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Pricing goals and issues

Pricing problems
pricing issues
pricing goals

Pricing goals

In general, the goals that companies follow from pricing in domestic and international markets  are divided into five groups:

1. Continuing Life:This is a target for companies that face extreme capacity, with extreme competition and constant consumer change. If the price can cover variable costs and some fixed costs, the company can continue to maintain its business life. 

2. To maximize current profits: A company In order to maximize its current profits, it must estimate the demand and costs associated with different prices, and then select the price that will give the most current profits, cash flow, or return on equity for the company. Of course, in the event of excessive emphasis on current profits and lack of consideration of the effects of other marketing mix variables, potential competitors' responses and legal constraints, in the long run, the company's performance will be compromised. 

3. Market skimming: Some companies prefer to set prices at a high level and thereby “kill the market”. Under the following conditions, companies can achieve these goals: Having a large number of buyers and high demand in the market , and Determining the starting price at a high level does not attract the attention of rival companies to the market. High-priced pricing creates an impression on buyers that the company and its products are at a higher level (quality) than competitors.

4. To maximize the market share:Some companies target this because they believe that achieving higher volumes of sales will lead to a reduction in the cost of each unit and, therefore, more profitable in the long run. In other words, such companies set their prices at the lowest level for market penetration. This strategy can be appropriate in the following circumstances:

 1. The market is over-sensitive to price sensitivity, resulting in low prices will lead to market growth. 

2. With added experience, the cost of production and distribution will be reduced. 

3. Low prices will scratch out rivals. 

5. Quality Leading:Companies that aim to deliver high-quality products that want to be market-leading in this regard, offer higher-end products at higher prices. They offer high-quality products, and these products have special features that can bring more benefits and values to buyers. Such companies can set prices at a higher level.

Nevertheless, for reaching these goals, companies face different problems: 

Pricing problems in international markets

 1. Multinational pricing problems: Companies face difficulties with regard to establishing the necessary coordination between pricing and other activities as well as price controls to help them achieve their effective financial positioning. 

  • How can the company maintain the same price-based positioning in different markets?
  • How can a company be able to import and export its products through an intermediary and integrates prices in different markets?

2. Problems of foreign exchange control and exchange rate fluctuations

Problems in foreign exchange due to the need to buy and sell products in different currencies. 

  • Is it better for the company to determine the price of its products on what international markets exchanges? 
  • Is it better for the company to cope with fluctuations in exchange rates? 
  • How can the company minimize exchange rate risks in long-term?

3. Problems in receiving cash in high-risk markets: Receiving cash payments quickly through a suitable currency from less developed countries can lead to cost and trouble. 

  • Is it better for the company to start selling to countries that suffer from a lack of strong currency or high inflation? 
  • How can a company receive long-term cash payments in advance? 

4. Administrative problems related to the transfer of goods to the borders of other countries:Due to the physical transfer of goods within the borders of countries, the problems of paperwork and delays in delivery of goods increases. 

  • At what stage is an exporter better transfer the control and responsibility of the goods to others?
  • What is the stage in the export order process, in order to minimize delays in delivery of orders?

There are other factors that companies should consider in international pricing:

  • Organizational factors: These factors include the cost of completion, packing costs, shipping costs, customs fees, taxes, operating costs, distribution channels, and other costs.   
  • Market: The income level of individuals and the competition situation are two main factors that differ in different markets. 
  • Environment: factors such as inflation, exchange rates, and regulatory control of governments in different markets affect pricing.