Goals and Objectives

　　Pricing is ultimately part of an organisation's strategy and is integrally tied to goals and mission—the starting point for the strategic planning process. The goals and mission will reflect the organisation's purpose, its self-perception, its feeling about its position in the market, and its values. These traits will be reflected in the organisation's objectives and, as such, influence pricing strategy.

　　1 Marketing Objectives

　　An organisation might have a charitable or not-for-profit purpose, in which case prices for its products and services might be nil or heavily subsidised.

　　An organisation might perceive itself to be "up-market", in which case it might have to charge high prices to project quality and exclusivity.

　　Pharmaceutical and chemical companies face ethical issues when pricing their products for wealthy markets where they hope to make profits and poor markets where there are dimensions of ethical and social responsibility.

　　2 Pricing Objectives

　　Whereas goals and marketing objectives tend to be long term, in the shorter term there can be a variety of pricing objectives.

　　Profit-seeking organisations have to at least break even eventually and, if possible, prices have to be set to allow this. There is, for example, no point in trying to be "up-market" and trying to enforce that impression by having high prices but negligible sales volume.

　　Sometimes the need to survive and quickly bolster cash flows will dictate massive price cuts.

　　Sometimes an organisation might reduce its prices, sustaining losses for a while, in the hope of forcing competitors to withdraw from the market.

　　Costs

　　In profit-seeking organisations, revenues have to exceed costs; in not-for profit organisations, revenue has to at least match income. Any revenue contribution helps to cover fixed costs or contribute towards a profit.

　　More relevant to strategic management is the importance of opportunity costs and of exit costs.

　　An opportunity cost is value foregone as a result of a decision to do something else. If a company builds on a piece of land, the land cannot be sold for cultivation. The sale price foregone is an opportunity cost of the decision to build.

　　Exit costs can arise when trying to abandon a strategy. In a number of European countries, large liabilities can be incurred if employees are made redundant. Sometimes clean-up or reparation costs can be triggered if undertakings are closed down. In such circumstances it might be less costly to carry on, provided marginal revenues just exceed marginal costs.

　　The concepts of marginal costing and absorption costing also will have an effect on an organisation's pricing strategy.