That which is given up in an exchange to acquire a good or service

The sacrifice effect of price

"That which is given up" usually means money; customers may also sacrifice time or forego other products and services

Information effect of price

Customers do not always want to choose the lowest-priced product in a category; infer quality information from price (higher quality equals higher price)

Value is based on perceived satisfaction

Customers are interested in obtaining a perceived reasonable value for the price at the time of purchase

Profit-oriented pricing objectives

Profit maximization (revenue>cost); total price so that total revenue is as large as possible relative to total costs while still remaining competitive; increasing customer satisfaction, reducing costs by operating more efficiently

Sales-oriented pricing objectives

Sales-oriented pricing objectives are based on market share as reported in dollar or unit sales

A company's product sales as a percentage of total sales for that industry; larger market shares have often meant higher profits thanks to greater economies of scale, market power, and ability to compensate top-quality management

A firm with the objective of maximizing sales ignores profit, competition and the marketing environment as long as sales are rising ; fails as a long-run objective because it can mean little to no profitability; price-quality approach

Status quo pricing objectives

A pricing objective that maintains the existing prices or meets the competitor's prices; suboptimal pricing because it ignores the customers' perceived value of both the firm's goods or services and those offered by its competitors

The quantity of a product that will be sold in the market at various prices for a specific period high price --> low demand vs. low price --> high demand

The quantity of a product that will be offered to the market by a supplier at various prices for a specified period higher prices --> earn more capital --> produce more products

A pricing policy whereby a firm charges a high introductory price, often coupled with a heavy promotion; new product with perceived unique advantages; strong demand; well protected legally; technological breakthrough

A pricing policy whereby a firm charges a relatively low price for a product as a way to reach the mass market; obtain large market share, price-sensitive market, discourage or block competition from entering market

This pricing strategy means charging a price identical or very close to the competitor's price; although status quo pricing has the advantage of simplicity, its disadvantage is that the strategy may ignore demand or cost or both

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Marketing Management

Chapter 19: pricing concepts

Question	Answer
Price	That which is given up in an exchange to acquire a good or service
The sacrifice effect of price	"That which is given up" usually means money; customers may also sacrifice time or forego other products and services
Information effect of price	Customers do not always want to choose the lowest-priced product in a category; infer quality information from price (higher quality equals higher price)
Value is based on perceived satisfaction	Customers are interested in obtaining a perceived reasonable value for the price at the time of purchase
Profit-oriented pricing objectives	Profit maximization (revenue>cost); total price so that total revenue is as large as possible relative to total costs while still remaining competitive; increasing customer satisfaction, reducing costs by operating more efficiently
Sales-oriented pricing objectives	Sales-oriented pricing objectives are based on market share as reported in dollar or unit sales
Market share	A company's product sales as a percentage of total sales for that industry; larger market shares have often meant higher profits thanks to greater economies of scale, market power, and ability to compensate top-quality management
Sales maximization	A firm with the objective of maximizing sales ignores profit, competition and the marketing environment as long as sales are rising ; fails as a long-run objective because it can mean little to no profitability; price-quality approach
Status quo pricing objectives	A pricing objective that maintains the existing prices or meets the competitor's prices; suboptimal pricing because it ignores the customers' perceived value of both the firm's goods or services and those offered by its competitors
Demand	The quantity of a product that will be sold in the market at various prices for a specific period high price --> low demand vs. low price --> high demand
Supply	The quantity of a product that will be offered to the market by a supplier at various prices for a specified period higher prices --> earn more capital --> produce more products
Price skimming	A pricing policy whereby a firm charges a high introductory price, often coupled with a heavy promotion; new product with perceived unique advantages; strong demand; well protected legally; technological breakthrough
Penetration pricing	A pricing policy whereby a firm charges a relatively low price for a product as a way to reach the mass market; obtain large market share, price-sensitive market, discourage or block competition from entering market
Status quo pricing	This pricing strategy means charging a price identical or very close to the competitor's price; although status quo pricing has the advantage of simplicity, its disadvantage is that the strategy may ignore demand or cost or both

Created by: natalia.caicedo

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