1. Profit-oriented objective (most common strategy) :
• Focuses on current profit maximization rather than long-term performance,
• First estimate what demand and costs will be at different prices,
• Then choose the price that will produce the maximum current profit, cash flow, ROI.
2. Market-oriented objective:
1. Building a larger customer base = lower costs & higher long-run profit,
Low prices generally build market share.
AOL broadband Internet connection services is low to increase market share.
2. Product-quality leadership = high price to cover higher performance quality and high
cost of R&D.
3. Negotiation and bidding.
3. Competition-based pricing objective:
• Price according to what competitors charge for similar products, paying less
attention to the company's own costs or to demand.
When one airline drops prices, its competitors usually follow suit.
The Internet gives firms quicker access to competitive price changes.
• Focuses on current profit maximization rather than long-term performance,
• First estimate what demand and costs will be at different prices,
• Then choose the price that will produce the maximum current profit, cash flow, ROI.
2. Market-oriented objective:
1. Building a larger customer base = lower costs & higher long-run profit,
Low prices generally build market share.
AOL broadband Internet connection services is low to increase market share.
2. Product-quality leadership = high price to cover higher performance quality and high
cost of R&D.
3. Negotiation and bidding.
3. Competition-based pricing objective:
• Price according to what competitors charge for similar products, paying less
attention to the company's own costs or to demand.
When one airline drops prices, its competitors usually follow suit.
The Internet gives firms quicker access to competitive price changes.
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