Briefly describe the different types of pricing objectives
What will be an ideal response?
When a company is preparing to sets its price, it first has to select its pricing objectives. The five major objectives available to a company are:
1. Survival — Companies pursue survival as their major objective if they are plagued with overcapacity, intense competition, or changing consumer wants. As long as prices cover variable costs and some fixed costs, the company stays in business.
2. Maximum current profit — Companies who try to maximize their current profit, estimate the demand and costs associated with alternative prices and choose the price that produces maximum current profit, cash flow, or rate of return on investment. This strategy assumes the firm knows its demand and cost functions, but in reality, these are difficult to estimate.
3. Maximum market share — Companies that want to maximize their market share believe that a higher sales volume will lead to lower unit costs and higher long-run profit. They set the lowest price, assuming the market is price sensitive. This is a market-penetration pricing strategy.
4. Maximum market skimming — Companies unveiling a new technology favor setting high prices to maximize market skimming. Companies that use this, introduce their products at a high price and slowly drop the price over time.
5. Product-quality leadership — Companies that aim to be product quality leaders strive to be affordable luxuries, i.e., they want their products and services to be characterized by high levels of perceived quality, taste, and status with a price just high enough not to be out of the consumer's reach.
You might also like to view...
Which one of the four levels of the cost hierarchy would be used by a dress manufacturer that uses activity-based management for sewing seams on a garment?
a. Unit-level activity b. Batch-level activity c. Product-level activity d. Facility-level activity
In a company, the job of a chief privacy officer is to ________
A) ensure timely product deliveries B) detect patent infringements and copyright violations C) safeguard the privacy of a firm's customers D) engage in niche marketing E) safeguard the privacy of senior executives
Leaders who make decisions based on big data are ______ than those that don’t.
a. equally successful b. more successful c. less successful d. It is not clear whether big data leads to more successful decisions or not.
?A moderate current asset investment policy is one:
A. ?under which the level of accounts receivable is always greater than the level of accounts payable. B. which emphasizes on holding equal amount of current assets and current liabilities.? C. ?that calls for relatively large amounts of current assets to be carried. D. ?under which holdings of cash and marketable securities, inventories, and receivables are minimized. E. ?that lies between the relaxed and restrictive current asset investment policies.