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10 Types of Pricing Objectives

 , July 04, 2017
Pricing objectives are goals that define what a business plans to achieve with pricing strategy. In other words, before defining a price it is common to define an objective for what you're trying to achieve. The following are common types of pricing objective.

Price Leadership

Setting a lower price than the competition. In many cases, the firm with the lowest price gains market share as many customers will purchase on price alone. Risks a price war whereby prices spiral downward until all firms are unprofitable.

Revenue & Margins

Financial targets for pricing such as revenue and margins.

Closing Sales

Sales teams typically have a primary objective to close as many sales as possible. This influences pricing as sales managers may be given leverage to set discounts based on factors such as negotiations and the size of a sale.

Yield

Firms that have inventory that expires at a point in time such as a seat on an flight typically want to sell at a high selling price but also don't want to be left with unsold inventory. Meeting these two objectives requires complex strategies such as yield management and revenue management.

Premium Pricing

Charging a high price that is never or rarely discounted to preserve the status or quality of your brand. Premium pricing requires discipline as it limits the quantity that can be sold. For example, a strong luxury brand could easily drive higher sales with discounts but this may damage the brand's status and future sales.

Price Discrimination

The objective of charging a high price to customers who are willing to pay more while still selling to price sensitive customers. For example, coupons that are only good on a Tuesday may attract your price sensitive customers while customers who are willing to pay more will shop at their convenience.

Differentiation

Thinking of price as one of the differentiation factors of your brand or product. For example, aiming to be the cheapest organic coffee on the shelf.

Market Price

If your selling a commodity product your objective might be simply to accurately track to market prices.

Promotion

Setting prices that customers find interesting, unique or compelling. For example, a telecom company that offers clear flat rate prices with unlimited bandwidth when competitors have complex billing methods that are unpopular.

Skimming

The objective of recouping product development costs by initially setting a high price for a product that goes down with time. This works when your brand has fans who want to be first to try new releases.
Overview: Pricing Objectives
Type
DefinitionGoals that define what a business plans to achieve with pricing strategy.
Related Concepts

Pricing

This is the complete list of articles we have written about pricing.
Algorithmic Pricing
Bargaining Power
Benchmark Price
Commoditization
Cost-plus Pricing
Customary Pricing
Decoy Effect
Everyday Low Price
Marginal Utility
Willingness To Pay
Dynamic Pricing
High-Low Pricing
Market Value
Flat Pricing
Loss Leader
Predatory Pricing
Price Discrimination
Snob Effect
Market Price
Price Competition
Price Leadership
Premium Pricing
Price Economics
Price War
Revenue Management
Veblen Goods
Price Floor
Price Promotion
Price Sensitivity
Price Skimming
Price Umbrella
Pricing Models
Pricing Power
Pricing Strategy
Sticky Prices
Value For Money
More ...
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Pricing

The common types of pricing.

Pricing Examples

An overview of common pricing strategies.

Pricing Strategy

An overview of common pricing strategies.

Sales Promotion

The common types of sales promotion.

Price Optimization

The common ways to optimize pricing.

Flat Pricing

A definition of flat pricing with examples.

Revenue Management

The definition of revenue management with examples.

Dynamic Pricing

The common types of dynamic pricing.

Benchmark Price

A definition of benchmark price with examples.

Price Escalation

The two common meanings of the term price escalation.

Price Discrimination

A list of price discrimination strategies.

Price War

An overview of price wars.

Price Economics

A list of price economics principles and theories.

Premium Pricing

A definition of premium pricing with examples.

Penetration Pricing

A definition of penetration pricing with examples.

Variable Pricing

The definition of variable pricing with examples.

Channel Pricing

A definition of channel pricing with examples.

Supply And Demand

An overview of supply and demand with examples.

Value Pricing

The definition of value pricing with examples.
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