Explain the significance of market share as a sales-oriented pricing objective.

Question

What will be an ideal response?

Answer 1

Answers will vary.Sales-oriented pricing objectives are based on market share as reported in dollar or unit sales. Firms strive for either market share or to maximize sales.Market shareis a company's product sales as a percentage of total sales for that industry. Sales can be reported in dollars or in units of product. It is very important to know whether market share is expressed in revenue or units because the results may be different.Many companies believe that maintaining or increasing market share is an indicator of the effectiveness of their marketing mix. Larger market shares have indeed often meant higher profits, thanks to greater economies of scale, market power, and ability to compensate top-quality management. Conventional wisdom also says that market share and ROI are strongly related. For the most part they are; however, many companies with low market share survive and even prosper. To succeed with a low market share, companies often need to compete in industries with slow growth and few product changes-for instance, industrial supplies. Otherwise, they must vie in an industry that makes frequently bought items, such as consumer convenience goods.The conventional wisdom about market share and profitability is not always reliable, however. Because of extreme competition in some industries, many market share leaders either do not reach their target ROI or actually lose money.