Flashcards in Chap 18** Deck (17):
Firms that adopt volume objectives believe that:
companies should continue to expand sales as long as their total profits do not drop below a specified minimum return
Which of the following actions is most likely to be taken by a company in order to implement the value pricing objective?
Convincing consumers that the quality of their lower-priced product is the same as that of a comparatively higher-priced product sold by a competitor
Prestige pricing objectives emphasize:
quality and exclusivity
What is the Robinson-Patman Act?
- Fed legislation prohibiting price discrimination that is not bases on a cost differential
- Prohibits selling at an unreasonably low price to eliminate competition
- Inspired by price competition triggered by the rise of grocery store chains
State law that requires sellers to maintain minimum prices for comparable merchandise and was intended to protect small specialty stores from loss-leader tactics.
The statutes enacted in most states that once permitted manufacturers to stipulate a minimum retail price for their product are called what?
What are the purposes of profitability objectives (pricing objective)?
- profit maximization (point at which the additional revenue gained by increasing the price of a product equals the increase in total cost)
- target return (short or long run pricing objectives of achieving a specified return on either sales or investment
Ex. Samsung's initially high price for the Blu-ray players
What are the purposes of volume objectives?
- sales maximization (through service and quality)
- market share (goal of controlling a portion of market for a firm's product)
Ex. Delta's low fares in new markets
What discovered a strong positive relationship between a firm's market share and product quality and its return on investment?
Profit Impact of Market Studies (PIMS) project
What are the purpose of prestige objectives?
- to develop and maintain an image of quality and exclusiveness that appeals to status conscious consumers levels of competing offerings
How does value pricing work?
- emphasizes benefits derived from a product in comparison to the price and quality levels of competing offerings
- works best for relatively low-prices goods and services
- challenge is convincing customers that low-priced brands offer quality comparable to that of a higher priced product
What is an oligopoly vs monopoly?
O = relatively few sellers; each has large influence on price
M = only on seller of a product exists and for which there are no close substitutes
A variable cost is a ?
cost that changes with the level of production
A fixed cost is a ?
remain stable at any production level within a certain range
- lease payments or insurance costs
What is elasticity?
it is the measure of responsiveness of purchasers and suppliers to a change in price
A pricing technique used to determine the number of products that must be sold a specified price to generate enough revenue to cover total cost is called?