3023_ch18_net - Setting the Right Price CHAPTER 18 How to...

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CHAPTER 18 Setting the Right Price
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Fine tune with pricing tactics Choose a price strategy Estimate demand, costs, and profits Establish pricing goals Results lead to the right price How to Set a Price on a Product or Service
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Establish Pricing Goals Profit-Oriented Sales-Oriented Status Quo
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Choose a Price Strategy Price Strategy 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 .
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Status Quo Pricing Price Skimming Penetration Pricing Charging a price identical to or very close to the competition’s price. A firm charges a high introductory price, often coupled with heavy promotion. A firm charges a relatively low price for a product initially as a way to reach the mass market. Choose a Price Strategy
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LO Price Skimming Situations When Price Skimming Is Successful Unique Advantages/Superior Legal Protection of Product Blocked Entry to Competitors Technological Breakthrough Inelastic Demand
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Penetration Pricing Discourages or blocks competition from market entry Boosts sales and provides large profit increases Can justify production expansion Requires gear up for mass production Selling large volumes at low prices Strategy to gain market share may fail Advantages Advantages Disadvantages Disadvantages
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Status Quo Pricing Advantages Advantages Disadvantages Disadvantages Simplicity Safest route to long- term survival for small firms Strategy may ignore demand and/or cost
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3023_ch18_net - Setting the Right Price CHAPTER 18 How to...

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