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Management (MGT)
Chris Bovaird

Chapter 7: Pricing and Distributing Goods and Services PRICING OBJECTIVES AND TOOLS -the price element of the marketing mix has become competitive -it influences both consumer demand for a product, and company profitability -pricing: deciding what the company will receive in exchange for its product Pricing to Meet Business Objectives -companies often price products to maximize profits, but also hope to attain other pricing objectives -pricing objectives: goals that producers hope to attain in pricing products for sale -some firms want to dominate the market or secure high market share -pricing decisions are also influenced by the need to survive in the marketplace, by social and ethical concerns, and by corporate image Profit-Maximizing Objectives -companies try to set prices to sell the number of units that will generate the highest total profits -companies often try new pricing systems -in calculating profits, managers weigh receipts against costs for materials and labour to create the product -they also consider the capital resources that the company must tie up to generate that level of profit -the costs of marketing (such as maintaining a large sales staff) can also be substantial Pricing for Ebusiness Objectives -marketers pricing for sales on the internet must consider different kinds of costs and different forms of consumer awareness are lowering prices, due to the internets unique marketing capabilities -there is a more direct link between producer and ultimate consumer, buyers avoid the costs entailed by wholesalers and retailers -prices are also lowered, because of the ease of comparison shopping -both consumers and businesses can force lower prices by joining together in the internet of greater purchasing power Market Share Objectives -many companies initially set low prices for new products -they are willing to accept minimal profitseven losesto get buyers to try products -they use pricing to establish market share -market share: a companys percentage of the total market sales for a specific product -even with established products, market share may outweigh profits as a pricing objective Other Pricing Objectives -sometimes, neither profit maximizing nor market share is the best objective -during difficult economic times, loss containment and survival may become a companys main objectives Price-Setting Tools -managers must measure the potential impact before deciding on final prices -two basic tools are: cost-oriented pricing and break-even analysis -these tools are combined to indentify prices that will allow the company to reach its objectives Cost-Oriented Pricing
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