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8) Pricing:
The firm's pricing objectives must be identified in order to determine the optimal pricing.
Common objectives include the following:
Current profit maximization - seeks to maximize current profit, taking into account
revenue and costs.
Maximize quantity - seeks to maximize the number of units sold or the number of
customers served in order to decrease long-term costs
Maximize profit margin - attempts to maximize the unit profit margin, recognizing
that quantities will be low.
Quality leadership - use price to signal high quality in an attempt to position the
product as the quality leader.
I)
Partial cost recovery - an organization that has other revenue sources may seek only
partial cost recovery.
Survival - in situations such as market decline and overcapacity, the goal may be to
select a price that will cover costs and permit the firm to remain in the market.
Status quo - the firm may seek price stabilization in order to avoid price wars and
maintain a moderate but stable level of profit.
Pricing Methods
To set the specific price level that achieves their pricing objectives,
managers may make use of several pricing methods. These methods
include:
Cost-plus pricing - set the price at the production cost plus a
certain profit margin.
Target return pricing - set the price to achieve a target return-oninvestment.
Value-based pricing - base the price on the effective value to the
customer relative to alternative products.
Psychological pricing - base the price on factors such as signals of
product quality, popular price points, and what the consumer
perceives to be fair.
Print media
Broadcast media
Electronic media
Outdoor media
Transit media
Cyber media
a) Newspapers
Advantages:
Year-round readership
Geographic selectivity
Immediacy
High individual market coverage
Short lead time
Disadvantages:
Limited demographic selectivity
Little color
May be expensive
Low pass-along rate
Clutter
Mass market medium
b) Magazine
Advantages:
Good reproduction
Demographic selectivity
Regional/local selectivity
Long advertising life
High pass-along rate
Disadvantages:
Higher cost per contact
Long-term advertiser commitments
Slow audience build-up
Limited demonstration capabilities
Lack of urgency
Long lead time
c) Radio
Advantages:
Selectivity and audience segmentation
Immediate and portable
Geographic flexibility
Entertainment carryover
Short-term ad commitments
Disadvantages:
No visual treatment
Short advertising life
High frequency to generate retention
Commercial clutter
Background distractions
d) TV
Advantages:
Wide, diverse audience
Low cost per thousand
Creative and demonstrative
Immediacy of messages
Entertainment carryover
Demographic selectivity with cable
Disadvantages:
Short life of message
Expensive with high campaign cost
Little demographic selectivity with network
Long-term advertiser commitments
Long lead times
Clutter
e) Outdoor media
Advantages:
High exposure frequency
Moderate cost
Flexibility
Geographic selectivity
Broad, diverse market
Disadvantages:
Short message
Lack of demographic selectivity
High noise level
f) Cyber media (Internet)
Advantages:
Fast growing
Ability to reach narrow target audience
Short lead time
Moderate cost
Disadvantages:
Difficult to measure ad effectiveness and ROI
Ad exposure relies on click through
Not all consumers have access to internet
1) Consumer decision making process
Problem Recognition
Information Search
Decision Implementation
Post-purchase Evaluation