The Strategy and Tactics of Pricing, 5th Edition

Chapter 10Financial Analysis

Pricing for Profit

Internal financial considerations and external market considerations are, at most companies, antagonistic forces in pricing decisions. Financial managers allocate costs to determine how high prices must be to achieve profit objectives. Marketing and sales staff analyze buyers to determine how low prices must be to achieve sales objectives. The pricing decisions that result are politically charged compromises, not thoughtful implementations of a coherent strategy. Although common, such pricing policies are neither necessary nor desirable. An effective pricing decision should involve an optimal blending of, not a compromise between, internal financial constraints and external market conditions.