What are the objectives of Pricing? Also discuss the variables/ elements of Price Mix.

Pricing objectives refer to the targets to be achieved via pricing strategies in the marketing plan. These should be clearly outlined in quantitative terms so as to be understood by all the members involved in pricing decisions.

The pricing objectives can be divided as Short term objectives and Long term objectives-

1) Short term pricing objectives-
The short term objectives for pricing policies are as below-
• Attracting new customers, middlemen, etc.
• Generate interest in the product
• Discourage competition
• Sales or profit growth
• Rapidly establish market position
• Meeting competition
• Maintain market share
• Promote new products
• Recover costs of a product in decline stage
• Secure key accounts

2) Long term pricing objectives-
The long term objectives for pricing policies are as below-
• Stabilise industry prices
• Market share growth
• Maximise long-run profits
• Strategic pricing in different markets
• Retain or capture market share
• Maintain price leadership
• Maximise return on investment
• Product and quality leadership

Whether the objectives are long term or short term, they should be clearly defined and easily understandable.

Below are the examples of corporate pricing objectives (Source- Marketing Management; Cravens, Hills, Woodruff, A.I.T.B.S. Publishers and Distributors, 2002, pg. 457)

To meet the prices of competitors – Goodyear
To follow the price of the most important marketer in each area – Gulf
To maintain existing market share – Kroger
To maintain a full line of food products and novelties – General Foods
To promote new products – Alcoa and General Electric
To stabilise industry price – Exxon and Johns-Mansville

The organisation adopts a pricing strategy depending on the pricing objective. In the short run, most of the time the main objective is to survive in the market which has intense competition or changes in consumer preferences. Adding value to the brand generally comes under long term objective.
Price should be used as a strategic tool rather than it being determined by costs and markets.

There are many variables that affect the pricing strategy. Basis the factors, an organisation utilises different pricing variables to cover the costs of manufacturing and generate profits. The Price Variables depend on “Pricing policies and strategies”, “terms of credit” and “resale price maintenance.”
Pricing Policies and Strategies are outlined basis the market needs. These help the organisations in outlining different Discount options – discounts offered for large quantity sale, cash discounts, trade discounts, seasonal discounts, etc.

Terms of credit help to increase of market size. Increase the sale of the product results in increase in production. More the production, more is the economies of scale. Buying on credit is the most followed option in modern day marketing as it is a means of sales promotion and contributes to hassle free selling. In today’s economy, no firm can do business without offering credit facility.

Resale Price Maintenance is also followed by many organisations. Through this the manufacturer or the distributor recommends the profit margin at which the next channel member/ members can sell the product. Here the minimum sale price is fixed below which the channel member cannot sell the product. This Price variable helps the organisation in generating cooperation and support from the distributors. When a certain profit margin in fixed, the intermediaries cannot sell the product below or above the specified percentage. This helps consumers as well as it protects them from being overcharged for the product by the middlemen.