Test 4 Study Guide (1).docx - 14 Price the overall sacrifice a consumer is willing to make money time energy to acquire a specific product or service

Test 4 Study Guide (1).docx - 14 Price the overall...

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14. Price the overall sacrifice a consumer is willing to make – money, time, energy – to acquire a specific product or service ; one of the most important factors for consumers purchase decision; only one of 4 P’s that generates revenue, not costs; most difficult factor to understand; opportunity to create value (effected by competitors, government regulations, and economic conditions) Company Objectives pricing of a company’s products should support and allow the firm to reach its overall goals | | Profit orientation a company objective that can be implemented by focusing on target profit pricing, maximizing profits, or target return pricing 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 percentage of sales | | | Sales orientation a company objective based on the belief that increasing sales will help the firm more than will increasing 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 those 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 competitors 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 competitors | | Customer orientation a company objective based on the premise that the firm should measure itself primarily according to whether it meets its customers’ needs; concept of value by lowering overall price; “no haggle” pricing | | | Customers understanding consumers’ reactions to different prices; customers want value and price is ½ of the value equation; Demand curve shows how many units of a product or service consumers will demand during a specific period at different prices; demand increases as price decreases Prestige products or 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
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