MarketingLesson 3 of 3 in the course Pricing Products and Services

The Five-Step Pricing Policy Process: From Objectives to Tactics

5 flashcards · 5 quiz questions · 5 match pairs · 5 fill-in sentences · English

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Summary

Pricing is more than choosing a number: it is a policy decision that should help customers perceive value while supporting the company’s goals. This lesson introduces the first step in establishing pricing policy: deciding what the price is meant to accomplish.

A pricing objective states what a company hopes to achieve through its pricing decisions. It gives marketers a direction for choosing and evaluating prices. Objectives may be based on customer value, costs, sales volume, market share, target returns, competitors, or what customers are willing to pay. A company can pursue more than one objective, provided the objectives can be balanced in practice.

All flashcards

What is a pricing objective?
The outcome a company wants its pricing decisions to achieve.
What is a target return objective?
Setting a price intended to produce a specified profit or return within a particular period.
What is a variable cost?
A cost that changes with the number of units produced.
What is customer value–based pricing?
Setting a price with regard to the benefits customers perceive.
How do a pricing objective and a pricing tactic differ?
An objective is the intended outcome; a tactic is an approach used to pursue it.

Quiz questions

  1. What does a competition-based pricing objective primarily use as a reference?Answer: Competitors’ prices.
  2. What does cross-elasticity of demand examine?Answer: How demand for one good responds when a related good’s price changes.
  3. Why might a high price increase demand for a prestige product?Answer: Buyers may associate the price with status, quality, or exclusivity.
  4. Which statement best describes a factory lease as a fixed cost?Answer: Its cost stays the same as output changes within the relevant range.
  5. Which set lists the six PESTLE categories?Answer: Political, economic, social, technological, legal, and environmental.

Based on Principles of Marketing by Dr. Maria Gomez Albrecht, Dr. Mark Green, Linda Hoffman (OpenStax), licensed CC BY 4.0. Adapted into a summary, flashcards and quizzes.

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