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Notes 3-10-08 - Notes Chapters 17 18 Chapter 17 Pricing...

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Notes Chapters 17 & 18 Chapter 17: Pricing Concepts The Importance of Price To the seller : price is revenue To the consumer : price is the cost of something Price allocates resources in a free-market economy. Price is that which is given up in an exchange to acquire a good or service. It is a revenue determination. The Importance of Price to Marketing Managers Revenue is the price charged to customers multiplied by the number of units sold. Profit is revenue minus expenses. Trends Influencing Price Flood of new products (in many instances, new products lead to lower prices) Increased availability of bargain-priced private (ex. President’s Choice) and generic brands (pharmaceutical generics and example, “BEER.” Popular in economic slumps. Perceived as low quality, sometimes they are.) Price cutting as a strategy to maintain or regain market share Internet used for comparison shopping. Profit drives growth, salary increases, and corporate investment. Pricing Objectives Profit-Oriented The goal is profit maximization: setting prices so that total revenue is as large as possible relative to total costs. There are many circumstances where that is not possible. Satisfactory Profits is a much more common goal. There is also target return on investment, net profit after taxes divided by total assets. Sales-Oriented There is market share and sales maximization. Market share is a company’s product sales as a percentage of total sales for that industry. Sales maximization involves an immediate sell, ignoring profits, competition, etc.
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