Pricing Objectives: How Firms Decide on a Pricing Strategy

An error occurred trying to load this video.

Try refreshing the page, or contact customer support.

Coming up next: Pricing Strategy and Consumer Perception

You're on a roll. Keep up the good work!

Take Quiz Watch Next Lesson
Your next lesson will play in 10 seconds
  • 0:04 Price and Pricing Strategies
  • 1:14 Profit-Oriented…
  • 2:03 Sales-Oriented Pricing…
  • 3:09 Status Quo Pricing Objectives
  • 4:10 Lesson Summary
Add to Add to Add to

Want to watch this again later?

Log in or sign up to add this lesson to a Custom Course.

Login or Sign up


Recommended Lessons and Courses for You

Lesson Transcript
Instructor: Jennifer Lombardo
After watching this video, you should understand pricing strategy as it relates to the marketing mix. The three types of pricing strategies are profit-maximization, sales-oriented and status quo.

Price and Pricing Strategies

Our local farmer needs to come up with a pricing strategy for his certified organic product. You will have a chance to learn all about the pricing strategy choices that he can choose from for his marketing mix. Price is one of the four P's that make up the marketing mix. The other P's of the marketing mix are product, promotion and place.

A consumer must pay a price for a product or service, and price is what is given up in exchange to acquire a good or service. Price is very important to the marketer as well because it is the revenue that's acquired! Revenue is the price charged to customers multiplied by the number of units sold.

The biggest challenge facing a marketer is to figure out what price to charge. A higher price can communicate quality and prestige, while a lower price can communicate lower quality and cheapness, and how you balance the two all depends on the type of product. The three types of pricing strategies that the farmer can choose are profit-oriented maximization, sales-oriented pricing, and status quo pricing.

Profit-Oriented Pricing Objectives

Profit-maximization pricing means setting prices so that total revenue is as large as possible relative to total costs. This is the prime pricing strategy to use if you are in a monopoly. The farmer is the only major farm in town selling certified organic produce, so maybe this would be an excellent option for him to use.

There are some other ways that the farmer can maximize profits. He can increase customer satisfaction, which can improve revenue, and he also can reduce costs. Some ways for the farmer to reduce costs would be to lay off employees and improve his product efficiency by minimizing loss of crops and implementing more effective mass distribution of his product line.

Sales-Oriented Pricing Objectives

Sales-oriented pricing objectives are based on either market share or unit/dollar sales. Market share is a company's product sales as a percentage of total sales for that industry, and it can be shown via revenue or units. For example, our farmer has 70% of the local organic produce market in revenue. The farmer can have an increase of market share to 80% as a company goal. He can achieve this through aggressive pricing to steal away his competition.

To unlock this lesson you must be a Member.
Create your account

Register to view this lesson

Are you a student or a teacher?

Unlock Your Education

See for yourself why 30 million people use

Become a member and start learning now.
Become a Member  Back
What teachers are saying about
Try it risk-free for 30 days

Earning College Credit

Did you know… We have over 160 college courses that prepare you to earn credit by exam that is accepted by over 1,500 colleges and universities. You can test out of the first two years of college and save thousands off your degree. Anyone can earn credit-by-exam regardless of age or education level.

To learn more, visit our Earning Credit Page

Transferring credit to the school of your choice

Not sure what college you want to attend yet? has thousands of articles about every imaginable degree, area of study and career path that can help you find the school that's right for you.

Create an account to start this course today
Try it risk-free for 30 days!
Create An Account