Kotler and Keller Chapter Fourteen Questions.

1. The first step of successful price setting is selecting the pricing objective. There are five major objectives in pricing strategies: survival, maximum current profit, maximum market share, maximum market skimming and product-quality leadership. Out of these possible objectives, Sonic should focus on the survival objective. Sonic should pursue survival objective because its current market is highly preoccupied and filled with intense competition where consumer demands shift every day. Sonic is encompassed by several strong competitors who already take up a big part of the market share. The market itself has been very overheated and to an entrant company, survival should be the top priority before any other objective is considered. However, survival is a short-term objective, and consequently Sonic should move on to more future-oriented objectives once they successfully survive as an new firm in the market and their business establishes fundamental stability. Considering Sonic’s targeting strategy, Sonic should learn how to add value to their product for further market share as well as product quality leadership.

2. The second step to a successful price-setting is to determine the demand, under which we have to consider price sensitivity, demand curves and price elasticity. Price sensitivity degree to which consumers react to a price change of a particular product. Customers are less sensitive to low-cost items or items they purchase in frequently. There are some situations where customers are less sensitive to price. In markets where there are few or no substitutes or competitors exit, and when price only constitutes a marginal part of the total cost of obtaining, operating and servicing the product over its lifetime. When applying this to Sonic’s situation model, we can draw out a conclusion that customers are, generally speaking, less sensitive to price of a smart phone which they do not buy frequently or never have bought in their life. However,