Mar 3023 Chapter Notes - Chapter 10: Profit Maximization, Marginal Revenue, Profit Margin
Document Summary
In order to maximize profits, marketers must make strategic trade-offs between volume and price. The price-setting process: marketing executives want high prices, salespeople want lower prices, customers want lower prices. Penetration pricing- goal is to gain a large market share due to the low price. Designed to maximize cash flow over the short term and is typically implemented by a struggling firm. Step 2: evaluate demand: supply and demand sit at the heart of setting prices, optimal point is where marginal revenue = marginal cost. Varies from product to product and from consumer to consumer: price elasticity of demand- a measure of price sensitivity that gives the percentage change in quantity demanded in response to a percentage change in price. One of the most important concepts in marketing. Prices are generally more elastic in the early stages of the product life cycle and increasingly inelastic in the later stages: the external environment affects price elasticity (ex.
