Business review

Before you set pricing objectives for your company, ask yourself the following questions.

• Who are my customers?
• Will they bargain?
• Are they keen on customer service?
• Do they buy products based on the underlying prestige value?
• What is my cost of marketing this product or service?

Once you answer all the above questions, you can decide on a strategy which meets the various pricing objectives that are essential for the well being of any business. Books like “Strategy and Tactics of Pricing: A Guide to Profitable Decision Making” and “Pricing for Profitability: Activity-Based Pricing for Competitive Advantage” which can be bought at can be of great help when deciding pricing objectives for your company. If you’re curious as to what those could be, read on.

Immediate profits: For entrepreneurs, it’s quite common to aim for short-term profits, especially from products that are “revolutionary” or in the initial stage of the life cycle. At this point, your aim is to make as much money as possible from fewer customers, which naturally means charging a premium price for your products. While making quick profits in a short period of time is tempting, it is not a good idea if you are planning to stay in business over the long term.

Short-term revenues: This objective will increase your company’s market share and cut unit cost by leveraging economies of scale, which will ultimately maximize long-term profits. Revenue is the most important goal of any business, and is an indicator of how successfully its products are reaching customers. In the early stages it does not matter that much whether your business makes a profit or loss, but higher revenues indicate that the company is building market share and will surely reach profitability at a later date. Thus, put it at the top of your list of pricing objectives.

Quantity maximization: As mentioned above, higher sales volumes help in reducing long-term costs of the company. That means there is an increase in the efficiency of production as the number of goods being produced increases. Therefore, achieving the desired level of sales must be an important objective of any pricing strategy.

Market penetration: This pricing objective can be achieved when your business enters a market with existing products. The best way to fulfill this goal is by gaining competitors' customers. That is easier than converting non-users of the product or increasing product consumption levels among existing users.

Differentiation: You can do this by pricing your products or services at either end of the spectrum. While this works well to create an upper class image with high-end purchasers, in the opposite scenario, you become a leader in the low-cost market, with very little room to maneuver.

Survival: In times of a price war (market decline or market saturation), it is wise to set a temporary low price that will cover costs and still allow you to continue your business. A word of caution is in order here - do not stick to this for too long, else you might end up burning your fingers.

Hi, I'm Akhil Shahani, a serial entrepreneur who wants to help you succeed. If you like to work smart, check out http://www.SmartEntrepreneur.net . It's full of articles and resources to help you start and grow your business successfully. Please visit us & download our special "Freebie of The Month" at
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Article Source: ArticlesBase.com - Pricing Objectives: Playing the Numbers Game