Exam 3 - CH 17 and 18 (Rudy)

Exam 3 - CH 17 and 18 (Rudy) - Ch. 17 Pricing Objectives...

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Ch. 17 Price Has Many Strategy Dimensions: Pricing decisions affect BOTH the number of sales a firm makes & how much money it earns. Price is what a customer must give up to get the benefits offered by the rest of a firm’s marketing mix, so it plays a direct role in shaping customer value. Marketing managers develop specific pricing objectives. o These objectives drive decisions about key pricing policies: (1) How flexible prices will be (2) The level of prices over the product life cycle (4) How transportation costs will be handled. Price —The amount of money that is charged for “something” of value. o Almost every business transaction in our modern economy involves an exchange of money—the PRICE—for something. o PRICE has many dimensions . How each of these dimensions is handled affects customer value . If a customer sees greater value in spending money in some other way, no exchange will occur. Objectives Should Guide Strategy Planning for PRICE: Pricing OBJECTIVES should flow from, and fit in with, company-level & marketing objectives. o Pricing Objectives should be explicitly stated because they have a direct effect on pricing policies as well as the methods used to set prices. Profit-Oriented Objectives: A Target Return Objective sets a specific level of profit as an objective. Often this amount is stated as a percentage of sales or of capital investment. o However, many nonprofit organizations set a price level that will just recover costs. So their target return figure is Zero. Profit Maximization Objective —Seeks to get as much profit as possible. It might be stated as a desire to earn a rapid return on investment—or to charge all the traffic will bear. o Pricing to achieve profit maximization does NOT always mean “high prices”. Low prices may expand the size of the market & result in greater sales & profits. Sales-Oriented Objectives: A Sales-Oriented Objective seeks some level of unit sales, dollar sales, or share of market— without referring to PROFIT . o Some managers are more concerned about sales growth than profits. This is bad when a firm’s costs are growing faster than sales.
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Status Quo Pricing Objectives: Managers that are satisfied with their current market share & profits sometimes adopt Status quo Objectives —Don’t-rock-the- pricing -boat objectives. Managers may say that they want to stabilize prices, or meet competition, or even avoid competition. o A status quo pricing objective may be part of an aggressive overall marketing strategy focusing on Nonprice competition —Aggressive action on one or more of the Ps other than Price. Most Firms Set Specific Pricing Policies—To Reach Objectives:
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This note was uploaded on 04/22/2009 for the course MKT 320F taught by Professor Miller during the Spring '08 term at University of Texas at Austin.

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Exam 3 - CH 17 and 18 (Rudy) - Ch. 17 Pricing Objectives...

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