MARK 3000 Chapter Notes - Chapter 14: Marketing, Blu-Ray, Variable Cost

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MARK 300O Test 3
Chapter 14: Pricing Concepts for Establishing Value
1. Price the overall sacrifice a consumer is willing to make to acquire a specific product or
service easiest of  P’s to change
a. Includes the money paid, value of time necessary to acquire item, travel costs,
taxes, shipping costs, etc.
b. Price allocates resources in a free-market economy
2. The  C’s of Pricing
a. Company Objectives pricing of a company’s product should support overall goals
i. Profit Orientation: focusing on target profit pricing, maximizing profits, or
target return pricing
1. Target Profit Pricing implemented when firms have a particular
profit goal as their concern; firms use price to stimulate a certain
level of sales at a certain profit per unit
2. Maximizing Profits relies on economic theory saying that if a firm
can accurately specify a mathematical model that captures all the
factors required to explain sales and profits, it should be able to find
a price where profits are maximized
3. Target Return Pricing more concerned with the rate at which their
profits are generated relative to investments; employ strategies
designed to produce a specific return on their investment
ii. Sales Orientation: belief that increasing sales will help the firm more than
will increasing profits
1. Ex: A new health club might focus on unit sales and set a lower
membership fee to generate customers while a high end jewelry
store wants to sell less units for a higher price (dollar sales); some
firms are more concerned with overall market share
2. Premium Pricing a competitor-based pricing method by which the
firms deliberately prices a product above the prices set for
competing products to capture those consumers who always shop
for the best or for whom price does not matter
iii. Competitor Orientation: a firm should measure themselves primarily
against their competition
1. Competitive Parity setting prices that are similar to those of their
major competitors
2. Status Quo Pricing changing prices only to meet those of
competition
iv. Customer Orientation: the firm should measure itself primarily according
to whether it meets its customer’s needs and adding value
1. Sets prices with a close eye on how consumers develop their
perceptions of value (set a high price to a product to increase the
image of the firm)
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