MKT Final - Chapter 13

The money or other considerations exchanged for the ownership or use of a product or service

Final Price = [List Price] - [(Incentives)+(Allowance)] + [ Extra Fees]

The ratio of perceived benefits to price

= Perceived Benfits
Price

Price increases

The practice of simultaneously increasing product and service benefits while maintaining or decreasing price

The statement that a higher price usually means a higher quality

Profit = Total Revenue - Total Cost
= (Unit Price * Quantity Sold) - (Fixed Costs + Variable Costs)

Price effects the quantity sold:
- quantity sold affects the amount of cost a company has which means price indirectly affects costs as well

Influence both total revenue (sales) and total cost, which makes pricing one of the most important decisions marketing executives face
(6 steps in setting prices)

Identify Pricing Objectives and Constraints:

- involve specifying the role of price in an organization's marketing and strategic plans
- (profit, sales, market share, unit volume,survival, social responsibility)

- managing for long-run profits: companies give up immediate profit by developing quality products to penetrate competitive markets over the long term
- maximizing current profits: common in many firms where they just look to make money in the short term
- target return: occurs when a firm sets a profit goal, usually determined by its board of directors

- goal may be to increase sales revenue, which in return will lead to increases in market share and profit
- cutting price on one product in a firms line may increase sales revenue but reduce those of related products

-companies often pursue a market share objective when industry sales are relatively flat or declining

- many firms use this objective
- firms often sell multiple products at very different prices and need to match the unit volume demanded by customers with price and production capacity
- could be counterproductive if drastic price cuts drive down the profit