Meaning of Pricing

Meaning of Pricing
Pricing means the process of selecting the pricing objectives, determining the possible range of
prices, developing price strategies, setting the final price, and implementing and controlling
pricing decision. The determination of price is very important and crucial decision. It affects all
parties involved in the production, distribution, and consumption of goods. Price affects the
volume of production and the amount of profit. It is a source of income to distributors.
According to M.J. Jones and S.W. Jetty, “Pricing begins with an understanding of the
corporate mission, target markets, and the marketing objectives; then pricing objectives are
developed; next management estimates as to extent of flexibility in establishing prices by
studying costs and profits internally and demand and competition externally; prices are, then set
between these two extreme ends by deciding price strategies in the light of objectives so set;
specific methods are used to set prices; final aspects in implementation and control that
includes effective monitoring to get feedback on consumer response and competitive reaction.”
According to W.J+.Stanon, “Pricing is the functions of determining the products value in
monetary terms.”
Objectives of Pricing
The pricing objectives reflect overall goal of the organization. It describes the what an
organization wants to achieve through pricing. All the pricing policies and strategies are
determined by the parameter of pricing objectives. So, pricing objective provides the guideline-
setting the pricing policies and strategies. Moreover, the pricing objectives determine the overall
objectives of the organization. The pricing objectives are as follows:

Source: www.witiger.com
1. Profit Oriented Objectives
Profit oriented objectives focus on profit. This objective can be profit maximization and achieve
target return.
 To maximize profit:
One of the objectives of pricing is to maximize the profit. It is very important to maximize the
profit to run the organization.Some company set price to their products or services with a view
of maximizing profit. It is very important to focus on profit maximization.
 Achieving target return:
Another objective of pricing is to achieve target return.Some company may determine the price
of their goods or services to achieve a certain return on investment or on sales. This is the
desired profit. It is necessary to have target return in the pricing process.
 Achieving target return on sales:
It is necessary to achieve target return on sales in pricing.Mostly resellers manage their pricing
to achieve a target return on sales. For example, 10% of sales. If there is not more competition
this objectives can be used.

 Achieving target return on investment:
Pricing should focus on achieving target return on investment too.Manufacturing company
manages pricing in order to achieve specified return on investment in manifesting, research and
development, establishment and commercialization. For example, 5% on investment.
2. Sales Oriented Objectives
Sales oriented pricing objectives focus on sales volume rather than on profit. The profit can be
to gain sales volume and market share.
 Sales volume increase:
One of the pricing objectives may be determined in terms of increasing sales volumes over the
certain period of time. For example, 10% increase annually. This does not mean that profit
should be avoided. Organization believes that higher sales volume will lead to lower unit costs
and higher long run profit. It is necessary to focus in the increment in sales volume of the
company.
 Maintain market share:
Pricing should have the basic objectives in maintaining market share.Market share is really a
meaningful measure of the success of a firm's marketing strategy. A market share price
objective can be either to maintain the market share, to increase it or sometimes to decrease it.
The company uses the price as an input to enjoy a target market share. This market share is
normally expressed as a percentage of the total industry sales.
3. Status Oriented Objectives
Status oriented pricing focus on maintaining the current position. This objective can be
described as “Don’t Rock the Boat” objective. The large companies in order to minimize the risk
of loss and maintain their status adopt this objective. Organization does not take any initiative in
the price change. These objectives are as follows:

 Stabilization of price:
Pricing should have the objectives in stabilizing the price of a product.Some organization may
set their pricing objective in order to maintain or stabilize price and prevent from market
uncertainty. These objectives are adopted for minimizing the risk of loss. Small organizations in
market adopt these objectives. These objectives build up their status and goodwill.
 Meet competition:
The objective of pricing is to meet the competition in the market. Now there is big competition in
the market.In highly competitive market some organization may set the meet competition. Under
this objective organization set the prevailing market price. It is important to meet the competition
in the market. Without it, market cannot achieve its objectives.
Importance of Pricing
The importance of pricing has been increasing substantially in the recent years. The role of the
price is crucial not only in the national economy but also in the marketing sector, especially to
the marketing organization or executives. Pricing is important to the economy, to the
organization and to the customers.Some of the importances of the pricing in the business can
be :
 Profit Margin
 Sales Volume
 Position
 Market share
ITS BETTER TO FOLLOW THIS LINK FOR PRICCING

STRATEGY :
http://www.netmba.com/marketing/pricing/
AND FOLLOW THIS LINK FOR NEW PRODUCT LAUNCH :
https://www2.gov.bc.ca/assets/gov/farming-natural-
resources-and-industry/agriculture-and-
seafood/programs/market-development-and-
trade/domestic-
marketing/how_to_introduce_a_new_product_into_the
_market.pdf

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Meaning of Pricing

volume of production and the amount of profit. It is a source of income to distributors.

developed; next management estimates as to extent of flexibility in establishing prices by

According to W.J+.Stanon, “Pricing is the functions of determining the products value in

objectives of the organization. The pricing objectives are as follows:

1. Profit Oriented Objectives

of maximizing profit. It is very important to focus on profit maximization.

 Achieving target return:

desired profit. It is necessary to have target return in the pricing process.

 Achieving target return on sales:

this objectives can be used.

Pricing should focus on achieving target return on investment too.Manufacturing company

development, establishment and commercialization. For example, 5% on investment.

2. Sales Oriented Objectives

to gain sales volume and market share.

 Sales volume increase:

 Maintain market share:

normally expressed as a percentage of the total industry sales.

3. Status Oriented Objectives

the price change. These objectives are as follows:

in the market. Without it, market cannot achieve its objectives.

the marketing organization or executives. Pricing is important to the economy, to the

ITS BETTER TO FOLLOW THIS LINK FOR PRICCING

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