price-quality trade-offs

price-quality trade-offs

a firm's MARKETING policy on what QUALITY of product or BRAND to sell and the PRICE at which it is sold. Such decisions can be made only in the context of the quality of rivals' brands and the prices they are charging. In this context, quality refers to both durability and performance and to technical sophistication.

A firm may choose to offer a high-quality brand and sell it at a high price to appeal to a particular quality-conscious MARKET SEGMENT; or to produce a lower-quality brand to sell at a lower price to a more price-conscious segment. In terms of PRODUCT POSITIONING a firm, for example, may choose to upgrade slightly the quality of its brand and offer it at an unchanged price to make it more competitive; alternatively, the firm may modify a low-quality, low-price brand by significantly upgrading its quality and offering it at the same price to appeal to a new medium-quality price-conscious segment. Businesses often offer several different qualities or specifications of a product as a product line in order to appeal simultaneously to several market segments. See PRODUCT RANGE, PSYCHOLOGICAL PRICING.

Collins Dictionary of Business, 3rd ed. © 2002, 2005 C Pass, B Lowes, A Pendleton, L Chadwick, D O’Reilly and M Afferson