10.7 So What Should be Optimized:  Revenue or Profit?

The long-term goal of a business is to maximize the returns of its shareholders; with that focus in mind, businesses should pursue pricing strategies that maximize profits.  A pricing strategy geared towards profit maximization is generally the best overall approach for a business to use.  

However, in the short-run, there may be other factors at play.  If a firm has an urgent need to generate cash flow, it might opt for a revenue-maximizing strategy rather than a profit-maximizing strategy.  Such a situation might arise if the business needs to service a debt obligation that is about to mature, must generate cash to meet payroll or other obligations, or is hoping to impress analysts or outside investors by hitting a particular revenue target in a certain time period.