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Financial Analysis for Profit-Driven Pricing

April 15, 1994 | Gerald E. Smith, Thomas T. Nagle | Marketing

Pricing decisions require a balance between competing forces. Prices must be high enough to yield a profit yet low enough to give buyers sufficient incentive to buy. According to the authors, many companies let one or the other of these concerns dominate pricing decisions, resulting in tactical, short-term decisions that are not connected to marketing strategy. Here they suggest a profit-driven approach to pricing that focuses on profit contribution and defines the market response necessary to achieve incremental profitability.

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