Survival
Firms rely on price to cover the costs of production, pay expenses, and provide the profit incentive necessary to continue to operate the business. These factors help an organization survive. Most managers pursue strategies that enable their organizations to continue in operation for the long term. Thus, survival is one major objective pursued by company executives. For a commercial firm, the price paid by the buyer generates the firm's revenue. If revenue falls below cost for a long period of time, the firm cannot survive. Survival is closely linked to new product development, profit, sales, market share, and image.
New Products
For several decades, business has come increasingly to the realization that new and improved products may hold the key to their survival and ultimate success. Consequently, professional management has become an integral part of this process. As a result, many firms develop new products based on an orderly procedure, employing comprehensive and relevant data and intelligent decision-making.The continuing development of a successful new product looms as the most important factor in the survival of the firm.
Profit
Making a $500,000 profit during the next year might be a pricing objective for a firm. Anything less will ensure failure. All business enterprises must earn a long term profit. For many businesses, long term profitability also allows the business to satisfy company stakeholders such as investors, employees, customers, and suppliers. Lower-than-expected or no profits will drive down stock prices and may prove disastrous for the company.
Sales
Just as survival requires a long term profit for a business enterprise, profit requires sales. The task of marketing management relates to managing demand. Demand must be managed in order to regulate exchanges or sales. Thus, marketing management's aim is to alter sales patterns in some desirable way.
Market Share
If the sales of Safeway Supermarkets in the Dallas-Fort Worth metropolitan area of Texas account for 30 percent of all food sales in that area, we say that Safeway has a 30 percent market share. Management of all firms, large and small, are concerned with maintaining an adequate share of the market so their sales volume will enable the firm to survive and prosper. Again, pricing strategy is one of the tools that is significant in creating and sustaining market share. Prices must be set to attract the appropriate market segment in significant numbers.
Image
Price policies play an important role in affecting a firm's position of respect and esteem in its community. Price is a highly visible communicator. It must convey the message to the community that the firm offers good value, that it is fair in its dealings with the public, that it is a reliable place to patronize, and that it stands behind its products and services.
McDonald's Surviving the Recession
Pricing plays a significant role in attracting and retaining market share during tough economic times.