What is the difference between price objectives and price constraints? Can you share an example of...

What is the difference between price objectives and price constraints? Can you share an example of illustrate your thoughts?

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Expert Solution

Price objective refers to the setting up of a price considering the cost to produce and also keeping in mind the marketing and sales strategy of the company or business organization.

The price constraint refers to the factors that may limit the range of prices that an organization can put forth. For example, customers may perceive a price ceiling for a product and hence the company may have to reduce the margin to keep the price below the customer's perceived ceiling.

Let take an example of a service: Let us consider a 15 day international holiday package for Europe. Company A has a price of say $3900 whereas company B has a price of $5500 for the same. The difference here is that company A has mediocre hotels, budget airlines for the tour. The company B has post five start hotels and premium airlines for travel. This price set by each company is based on its price objective. Now if the customer has a perceived ceiling of $5,000 for the holiday, the company B will have to somehow find a mechanism to reduce the price from $5500 to below $5000 to increase sales.

jeff jeffy answered 1 year ago

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