What Is a Price Target?

Price targets are also called pricing targets. Its English name is Pricing Objectives. It is the purpose and standard that an enterprise consciously requires to set prices for the products it produces or operates. It is the main factor that guides companies to make price decisions. Pricing goals depend on the overall goals of the business. Enterprises in different industries, different enterprises in the same industry, and the same enterprise may have different pricing targets under different periods and different market conditions.

Price target

Aim for profit

Obtaining profits is the ultimate goal of enterprises engaged in production and operation activities, which can be achieved through product pricing. The goal of obtaining profit is generally divided into the following three types.

(1) Pricing target to obtain investment income

Investment income pricing objective refers to a pricing objective that enables an enterprise to realize its investment recovery within a certain period of time and obtain the expected return on investment. Enterprises adopting this pricing target generally calculate the profit per unit of product according to the rate of return stipulated by the investment amount, plus the product cost as the sales price. But we must pay attention to two issues. First, we must determine the appropriate rate of return on investment. Generally speaking, the return on investment should be higher than the interest rate on bank deposits during the same period. But it should not be too high, otherwise it will be difficult for consumers to accept. Second, the production and operation of an enterprise must be a best-selling product. Compared with competitors, the product has obvious advantages.

(2) Pricing target to obtain reasonable profit

Reasonable profit pricing goal refers to a pricing goal for enterprises to obtain long-term profits at moderate and stable prices in order to avoid unnecessary price competition. Companies adopting this pricing goal are often in order to reduce risks, protect themselves, or are limited in strength. They can only compensate for the average cost under normal circumstances and add a moderate profit as the price of the product. The condition is that the enterprise must have sufficient backup resources and intend to operate for a long time. It is generally inappropriate for temporary companies to adopt this pricing goal.

(3) Pricing goal to obtain maximum profit

The maximum profit pricing goal refers to a pricing goal that an enterprise pursues to obtain the highest amount of profit within a certain period of time. The maximum profit depends on the sales scale promoted by a reasonable price, so the pursuit of the maximum profit pricing target does not mean that the company must set the highest unit price. The maximum profit is divided into long-term and short-term, and there is a difference between the entire product of an enterprise and a single product. Visionary business operators are focused on maximizing long-term profits. Of course, it does not rule out that in a certain period and situation, setting high prices for its products to obtain short-term maximum profits. There are also many multi-variety companies that often use combined pricing strategies, that is, the prices of some products are set lower, and sometimes even lower than the cost to attract customers, thereby driving sales of other products, thereby maximizing corporate profits.

To increase market share

Also called market share target. That is to maintain and improve the market share (or market share) of the enterprise as a certain period of pricing goals. Market share is a direct reflection of an enterprise's operating conditions and the ability of its products to compete in the market, and is related to the rise and fall of an enterprise. A high market share can ensure the sales of the company's products, consolidate the company's market position, and thereby enable the company's profits to grow steadily.

In many cases, the level of market share is more indicative of the marketing status of an enterprise than the return on investment. Sometimes, due to the continuous expansion of the market, a company may obtain considerable profits, but compared to the entire market, the proportion may be small, or its share is declining. No matter large, medium or small enterprises, they hope to expand their target market with low-cost strategies for a long time and try to increase their market share. Targeting to increase market share, companies usually have:

(A) pricing from low to high

Pricing from low to high means that under the premise of ensuring product quality and reducing costs, the price of products entering the market is lower than the prices of major competitors in the market. Consumers are priced at low prices, product sales are opened, and the market is crowded, thereby improving enterprises Product market share. After occupying the market, the enterprise will gradually increase the price of the product by adding certain functions of the product or improving the quality of the product, with the aim of obtaining more profits while maintaining a certain market share.

(Two) pricing from high to low

Pricing from high to low is the price of some products that are not yet competitive. When entering the market, the price can be higher than the price of competitors. Using the consumer's innovation psychology, they can obtain higher profits in the short term. When the competition is fierce, companies can lower the price appropriately, win the initiative, expand sales, and increase market share.

Aim to deal with and prevent competition

Enterprises are very sensitive to the behavior of competitors, especially the price changes. Under the situation of increasingly fierce market competition, companies must collect information extensively, carefully study the prices of competitors' products, and deal with competitors through their own pricing goals before actual pricing. According to different conditions of the enterprise, the following decision objectives are generally available for selection.

(I) Price Stability Target

Pricing is aimed at maintaining relatively stable prices and avoiding positive price competition. When an enterprise prepares to operate in an industry for a long period of time, or a market often undergoes changes in market supply and demand and price fluctuations, a stable price is required to stabilize the market. Large companies or dominant enterprises in the industry are the first to develop a longer The prices of other companies are kept at a certain proportion. In this way, it is safe for large enterprises, and SMEs also avoid being hit by large enterprises' arbitrary price increases at any time.

(2) Follow pricing targets

Enterprises consciously respond to and avoid market competition by pricing their products. The establishment of enterprise prices is mainly based on the prices of competitors that have an impact on market prices, and is slightly higher or lower than competitors based on the specific product. The prices of competitors are unchanged, and companies that implement this goal also maintain their original prices. The prices of competitors may go up or down, and such companies may adjust prices accordingly. In general, the prices of SMEs' products are set slightly lower than the prices of the dominant enterprises in the industry.

(3) Challenge pricing goals

If the enterprise has strong strength and special superior conditions, it can take the initiative to challenge its competitors and gain a larger market share. Commonly used strategic goals are:

(1) Combat pricing. Stronger companies take the initiative to challenge competitors and expand market share, and they can sell products at prices lower than those of competitors.

(2) Special pricing. Companies that are strong and have special technology or good product quality or can provide more services to consumers can sell products at higher prices than competitors.

(3) Intercept pricing. In order to prevent other competitors from joining the competition of similar products, under certain conditions, low prices are often used to enter the market, forcing small and small enterprises to exit the market unprofitably or preventing competitors from entering the market.

Price is an important factor affecting the future of manufacturers, distributors, customers and product markets. Setting the right price is the key to protecting the interests of manufacturers, motivating distributors, attracting customers to buy, defeating competitors, and developing and consolidating the market. Enterprise pricing goals directly affect product prices. This article will start by introducing the classification of enterprise pricing goals, explaining the impact of financial goals and market goals of corporate pricing on prices, and making suggestions on how to choose pricing goals.

I. Classification of Enterprise Pricing Goals Enterprise pricing goals refer to the expected goals that enterprises need to achieve by setting a certain level of price. The product price composition consists of production costs, circulation costs, profits and taxes. The goals of corporate pricing are divided into financial goals and market goals. Financial targets include cost targets and profit targets. The cost target, that is, the price of the product must be the target of compensating the production cost; the profit target, that is, the question of the proportion of profit in the product price. Market goals include sales goals, market share goals, and price stabilization goals. Sales target, that is, to maximize sales under the premise of guaranteeing a certain profit; market share target, that is, to maximize market share under the premise of ensuring a certain profit; stable price target, that is, to set an appropriate price so that The price of products between similar enterprises has remained stable, reducing losses between enterprises due to price competition.

Second, the impact of corporate pricing financial targets on prices (a) cost targets. Cost is the sum of a company's production, marketing, and management expenses.

Third, the enterprise price target can improve the elements of comprehensive management of the enterprise.