BUS-101 Lecture Notes - Lecture 37: Profit Margin, Profit Maximization, Marketing Effectiveness
2 May 2016
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Pricing decision = made by executive level management, accounting, finance, and production management. Selling price = how much a customer values the product in the marketplace // based of perceived value // cost of production as a basis. According to economic theory, the marketplace determines what the customer will pay, not the company. Businesses use product, promotion, and distribution strategies to signal customers about the value of it"s brand. Businesses have one of three pricing objectives in setting products price: 1: profit maximization: a company"s product needs to be desirable enough to command an above market price // higher profit margin for each sale. 2: sales maximization: maximization of sales through setting price below market point // sell more items at a lower price. 3: status quo: sets a price level the same as competitors // lower profit margins. Arrive at set price based on several factors:
