Having thoroughly studied the factors that influence our product or services prices, we should set our price goal. There are four main groups of price goals, price go survival, NGO, profit, goal sales, and NGO call it these groups have subgroups. For instance, the goal survival has two different subgroups. Non price competition means that we shall not follow strictly the price level competitors amendments will rather compete via non price tactics like product and package design, guarantee period, etc. On the other hand, the equalizing key competitor sub goal is focused on following their price strategy. In this scenario, we would rather avoid challenging competitors.
Survival is associated with avoiding direct confrontation. being invisible for the competitors, gives us room to grow silently. The two sub goals of profit are fixed profit and profit maximizing. An example of fixed profit would be a goal to have two doors profit in each unit price. regardless how the cost change, we add two doors profit and calculate the new sale price. profit maximizing is related to increasing the profit is a scenario where the supplier stopped producing an item of which we have 700 pieces In our house, we should immediately increase the price.
We know that there will be normal goods of this kind and so the customers will not have other choice but to buy from us. This is the classical situation where demand dominates over supply. For one of our customers we gradually reach 200% of the initial price. How 150 pieces of those 700 was sold a 30% markup on top of the your price. The next 100 pieces an additional 25% markup. At the next tip, new increase with 10% followed by another 10%.
The customer ended with 92% higher profit from those 700 pieces in comparison to the no price change approach. Sales goal most common sub goals are market share increase and sales maximizing market share increase is focused on reaching a certain higher sales volume milestone where we shall get a benefit. The benefit could be a rebate from the supplier, additional shelf space at our store chain listing additional of our product in main distributors portfolio and so on and so on. Sales maximizing sub goal is similar to profit maximizing but here the target is set on the quantity of the assault unit. Suppose you are Running a warehouse. Your costs for salaries, overheads, depreciation, etc, are relatively fixed.
Your calculations show that increasing goods turnover by 4% will increase your annual gross profit by 71,000 doors. It looks like a very good decision to choose the sales maximizing sub goal. The quality leader sub goal usually goes in one direction, increasing the quality of our products or services. To choose it, we have to be certain that the higher quality will allow us to generate higher absolute margin in the total annual sales volumes. In other words, being quality leader must provide us with greater annual profit although theoretically It is possible to reduce the quality. This would be a very risky approach as customers will likely associate the reduced quality of that item with all our products and the company brand in general