COMM 296 Chapter Notes - Chapter 13: Premium Pricing, Marketing, Demand Curve

48 views4 pages
Published on 15 Jul 2016
School
UBC
Department
Commerce
Course
COMM 296
Professor
PRICING CONCEPTS FOR ESTABLISHING VALUE
COMM 296: Introduction to Marketing Jenny Tao
- Price: the overall sacrifice a consumer is willing to make money, time, energy to
acquire a specific product or service
o Need to match the product/service with consumer’s value perceptions
o Only element of the marketing mix that does not generate cost, but revenue
o Price is an indicator of quality, especially if consumers have little knowledge
about it
(1) List the four pricing orientations
(2) Explain the relationship between price and quantity sold
(3) Explain price elasticity
(4) Describe how to calculate a product’s break-even point
(5) Indicate the four types of competition
- Five C’s of Pricing:
o Company objective: reflect how the firm intends to grow
Profit orientation: focusing on target profit pricing, maximizing
profits, or target return pricing; three strategies:
Target profit pricing: a pricing strategy that uses price to
stimulate a certain level of sales at a certain profit per unit
Maximizing profits: a profit strategy that requires firm to
accurately specify a mathematical model that captures all the
factors required to explain and predict sales and profits, it
should be able to identify the price at which its profits are
maximized difficult to come up with accurate model
Target return pricing: a pricing strategy implemented by firms
less concerned with the absolute level of profits and more
interested in the rate at which their profits are generated
relative to their investments; designed to produce a specific
return on investment, usually expressed as a % of sales
Sales orientation: a company objective based on the belief that
increasing sales will help the firm more than will increasing profits
Unit sales: set low prices to generate more unit sales and take
sales away from competitors even if profits suffer
Dollar sales: set high prices with less unit sales but generate
high dollar sales (ie. jewelry stores)
Market share: may or may not (premium brands) set low
prices to discourage new entry and take away market share
from competitors
Premium pricing: firm deliberately price a product above the
competing products’ prices to capture those consumers who
always shop for the best or for whom price does not matter
For sales to increase, customers must see greater value
Competitor orientation: a company objective based on the premise
that the firm should measure itself primarily against its competition
Competitive parity: a firm’s strategy of setting prices that are
similar to those of major competitors
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Document Summary

Five c"s of pricing: company objective: reflect how the firm intends to grow. Profit orientation: focusing on target profit pricing, maximizing profits, or target return pricing; three strategies: Target profit pricing: a pricing strategy that uses price to stimulate a certain level of sales at a certain profit per unit. Sales orientation: a company objective based on the belief that increasing sales will help the firm more than will increasing profits. Unit sales: set low prices to generate more unit sales and take sales away from competitors even if profits suffer. Dollar sales: set high prices with less unit sales but generate high dollar sales (ie. jewelry stores) Market share: may or may not (premium brands) set low prices to discourage new entry and take away market share from competitors always shop for the best or for whom price does not matter. For sales to increase, customers must see greater value.

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