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BUS360RgChptr12Smry - North Carolina State University...

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North Carolina State University College of Management BUS 360 Marketing Methods Lecture Summary Chapter 12 Pricing Concepts for Establishing Value Price – The overall sacrifice a consumer is willing to make – money, time, energy – to acquire a specific product or service Potential Issues A great but overpriced product can be judged as low in value and may not sell as well as an inferior but well priced item. Pricing decisions are often relegated to standard rules of thumb that fail to reflect our current understanding of the role of price in the marketing mix. The Five Cs of Pricing Successful pricing strategies are built through these five critical components 1. Company Objectives 2. Customers 3. Costs 4. Competition 5. Channel Members Company Objectives and Price Profit Orientation Pricing Target Profit Pricing – Strategy implemented by firms with particular profit goal; uses price to stimulate sales at a certain profit per unit Maximizing Profits – An economically based pricing strategy that attempts to identify the price at which a product or services profits are maximized Target Return Pricing – Strategy implemented by firms interested in the rate of profits relative to investments; designed to produce specific return on investment usually expressed as a percentage of sales Sales Orientation Pricing Based on the belief that increasing sales will benefit the firm more than will increasing profits. May be willing to set a lower initial price in order to generate more unit sales May focus on dollar sales and maintain higher prices BUS 360Rg Chapter 12 Summary Instructor: Weems
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May concentrate on market share rather than dollar sales Competitor Orientation A company objective based on the premise that the firm should measure itself primarily against its competition. - Competitive Parity – Strategy of setting prices similar to those of major competitors - Premium Pricing – Deliberately pricing products above competitors to capture consumers who always shop for the best or for whom price does not matter - Status Quo Pricing – Prices are changed only to meet those of competitors Customer Orientation Focuses on the concept of value to the customer and customer satisfaction May be “no haggle” pricing or “state of the art” pricing. Is a price orientation that explicitly invokes the concept of customer value sets prices to match consumer expectations. Price Skimming Strategy of selling innovation at a high price that innovators and early adopters will pay to obtain it, then lowering the price to capture or “skim” the most price sensitive segment.
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