Exogenous purposes of price (11)

As already seen, pricing has endogenous and exogenous purposes.

Endogenous purposes of price are those that meet the needs and desires of the offerer himself and, therefore, of internal origin. Exogenous purposes consider demands related to the market, competition, commercial partners, and business environment, thus originating externally from those who offer.

Among the range of exogenous price purposes, it is worth mentioning:

1. As for the volume traded

To expand the offerer’s volume traded to increase his bargaining power with customers, distributors, suppliers, and other business partners.

2. As for the market share

To enhance the offerer’s participation in markets already served, penetrate new markets, acquire new customers, displace competitors, and generally increase the presence and visibility of  his offers.

3. As for the offer image

Collaborate in building the image of prestigious products and service lines using high prices compared to other offers as well as the reputation of low-cost lines using more affordable prices than their competitors.

4. As for promotional initiatives

To enable promotional initiatives to meet customer preferences or face competitors’ actions.

5. As for new competitors

To discourage the emergence of new competitors by using unattractive prices and trading conditions to potential entrants.

6. As for constituted authorities

To meet public authorities’ requirements about price practices and trading rules for domestic and foreign markets.

7. As for commercial partners

To enable transactions that meet commercial partners’ supply and income needs, particularly sales teams, logistic operators, and distributors.

Remember that there is no value scale for endogenous and exogenous price purposes. The relevance of each purpose will depend on the offerer’s goals and strategies and the circumstances surrounding a given offer.

Further, such purposes rarely occur in isolation. The same negotiation often involves several purposes, such as winning a customer, penetrating a specific market, increasing revenue, and guaranteeing a minimum profit.

C. L. Eckhard, author of Pricing in Agribusiness: setting and managing prices for better sales margins.