Briefly Describe The Different Types Of Pricing Objectives Essays Examples

Depending on a specific set of goals and priorities that a business wants to pursue, it may choose among the following types of pricing objectives to help shape its pricing strategy:
Profit oriented objectives include maximization of profits by setting up prices that can cover the costs and yield maximum current profits, and target return on investment when companies pricing strategy allows for sales revenue that yields average return on investment;
Sales oriented objectives are related to driving sales volume and gaining desired market share both of which can be achieved through price adjustment;
Status Quo oriented objectives promote competition that is not based prices due to a lack of resources that are needed to effectively compete with the other players on the market;
Customer oriented objectives include gaining customer confidence and maximizing customer satisfaction, and in the center of both objectives are the customers, their needs and relationship with the company.
Compare market penetration pricing and market skimming pricing. State the appropriate times to use those pricing strategies.
Companies use penetration pricing when bringing new products to the market that already has many competitors selling similar products. This pricing strategy is designed to capture market share – both new customers and buyers who are willing to switch from the competition - by offering a price that is lower than that of the competitors’. Lower prices attract potential buyers and help companies build awareness for their new products. After a market share for new products has been gained, companies tend to increase price for their products.
On the other hand, price skimming strategy suggests pricing new products initially very high – the highest that the potential customers are willing to pay – and then gradually reducing prices as more and more similar products enter the market. Price skimming should be used when a company has a significant competitive advantage over the competitors and there are many buyers who are willing to pay the high price; Apple is known for using this strategy in cell phone sales (Kirk, 2013).
How do consumers use reference prices?
Reference price is the price that consumers think, based on all of their previous knowledge, is reasonable to pay for a specific good/service that they want to purchase. Buyers use reference prices when they are interested in buying a product and are shopping around to compare prices from multiple sellers. If a particular price is higher than a reference price, a customer will opt not to purchase that product and look for it elsewhere instead. If a particular price is the same as or lower than a reference price, a buyer will most likely buy the product.
What are the different forms of countertrade?
Offset is a type of countertrade in which a company agrees to buy components or raw materials for manufacturing of its product from one country, in return that country agrees to buy the products. Counter purchase occurs when one company sells its goods or services to another company, and at the same time it also agrees to make purchases from the said company in the future. Barter is purely an exchange of goods and services, no money is used in this exchange process. Buyback happens when a company sets up a plant or factory to produce products in a certain developing country; in return that company takes a part on the plant’s output as a payment for its investment. Switch trading occurs when one company trades its commitment to buy goods and services in a certain country with another company.
What are the different types of promotional pricing?
Promotional pricing is used by companies to encourage customers to buy certain products. Prices are reduced temporarily, then raised again to their normal level. The following are the different types of promotional pricing:
Cash rebates – goods are sold at prices they are listed at but later buyers can get cash back;
Loss leader – prices are set below the cost of manufacturing to increase the demand, which is supposed to offset the lost margin;
Special event pricing – prices are reduces on selected goods for a short period of time;
Psychological discounting – prices are intentionally set too high at first and then reduced to create an illusion of a good deal for buyers;
Buy one get one free – volume of sales can be increased through buy two for the price of one deal.
Additionally, companies can offer extended warranties, extra services or free parts, low interest financing and delayed payment plans (Gray, 2012).
References
Gray, T. H. (2012, April 25). Promotion pricing. Retrieved from http://www.tom- gray.com/2012/04/25/promotion-pricing/
Kirk, J. (2013, March 21). Android’s Penetration Vs. Apple’s Skimming Marketing Strategies. Retrieved from https://techpinions.com/androidss-penetration-vs-apples-skimming-marketing-strategies/15255