Abstract
Any company’s goal should be long-term—and not short-term—profit maximization. This goal is synonymous with the maximization of shareholder value. Up until now, we have not examined relationships across time periods. For long-term price optimization, it is necessary to take into account that the determinants of the optimal price can be dynamic—the goals, the price-response function, and the cost function. Competitive conditions also typically change over the life cycle of a product or market. In this chapter, we focus on how the effects of price changes, carryover effects, and the experience curve influence the optimal development of price. For the introductory phase of a product, we will examine two standard strategies—skimming and penetration strategy. We will then use several cases to demonstrate the differences between short-term and long-term optimal prices. The chapter will conclude with a qualitative perspective on price management and relationship marketing.
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Notes
- 1.
See Background Information at the end of this chapter.
- 2.
The literature contains many similar descriptions such as “brand loyalty parameter,” “new buyer holdover,” or “repeat purchase parameter.”
- 3.
See Background Information at the end of the chapter.
- 4.
See Background Information at the end of the chapter.
- 5.
Derivation: see Background Information at the end of the chapter.
- 6.
One must distinguish between customer value and value-to-customer, even though they are often used synonymously in practice. Value-to-customer describes the benefit that a business provides to a customer (see Chap. 3).
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Simon, H., Fassnacht, M. (2019). Decision: Long-Term Price Optimization. In: Price Management. Springer, Cham. https://doi.org/10.1007/978-3-319-99456-7_7
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