Marketing ch14

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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


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