test 4 bus 360 - CH 14 pricing concepts Price the overall sacrifice a consumer is willing to make-money time energy to acquire a specific

test 4 bus 360 - CH 14 pricing concepts Price the overall...

This preview shows page 1 - 2 out of 10 pages.

CH 14- pricing concepts Price- the overall sacrifice a consumer is willing to make-money, time, energy- to acquire a specific product/service. ’Cs of Pricing : Company Objectives - Profit Orientation- a company objective that can be implemented by focusing on: - Target profit pricing- a pricing strategy implemented by firms when they have a particular profit goal as their overriding concern; uses price to stimulate a certain level of sales at a certain profit per unit. -Maximizing profits- a profit strategy that relies primarily on economic theory. If a firm can accurately specify a mathematical model that captures all the factors required to explain and predict sales and profits it should be able to identify the price at which its profits are maximized. Target return pricing- a pricing strategy implemented by firms less concerned with the absolute level of profits and more interested in the rate at which their profits are generated relative to their investments; designed to produce a specific return on investment, usually expressed as a % of sales. Sales Orientation- a company objective based on the belief that increasing sales will help the firm more than will increase profits. Premium Pricing- a competitor- based pricing method by which the firm deliberately prices a product above the prices set for competing products to capture the use consumers who always shop for the best or for whom price does not matter. Competitor Orientation- a company objective based on the premise that the firm should measure itself primarily against its competition -Competitive parity- a firm's strategy of setting prices that are similar to those of major competitors. -status quo pricing- a competitor oriented strategy in which a firm changes prices only to meet those of competition. Customer Orientation- a company objective based on the premise that the firm should measure it primarily according to whether it meets its customers needs. Customers : once firms develop company objectives they next try to understand their customer. Customers want value. Demand curve is downward sloping. x axis- quantity demanded. y- price. Prestige Products/services- consumers purchase for status not function. Price Elasticity of Demand- measures how changes in price affect quantity of product demanded. (%change QD/ % change in price) * Elastic- Price sensitive- price elasticity is less than -1. Inelastic- not price sensitive- PE is greater than -1. Factors that limit PE of Demand: Income Effect- change in a quantity of a product demanded based on consumers change in income. Substitution Effect- refers to consumers ability to substitute other products for the focal brand. Cross Price Elasticity- percent change in quantity product A demanded compared with percent change in price of product B. Complementary Products- products who demand curves are positively related. (ipod, headphones) Substitute Products- products which change in demand are negatively related (DVD, blue ray eitehr buy one or the other).* 3. Costs Variable Costs- primarily labour and material, costs taht vary with production volume. In service
Image of page 1
Image of page 2

You've reached the end of your free preview.

Want to read all 10 pages?

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture