Page 363 - Foundations of Marketing

330 Part 4 | Product and Price Decisions

decision makers view as satisfactory and attainable. Specific profit objectives may be stated in
terms of either actual dollar amounts or a percentage of sales revenues.

Return on Investment

Pricing to attain a specified rate of return on the company’s investment is a profit-related pric-
ing objective. A return on investment (ROI) pricing objective generally requires some trial and
error, as it is unusual for all required data and inputs to be available when setting prices. Many
pharmaceutical companies also use ROI pricing objectives because of their great investment
in research and development.

Market Share

Many firms establish pricing objectives to maintain or increase market share, which is a prod-
uct’s sales in relation to total industry sales. Frito-Lay, for instance, is pursuing a high-end and
low-end strategy to attract consumers from a broader spectrum of the snack foods market and
secure a larger market share. While brands like Doritos and Tostitos continue to be priced on
the low end of the snack food range, Frito-Lay also offers higher-priced brands such as Stacy’s
Pita Chips and Sabra. The company also released Taqueros brand, snacks that are priced low
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and aimed at the Hispanic market. The strategy has worked, making Frito-Lay the largest
snack food company by market share in the world. Many firms recognize that high relative
market shares often translate into high profits. The Profit Impact of Market Strategies (PIMS)
studies, conducted over the past 50 years, have shown that both market share and product
3
quality influence profitability. Thus, marketers often use an increase in market share as a
primary pricing objective.
Maintaining or increasing market share need not depend on growth in industry sales. An
organization can increase its market share even if sales for the total industry are flat or decreas-
ing. On the other hand, a firm’s sales volume can increase while its market share decreases if the
overall market grows.

Emerging Trends

Panera Cares: Pay What You Want

“Take what you need, leave your fair share.” That’s who can afford to pay add a little extra to cover meals
what signs tell customers who eat at the Panera Cares for customers who can’t afford to pay. “This is not about
Community Cafés in Missouri, Michigan, and Oregon. a handout,” he explains. “This is about a hand up, and
In these pay-what-you-want restaurants, people with every one of us has a need for that at some point in
little money can still enjoy a full meal without paying our lives.”
the full price. The menu boards in Panera Cares cafés Although Panera Cares restaurants don’t aim for
look just like those in the 1,500 other Panera cafés profits, they do aim to cover costs, reaching the break-
throughout the United States and Canada, with one even point when revenues reach 80 percent of sug-
exception: instead of prices, they show “suggested gested funding levels. So far, the company finds that
funding levels.” 60 percent of customers pay the suggested amount,
Why not give the restaurant food away? Panera’s 20 percent pay more, and 20 percent pay nothing or
Operation DoughNation already donates up to $ 150 million much less than the suggested amount. When Panera
worth of unsold bakery items every year to groups that began this program, it ran it year round; however,
feed the hungry. But Panera’s CEO also envisioned a small Panera management recently decided to offer this
a
chain of “shared responsibility” cafés, where customers program on a seasonal basis.

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