Pricing and Firm Objectives

In microeconomics, the purpose of every business is to make a profit. In business strategy management, this profit motive is often opposed by organization goals that bend towards social welfare or the firm's reputation. Read the section on the firm's pricing objectives. Can you identify a business that appears to promote a non-profit business goal, such as being a "green" organization?

The Pricing Framework and a Firm’s Pricing Objectives

LEARNING OBJECTIVES

  1. Understand the factors in the pricing framework.
  2. Explain the different pricing objectives organizations have to choose from.

Prices can be easily changed and easily matched by your competitors. Consequently, your product's price alone might not provide your company with a sustainable competitive advantage. Nonetheless, prices can attract consumers to different retailers and businesses to different suppliers.

Organizations must remember that the prices they charge should be consistent with their offerings, promotions, and distribution strategies. In other words, it wouldn't make sense for an organization to promote a high-end, prestige product, make it available in only a limited number of stores, and then sell it for an extremely low price. The price, product, promotion (communication), and placement (distribution) of a good or service should convey a consistent image. If you've ever watched the television show The Price Is Right, you may wonder how people guess the exact price of the products. Watch the video clip below to see some of the price guessing on The Price Is Right.

Perfect Bid on The Price Is Right

Contestant guesses exact price of prizes.

Source: Saylor Academy, https://saylordotorg.github.io/text_principles-of-marketing-v2.0/s18-01-the-pricing-framework-and-a-fi.html
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