Chapter 16 - Chapter 16 Pricing affects both the number of...

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Chapter 16 Pricing affects both the number of sales and the amount of money earned. Price is the amount of money that is charged for something of value. Usually involves an exchange of money. Pricing Objectives and Policies 1. Flexibility – is the company willing to alter the price? 2. Level over the PLC – price must be developed over the PLC 3. Use of discounts and allowances – where, when, to whom discounts and allowances must be considered 4. Paying for transportation – can have a big impact on prices. Examples: doctor’s fee, rent, interest on loan, college tuition Major pricing Objectives 1. Profit oriented a. target return: sets a specific level of profit as an objective. May be linked to a percentage of sales, roi ie: co. x wants to earn 6% ROI; wants to achieve a 10% increase in sales. b. profit maximization: seeks as much profit as possible. used to recoup high investment costs, company policy, achieve rapid return on investment. 2. sales oriented: objective is to increase sales – increase sales by 8% - without regard to effects on profit. Overlooks the cost associated with additional sales. Market share growth – attention must be given to competitors. Can lead to long term competitive advantages. Ie: achieve a 1% share of the market. Larger sales don’t necessarily lead to increased profits. 3.
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This note was uploaded on 03/29/2012 for the course BUSINESS S 4302 taught by Professor None during the Spring '11 term at University of Houston - Downtown.

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Chapter 16 - Chapter 16 Pricing affects both the number of...

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