Sometimes a firm’s objective may be to maintain the status quo or simply meet, or equal, its competitors’ prices or keep its current prices. Airline companies are a good example. Have you ever noticed that when one airline raises or lowers its prices, the others all do the same? If consumers don’t accept an airline’s increased prices (and extra fees) such as the charge for checking in with a representative at the airport rather than checking in online, other airlines may decide not to implement the extra charge and the airline charging the fee may drop it. Companies, of course, monitor their competitors’ prices closely when they adopt a status quo pricing objective.
Price is the only marketing variable that generates money for a company. All the other variables (product, communication, distribution) cost organizations money. A product’s price is the easiest marketing variable to change and also the easiest to copy. Before pricing a product, an organization must determine its pricing objective(s). A company can choose from pricing objectives such as maximizing profits, maximizing sales, capturing market share, achieving a target return on investment (ROI) from a product, and maintaining the status quo in terms of the price of a product relative to competing products.
- What are the steps in the pricing framework?
- In addition to profit-oriented objectives, what other types of pricing objectives do firms utilize?