HFT 2500 Chapter 11; Pricing
Products; Pricing Considerations,
Approaches and Strategy well
answered
Internal Factors to Consider When Setting Price - ANS ✔✔• Survival (recession/catastrophic
event)
• Current profit maximization - No long term concern.
• Market-Share Leadership - Lower prices and lower costs (Days Inn/Wal-Mart).
• Product-Quality Leadership - Ritz-Carlton charges higher prices for their high cost and
outstanding services.
• Create excitement for a new product, stabilize the market
Costs - ANS ✔✔*Set the floor price*
•Fixed (overhead) costs do not vary with production or sales level (rent, salaries, interest).
•Variable costs vary directly with the level of sales/production (direct result of business levels).
• Total costs are all costs fixed and variable
External Factors of The Marketplace - ANS ✔✔• The market and demand set the upper limit
while costs set the bottom limit.
• Both consumers and channel members are part of the market
Consumer Sensitivities
to Price - ANS ✔✔As a generalization we are less price-sensitive when:
• The product is unique.
• It is a special occasion.
Products; Pricing Considerations,
Approaches and Strategy well
answered
Internal Factors to Consider When Setting Price - ANS ✔✔• Survival (recession/catastrophic
event)
• Current profit maximization - No long term concern.
• Market-Share Leadership - Lower prices and lower costs (Days Inn/Wal-Mart).
• Product-Quality Leadership - Ritz-Carlton charges higher prices for their high cost and
outstanding services.
• Create excitement for a new product, stabilize the market
Costs - ANS ✔✔*Set the floor price*
•Fixed (overhead) costs do not vary with production or sales level (rent, salaries, interest).
•Variable costs vary directly with the level of sales/production (direct result of business levels).
• Total costs are all costs fixed and variable
External Factors of The Marketplace - ANS ✔✔• The market and demand set the upper limit
while costs set the bottom limit.
• Both consumers and channel members are part of the market
Consumer Sensitivities
to Price - ANS ✔✔As a generalization we are less price-sensitive when:
• The product is unique.
• It is a special occasion.
