Question

What is an example of profitability pricing objectives and an example of volume pricing objective?

Answer 1

Profitability pricing objectives are those objectives which are set to earn profit. What percentage of profit on what is decided by the management based on factors like investment, etc.

For example : 10% return on investment of $100,000 would mean that company plans to earn $10,000. So the pricing would be such that the revenue-cost =$10, 000

Good sold at 120,000 which is revenue.

Cost = 110,000. Which means that 10% ROI is achieved.

Volume pricing objective is based on sales. Company planning to sell particular volume in particular market and uses it as a base for pricing.

Example : company wishes to achieve 20% market share in the industry and thus to increase market share, company uses attractive pricing or sales promotion methods to achieve that figure.