS...............Thanks.

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