Marketing ch14
What increase customer orientation strategy
Setting prices to match consumer expectations and focusing on customer satisfaction
The five Cs
Company objectives, customers, costs, channel members, and competition
Substitution effect
Consumer's ability to substitute other products for focal brand
Fixed cost
Costs that remain at the same level regardless of any changes in volume of production
Variable cost
Costs that vary with production volume and also called primary labor and materials
Dynamic pricing/individualized pricing
Process of charging different prices for goods or services based on the type of customer, time of the day, week, season, and level of demand
Substitute product
Products whose demands are negatively related
Complementary product
Products whose demands are positively related
Prestige products or services
Purchase for the consumer's status rather than their functionality
Value
Relationship between product's benefits and consumer's costs
Profit alone
Does not indicate how many units should be sold before a firm breaks even
Maximizing profits
Relies on economic theory in order to identify the price at which its price is maximized
Target return pricing
Employ pricing strategies designed to produce specific return on their investment expressed as percentage of sales
Gray market
Employs irregular but not illegal methods of pricing
Limitations to break-even analysis
Can't predict how many units will sell, represents an average price to account for variances, and that firms have to perform several analyses at different quantities
Income effect
Change in quantity of product demanded by consumers due to change in income
Status quo pricing
Changes prices only to meet those of the competition
Predatory pricing
Firm sets a low price for one or more of its products with the intent to drive its competition out of business
Oligopolistic competition
Firms change their prices in reaction to competition to avoid upsetting competitive environment
Premium pricing
Firms deliberately prices a product above prices set for competing products to capture customers who always shop for the best
Sales orientation
Firms that believe increasing sales will help the firm more than increasing profits
Profit orientation
Focus on target profit pricing, maximizing profits, or target return pricing
Pure competition
Large number of sellers offer standardized products or commodities that consumers perceive as substitutable
Price elasticity of demand
Measures how changes in a price affect the quantity of the product demanded
Monopolistic competition
Occurs when there are many firms competing for customers in a given market but their products are differentiated
Price war
Occurs when two or more firms compete primarily by lowering their prices
Monopoly
One firm provides product or service in particular industry which results in less price competition
Price
One of the important factors in consumer's purchase decision
Price
Overall sacrifice a consumer makes to acquire a product or service
Cross-price elasticity
Percentage change in the quantity of Product A demanded compared with percentage change in price in Product B
Break-even point
Point at which the number of units sold generates enough revenue to equal the total costs
Contribution per unit
Price less the variable cost per unit
Demand curve
Shows how many units of a product or service consumers will demand during specific period of time at different prices
Competitor orientation
Strategize according to the premise that they should measure themselves against their competition
Total cost
Sum of variable and fixed costs
Break-even analysis
Technique that enables managers to examine the relationships among cost, price, revenue, and profit over different levels of production and sales
Why firm may set low prices
To discourage new firms from entering the market, encourage current firms to leave the market, and/or take market share away from competitors all to gain overall market share
Competitive parity
They set prices that are similar to those of their major competitors
Customer orientation
When firm sets its pricing strategy based on how it can add value to its products or services
Target profit pricing
When having particular profit goal as their concern it's used to stimulate certain level of sales at certain profit per unit