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

Info iconThis preview shows pages 1–3. Sign up to view the full content.

View Full Document Right Arrow Icon
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
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
All levels of government have a tremendous impact on the operation of hospitality and tourism firms throughout the country. o
Background image of page 2
Image of page 3
This is the end of the preview. Sign up to access the rest of the document.

This document was uploaded on 10/27/2011 for the course HTM 320 at UMass (Amherst).

Page1 / 5

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

This preview shows document pages 1 - 3. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online