Specific objectives of a company’s pricing policy are given below:
Objectives
1. To maximize profits:
The primary objective of a firm is to maximize its profits and, therefore, pricing policy should be determined in a way which may give the firm the maximum revenue and consequently the maximum profit.
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The firm can do so by exploiting the consumers but such a policy may help the firm only in the short run.
In the long run, it may prove fatal because the concern may lose it standing in the market. Moreover, competitors will very soon out it from the market. So, the firm should take a pricing decision with a long run view.
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2. Price stability:
The prices, as far as possible, should not fluctuate too often. A stable price policy only can win the confidence of the consumers and may add to the goodwill of the concern.
3. Facing competitive situation:
One of the objectives of pricing policy is to face the competitive situations in the market. The producer should fix the price of his product keeping the competitors, price in mind and with a view to check entry of the potential competitors.
4. Capturing the market:
Sometimes the producer wants to capture the market. He, therefore, fixes comparatively lower prices for his product at the time of introducing the product in the market keeping in view the competitive situation with an objective of capturing a lion’s share of the market.
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In order to achieve the aim, sometimes, the firm sells its product even at a loss in the initial stage which may prove beneficial in the long run. Such type of pricing policy is generally followed in price-sensitive market.
5. Achieving a target-return:
In some cases, mainly reputed firms aim at achieving the target return. So, the prices of the product are so calculated as to earn the target return on cost of production/sales/investment.
Different target returns may be fixed for different products or brands or markets but such returns should be related to a single overall rate of return target.
5. Ability to pay:
Price decisions are, sometimes, taken on the basis of the ability of customers to pay i.e. more prices can be charged from persons having more capacity to pay.
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Such policy is, generally, followed for services such as by lawyers, bankers, doctors, government etc.
7. Long-run welfare of the firm:
The main aim of some concerns is to fix the price of its product in such a way as is in the best interest of the firm in the long run keeping the market conditions and economic situations in mind.