Author Question: What are some of the objectives a firm might hope to achieve when setting ... (Read 36 times)

HudsonKB16 · **on:** Jun 29, 2018

What are some of the objectives a firm might hope to achieve when setting prices?

Question 2

Which of the following best describes someone who is an early adopter in terms of the major adopter categories?
A) They enjoy new products and are willing to take a risk.
B) They are oriented toward the past and are the last to adopt a new product.
C) They are skeptical of new products, but eventually adopt them because of economic necessity or social pressure.
D) They choose new products carefully and are viewed as in-the-know by other adopter categories.
E) They are deliberate and cautious in trying new products.

fwbard · **Reply #1 on:** Jun 29, 2018

Answer to Question 1

The first step in setting prices is developing pricing objectives that form the basis for decisions for other stages of the pricing process. A firm's objectives include survival, profit, return on investment, market share, cash flow, status quo, and product quality.
Survival means temporarily setting prices low, even at times below costs, in order to attract more sales. Profit objectives tend to be set at levels that the owners and top-level decision makers view as satisfactory and attainable. Pricing to attain a specified rate of return on the company's investment is a profit-related pricing objective. A return on investment (ROI) pricing objective generally requires some trial and error. Firms establish pricing objectives to maintain or increase market share. They recognize that high relative market shares often translate into high profits. Some companies set prices so they can recover cash as quickly as possible. The use of cash flow and recovery as an objective oversimplifies the contribution of price to profits. A status quo pricing objective can reduce a firm's risks by helping to stabilize demand for products. A high price on a product may have the effect of signaling to customers that the product is of a high quality.

Answer to Question 2

D