Test 5

Profit-Oriented Objectives

Focus on achieving a target return on investment (ROI) or maximizing net profit.

Sales-Oriented Objectives

Focus on maximizing unit sales volume, dollar revenue, or gaining market share.

Status Quo Objectives

Status Quo Objectives

Price for "Something of Value"

Price is not just a monetary value; it represents the exchange of money for a total package of value received by consumers or business buyers (including product quality, warranties, service, delivery, and branding).

Robinson-Patman Act

A federal law prohibiting price discrimination—charging different prices to different buyers for goods of "like grade and quality"—if it reduces competition. Exceptions are permitted for documented cost differences or matching a competitor’s legal price in good faith.

Cost-Oriented Pricing Approaches

Setting prices by calculating production and operating costs per unit and adding a specific profit markup.

Sale Price

A temporary price drop to stimulate immediate consumer purchases.

Rebate

A cash refund given to the buyer after the purchase has been made.

Trade/Quantity Discounts

Reductions offered based on trade roles or bulk order quantities.

Fixed Costs (FC)

Costs that remain constant regardless of production output (e.g., rent, executive salaries).

Variable Costs (VC)

Costs that change in direct proportion to production volume (e.g., raw materials, packaging).

Total Cost (TC)

$TC = FC + VC$

Average Costs

The total, fixed, or variable cost divided by the total number of units produced (e.g., $ATC = \frac{TC}{Q}$).

Average-Cost Pricing

Adding a standard markup to the average cost of a product. It can be risky if actual sales volume is lower than expected, leading to unrecovered fixed costs.

Markup

The dollar amount added to the product's cost to arrive at the selling price.

Markup Chain

The sequence of markups applied by each intermediary in the distribution channel (manufacturer $\rightarrow$ wholesaler $\rightarrow$ retailer).

Psychological Pricing

Setting prices to appeal to buyer emotions/perceptions (e.g., odd pricing such as $9.99).

Prestige Pricing

Setting high prices to signal premium quality, status, or exclusivity.

Leader Pricing

Pricing high-demand products low to generate store foot traffic.

Bait Pricing

Advertising an artificially low price to lure buyers, then attempting to switch them to a higher-priced model (unethical/illegal if the advertised item is not genuinely available).

Micro-Satisfaction

Evaluates how well individual business firms satisfy the specific needs of their target market (typically rated higher).

Macro-Satisfaction

Evaluates how efficiently the overall economic marketing system satisfies the needs of the entire society (harder to measure and more frequently criticized).

Legal

Strictly complying with government statutes, regulations, and consumer protection laws.

Ethical

Following moral guidelines, standards of fairness, transparency, and social responsibility that go beyond legal minimum requirements.

American Customer Satisfaction Index (ACSI)

A national economic benchmark metric measuring customer satisfaction across multiple industries in the United States.

Role of Advertising

The strategic use of paid, non-personal promotion to inform, persuade, and remind buyers. Societal assessments evaluate its economic value (informing choices) against potential criticisms (promoting materialism or raising product costs).