 
Question:
We drive a lot of pricing decisions based on market share objectives. Is this appropriate?
Answer:
Successful pricing decisions are those that increase, or prevent the loss of, long-term profitability. Pricing for volume can sometimes be a brilliant decision, if appropriately supported by a strategy for operating at lower cost (Southwest Air, Wal-Mart). Many companies, however, forgo long-term profitability because of an obsession with increasing or maintaining market share. The market share that maximizes profitability, however, is the share that you can serve with some competitive advantage. A company that sells a product or service that is more highly valued by 40% of the market, for example, can enjoy a price premium if it is willing to accept only a 40% share. If it insists on a 50% share, it will have to have to underprice its product to do so. Dramatic increases in profitability and cash flow are achievable when a company makes its sales goals consistent with its value delivery.
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