Setting the Price
A firm must set a price for the first time when it develops a new product, when it introduces its regular product into a new distribution channel or geographical area, and when it enters bids on new contract work. The firm must decide where to position its product on quality and price.
Firms devise their branding strategies to help convey the price-quality tiers of their products or services to consumers.12 Having a range of price points allows a firm to cover more of the market and to give any one consumer more choices. “Marketing Insight: Trading Up, Down, and Over” describes how consumers have been shifting their spending in recent years.
The firm must consider many factors in setting its pricing policy.13 Table 11.1 summarizes the six steps in the process.
Step 1: Selecting the Pricing Objective
Five major pricing objectives are: survival, maximum current profit, maximum market share, maximum market skimming, and product-quality leadership. 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. To maximize current profits, a firm estimates the demand and costs
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