Pricing Objectives

I was talking to a client recently, and they asked me why they should have a pricing strategy? What’s the point of having one, how does it help them?

My answer was that it helps to guide pricing decisions, but it’s even more important to have clarity regarding pricing objectives.

So what’s the difference between the two?

A price objective is what you want price to help you achieve. It clarifies the goal, not how you are going to achieve it. For example, if your company has developed an app and the goal is to grow as fast as possible so that Google buys you for $1b, then you will want to price your app to help you achieve your goal. Your pricing objective is to maximise sales.

A price strategy is the overarching approach to help you achieve that goal. For example, in a previous blog (30th August 2024: What is (and isn’t) a Pricing Strategy? - https://www.davidabbottspeaker.com/blog/what-is-and-isnt-a-pricing-strategy), I listed the most common pricing strategies, one of which is Penetration. Given the objective to maximise app sales, that might be your strategy. Adopting a pricing strategy of Skimming instead would be entirely counterproductive.

Of the two, the most important is to have clarity regarding pricing objectives. Pricing strategies follow from pricing objectives, not the other way round. In fact, you can have constructive discussions having only clarified your pricing objectives.

Let me give you an example.

I was recently helping a client with their pricing; I was running their pricing strategy day. They sell ‘space’, something that can’t be stored and sold again later – hotel rooms, plane tickets, theatre tickets, shared co-working areas, these are all examples of selling ‘space’. In all of these markets utilisation is an important metric. You can’t sell yesterday’s theatre seat. So if your theatre is 80% sold out, and it’s the day before the show, you could sell all the remaining seats for a ludicrously low price and it’s still financially better than those unsold seats being empty. Note that I said ‘financially better’; I’m ignoring the impact on things like brand, or future ticket sales because customers are being trained to wait for the last-minute sale, etc.

Given this, during times of strong sales their team were told to focus on maximising price, because they are at the premium end of the market. But during times when sales were slow and utilisation was low, they were told to maximise sales at any price. So discounting became a habit, the market started to expect last-minute sales, and the brand perception suffered.

The debate inside the company was whether to focus on the premium point and accept lower utilisation, or to maximise utilisation through discounting, or to swap back and forth between the two.

When we clarified what they wanted pricing to achieve – things like communicating their premium brand position, maximising long-term profitability, stabilising the company – some different approaches emerged. Instead of the sales team vacillating between two modes of sales, they were told to focus on premium prices and never discount. Their incentivisation plan was changed to reward maximum % margin. A different approach to low utilisation was introduced where two of the senior team (never the sales team) unloaded some capacity on a secondary market.

Obviously, those approaches could have been introduced anyway, but getting clarity on exactly what they wanted price to help them achieve helped enormously in guiding their thinking and unleashing the creative ideas.

So let’s start with pricing objectives. Why get clarity on them?

1. It aligns your pricing with your business goals. In fact, it’s even more fundamental than that. It ensures your pricing is helping to deliver your business goals.

2. It guides your decision making regarding price, and as long as you have clearly communicated it across teams it ensures those teams make consistent decisions – so sales incentives are aligned with product development decisions which are aligned with market positioning.

3. It enables consistency over time. This builds trust and confidence in the market. It also helps protect you from impulsive short-term internal decisions.

4. It makes it easier to measure impact and success. If you are not clear what you are trying to achieve, how do you know if your pricing is ‘working ‘?

5. It supports better negotiation and governance. It’s easier to defend decisions internally, and easier to defend external pressure to drop prices.

Once you have decided on your pricing objectives, you can start to think about your pricing strategies. And yes, that was deliberately plural. It’s seldom the case that a company has just one strategy, they often have complementary and overlapping strategies. For example, when launching a brand-new product, a company might decide to:

·      adopt a premium pricing strategy (so whatever the range of possible prices, you’re pricing at the top end);

·      combined with a skimming strategy (but you’ll start to reduce prices slightly to protect volumes when competition enters the market – but only slightly, you will never become budget priced) and;

·      a geographic pricing strategy (with local variations depending on market characteristics, such as a higher price in London).

So what’s the benefit of having clear pricing strategies?

1. You have a framework for consistent action. Every pricing decision can be tested against the strategy. It means the customer facing team know what to do, and customers know what to expect.

2. You have consistency across products, geographies, services, and across time, etc.

3. You can ensure your pricing works with the rest of your marketing mix (see my blog: 26th August 2025: Pricing and the Other 6 Ps of Marketing - https://www.davidabbottspeaker.com/blog/pricing-and-the-other-6-ps-of-marketing).

4. It makes it easier to communicate the price and the rationale behind it, e.g. we’re premium priced because our service is premium quality, or our product is premium priced because of the R&D invested in it.

5. It helps to drive sustainable long-term differentiation and advantage, such as Ryanair’s focus on a low-cost, no-frills and low-price volume model.

The fundamental message is this. Do not ever decide on a price without first being clear about what you want that price to help you achieve, and invest the time getting clarity on your pricing strategies because they provide a framework for long-term success.