Ch 15 - Chapter 15 Pricing Strategy Bartering- Individuals...

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Chapter 15 Pricing Strategy Bartering- Individuals or organizations exchange goods and services with one another without the use of money. Factors that affect Pricing Strategy Pricing is a continual process that requires a firm understanding of the market and its environments. It is best to take a systematic approach to pricing that includes: o Establishing pricing objectives consistent with the overall objectives of the firm o Assessing consumer price sensitivity o Monitoring the external environment. Pricing Objectives- can be grouped into four major categories based on goals related to financial performance, volume, competition, and image. o Financial Performance Objectives -focus on areas such as the firm’s level of profitability, rates of return on sales and equity, and cash flow. o Volume Objectives - focus on sales and market share o Competition Objectives - focus on the nature of the competitive environment. o Image Objectives - focus on the firm’s overall positioning strategy Consumer Price Sensitivity- reflects how consumers react to changes in price. o Price - Quality Effect Consumers will be less sensitive to a product’s price to the extent that they believe higher prices signify higher quality. o Unique Value Effect Consumers will be less price-sensitive when a product stays unique and does not have close substitutions. In essence, the firm’s strategy is to reduce the effort of substitutes, thereby eliminating the consumer’s reference value of the product. o Perceived-Substitutes Effect Consumers become more price sensitive when comparing a products higher price with the lower prices of perceived substitutes for the product. o Difficult-Comparison Effect Consumers may be aware of substitutes for a product, but they will tend to become less price-sensitive as it becomes more difficult to compare brands. o Shared-cost Effect Consumers will be less sensitive to price if another organization or individual is sharing in the cost of a product. o Total Expenditure Effect Consumers will tend to be more price-sensitive the larger the amount of the total expenditure. o End-Benefit Effect Consists of two parts: Derived demand (the relationship between the desired end benefit and the consumer’s price sensitivity for some that contributes to that end benefit) The share of total cost Environment Factors o Economic Environment Pricing strategies should reflect changes in the economy o Social Environment Consumers’ tastes often change over time with changes in cultures and subcultures. o Political Environment
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All levels of government have a tremendous impact on the operation of hospitality and tourism firms throughout the country. o
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Ch 15 - Chapter 15 Pricing Strategy Bartering- Individuals...

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