Chapter 18 Outline - Chapter 18 Outline I How to set a...

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Chapter 18 Outline I. How to set a price on a product a. Establish Pricing Goals i. Managers must consider trade-offs in light of the target customer, the environment, and the company’s overall objectives b. Estimate Demand, Costs, and Profits i. Study options in light of revenues, costs, and profits to determine what meets the firms pricing goals c. Choose a Price Strategy i. A basic, long term pricing framework, which establishes the initial price for a product and the intended direction for price movements over the product life cycle ii. Price Skimming: a pricing policy whereby a firm charges a high introductory price, often coupled with heavy promotion iii. Penetration Pricing: a pricing policy whereby a firm charges a relatively low price for a product initially as a way to reach the mass market iv. Status Quo Pricing: meeting the competition II. The Legality and Ethics of Price Strategy a. Unfair Trade Practices i. Laws that prohibit wholesalers and retailers from selling below cost b. Price Fixing i. An agreement between two or more firms on the price they will charge for a product c. Price Discrimination i. Robinson Patman Act of 1936 prohibits any firm from selling to
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