Chapter 11 Pricing Concepts and Strategies Establishing Value.docx

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Western University
Management and Organizational Studies
Management and Organizational Studies 2320A/B
John White

Chapter 11 Pricing Concepts and Strategies Establishing Value Consumers judge the benefits a product delivers against the sacrifice necessary to obtain it and then make a purchase decision based on this overall judgement of value Price is the only element of the marketing mix that generates revenue every other element in the marketing mix may be perfect but with the wrong price sales simply will not occur Price communicates to the consumer more than how much a product or service costs it can signal quality or lack thereof The Five Cs of Pricing Company Objectives Profit Orientation Profit Orientation A company objective that can be implemented by focusing on target profit pricing maximizing profits or target return pricing Target Profit Pricing A pricing strategy implemented by firms when they have a particular goal as their overriding concern uses price to stimulate a certain level of sales at a certain profit per unit Maximizing Profits Strategy A mathematical model that captures all the factors required to explain and predict sales and profits which should be able to identify the price at which its profits are maximized 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 percentage of sales Sales Orientation Sales Orientation A company objective based on the belief that increasing sales will help the firm more than increase profits Competitor Orientation Competitor Orientation A company objective based on the premise that the firm should measure itself primarily against its competition Competitive Parity A firms strategy of setting prices that are similar to those of major competitors Customer Orientation Customer Orientation Pricing orientation that explicitly invokes the concept of customer value and setting prices to match consumer expectations1
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