Test 4 Study.docx - Chapter 14 Pricing concepts for establishing value The five Cs of pricing 1)Competition 2)Cost 3)Company objectives 4)Customers

Test 4 Study.docx - Chapter 14 Pricing concepts for...

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Chapter 14 Pricing concepts for establishing value The five Cs of pricing 1)Competition 2)Cost 3)Company objectives 4)Customers 5)Channel members LO1: four pricing orientations Profit orientation : A company objective that can be implemented by focusing on target profit pricing, maximizing profits, or target return pricing. Sales orientation : A company objective based on the belief that increasing sales will help the firm more than will increasing profits. Premium pricing 故意定高价 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: change price only to meet those of competition Customer orientation : A company objective based on the premise that the firm should measure itself primarily according to whether it meets its customers’ needs. LO2: price and quantity sold Demand curve Prestige products or services : Those that consumers purchase for status rather than functionality. Like porsche, when customers value the increase in prestige more than the price differential between the prestige and other products, the prestige attains greater value. LO3: explain price elasticity Elastic : Refers to a 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. Less than -1 Dynamic pricing(individualized) : Refers to the process of charging different prices for goods or services based on the type of customer, time of the day, week, or even season, and level of demand. Income effect: Refers to the process of charging different prices for goods or services based on the type of customer, time of the day, week, or even season, and level of demand. Substitution effect: Refers to consumers’ ability to substitute other products for the focal brand, thus increasing the price elasticity of demand for the focal brand. Cross-price elasticity: The percentage change in demand for product A that occurs in response to a percentage change in price of product B Complementary products positively related Substitute : negatively related cross-price elasticity Target return based on markup, see below LO5: price competition levels Monopoly : one firm provides product or service Oligopoly : only a few firms control Predatory pricing, illegal in the US Mono compe tition: many sell closely related but not homogeneous products; these products may be viewed as substitutes but are not perfect substitutes. Pure competition: sell commodity products that consumers perceive as substitutable; price usually is set according to the laws of supply and demand.
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