Bus Test 4 - CHAPTER 14 Price the overall sacrifice a consumer is willing to make money time energy to acquire a specific product or service 5 Cs of

Bus Test 4 - CHAPTER 14 Price the overall sacrifice a...

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CHAPTER 14 Price – the overall sacrifice a consumer is willing to make – money, time, energy – to acquire a specific product or service 5 C’s of Pricing – competition, costs, company objectives, customers, channel members Company Objectives Profit Oriented – company objective that can be implemented by focusing on target profit pricing, maximizing profits, or target return pricing; ex: institute a companywide policy that all products must provide for at least an 18% profit margin to reach a particular profit goal for the firm Target Profit Practicing – when firms have a particular profit goal as their overriding concern; uses prices to stimulate a certain level of sales at a certain profit per unit Maximizing Profits – relies primarily on economic theory; if a firm can accurately specify a mathematical model that captures all the factors required to explain & predict sales & profits, it should be able to identify the price at which its profits are maximized Return Pricing – implanted 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 percentage of sales Sales Oriented – based on the belief that increasing sales will help the firm more than will increasing profits; ex: set prices very low to generate new sales & take sales away from competitors, even if profits suffer Premium Pricing – the firm deliberately prices a product above the prices set for competing products to capture those consumers who always shop for the best or for whom price doesn’t matter Competitor Oriented – the firm whould measure itself primarily against its competition; ex: to discourage more competitors form entering the market, set prices very low Competitive Parity- setting prices similar to those of major competitors Status Quo Pricing – competitor-oriented strategy in which a firm changes prices only to meet those of competition Customer oriented – the firm should measure itself primarily according to whether it meets its customers’ needs; ex: target a market segment of consumers who highly value a particular product benefit & set prices relatively high (referred to as a premium pricing) Demand Curve – shows how many units of a product consumers will demand during a specific period at different prices Prestige Products/Services – those that consumers purchase for status rather than functionality Price Elasticity of Demand – measures how changes in a price affect the quantity of the product demanded; specifically, the ratio of the percentage change in quantity demanded to the percentage change in price Elastic – refers to market for a product or service that is price sensitive; that is, relatively small changes in price will generate fairly large changes in the quantity demanded
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Inelastic – refers to a market for a product/service that is insensitive; that is, relatively small
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