List and explain a variety of pricing objectives. Establishing realistic and measurable pricing objectives is a critical part of any firm's marketing strategy. Pricing objectives are commonly classified into three categories: profit oriented, sales oriented, and status quo. Profit-oriented pricing is based on profit maximization, a satisfactory level of profit, or a target return on investment. The goal of profit maximization is to generate as much revenue as possible in relation to cost.
Often, a more practical approach than profit maximization is setting prices to produce profits that will satisfy management and stockholders. The most common profit-oriented strategy is pricing for a specific return on investment relative to a firm's assets. The second type of pricing objective is sales oriented, and it focuses on either maintaining a percentage share of the market or maximizing dollar or unit sales. The third type of pricing objective aims to maintain the status quo by matching competitors' prices.
1. Give an example of each major type of pricing objective.
2. Why do many firms not maximize profits?