1) KFC sets prices using a sales-oriented objective to maximize market share. It considers factors like demand, costs, competition and large customer demands. 2) KFC estimates demand and costs at different price points to determine the optimal price that meets its sales goals while earning profits. 3) KFC uses promotional strategies like discounts and bundles to increase demand and adjusts prices over time based on the product life cycle.

1. A. Price
Price is that which is given up in exchange to acquire goods or service. Price is typically
the money exchanged for the good and service. It may also be time lost while waiting to
acquire the good or service.
Price might also include “lost dignity” for individuals who lose their jobs and must rely
on charity to obtain food and clothing.
People especially consumers are interested in obtaining a “reasonable price”. It means
perceived reasonable value.
Remember, the price paid is based on the satisfaction consumers expect to receive from a
product and not necessarily the satisfaction they actually receive.
Price can be related to anything with perceived value, not just money. When good and
services are exchange, the trade is called barter
B. The Importance Of Pricing In Firms Or Franchises
- price are very important in all types of organizations because price are key to revenues,
which in turn are the key to profits for an organization. Revenue is the price charged to
customers multiplied by the number of units sold. Revenue is what pays for every activity
of the company production, finance, sales, distribution, and so on. What’s left over is
profit.
To earn profit, managers must choose a price that is not too high or too low, a price that
equals the perceived value to target customers. If, in customers’ minds, a price is set too
high, the perceived value will be less than the cost, and sales opportunities will be lost.

2. Pricing a new product too high may give some shoppers an incentive to go to a
“preowned” or consignment retailer. Lost sales means lost revenue. Conversely, if a price
is too low, the consumer may perceive it as a great value, but the firm loses revenue it
could have earned.
Trying to set the right price is one of the most stressful and pressure-filled tasks of the
marketing manager, as trends in the consumer market attest:
• Confronting a flood of new products, potential buyers carefully evaluate the price
of each one against the value of existing products. For example, In the 1970s,
Kentucky Fried Chicken(KFC) usually offered two kinds of chicken, one
produced according to Colonel Sanders' original recipe and the other made like
the typical "crispy" fried chicken found throughout the southern United States.
Since the crispy chicken had been offered, both products had been priced the
same. The thought behind this was that the company's competitors usually sold a
variety of product and their crispy products at lower prices, and the less attention
on the both product by the customers.
• The increase availability of bargain-priced private and generic brands has put
downward pressure on overall prices.
• Many firms are trying to maintain or regain their market share by cutting prices.
C. PRICING OBJECTIVES
- To survive in today’s highly competitive marketplace, companies need pricing
objectives that are specific, attainable, and measurable. In a marketing term, pricing
objectives falls into 3 categories: (1) profit-oriented (2) sales-oriented and (3) status quo.
As well as its vision which is to bring people of all ages, races and background together
to enjoy “Soul Food”-“proper food with a reasonable prices”-within bright and fun

3. interiors, KFC is designed to be perceived as a fun and inclusive brand. KFC much refer
in a category number (2)
(1) profit-oriented
This type of pricing objectives include profit maximization, satisfactory profit, and target
return on investment.
(2) Sales Oriented Pricing Objectives
- KFC makes their sales pattern as their main objective. Rather than to maximize profits,
their management is more focus to increase sale of production and increase customer
satisfaction. Sales-oriented pricing objectives are based either on market share or on
dollar or unit sales. The marketing manager should be familiar with these pricing
objectives. This pricing objectives includes market share and sales maximization.
Market Share
- is a company’s product sales as a percentage of total sales for that industry.
Larger market shares have indeed often meant higher profits, greater economies
of scale, market power and ability to compensate top-quality management. Take
KFC as an example. To survive in the market share, KFC need to get along with
their competitor with slow growth and few product changes. If not, they’ll lose
their track performance in various product categories over time and make them to
buy frequently bought items.
Sales Maximization
- a firms with the objective of maximizing sales ignores profits, competition, and
the marketing environment as long as sales are rising. They execute their sales
maximization and undergo sales promotional in the long-run. Sales maximization
can also be effectively used on a temporary basis to sell off excess inventory. It is
no wonder nowadays there is a lot of promotional strategy that most firms or
franchises used to market their product. KFC itself uses all kinds of strategy and
tactics to run their sales.

4. (3) Target return on investment
-the most common profit objective is a target return on investment (ROI), sometimes
called the firm’s return on total assets. It measures the management’s overall
effectiveness in generating profits with the available assets.
D. FACTORS DETERMINED THE CHANGE IN PRICE
After ones firms or franchises establish their pricing goals, they must set specific prices
to reach those goals. But then, the price for each product is often depends mostly on 2
factors: the demand for the good or service and the cost to the seller for that good or
service. As for the KFC perceives pricing goals as sales-oriented, demand for the KFC’s
products usually dominate. They are also other factor that can also influence price of the
product such as distribution and promotion strategies, perceived quality, demands of
large customers, the internet, and stage of product life cycle.
A. Demand
Demand is the quantity of product that will be sold in the market at various prices for a
specified period. The quantity of a product that people will buy depends on its price. The
higher the price, the fewer the goods or services consumers will demand and vise versa.
-elasticity of demand refers to customers’ responsiveness or sensitivity to changes in
price. Elastic demand occur when consumers buy more or less of a product when the
price changes. Conversely, inelastic demand means that an increase or decrease in price
will not significantly affect demand for the product.
-when the firms or franchises face the competitive environment, firms must know when it
can raise prices to maximize its revenue. More and more firms or franchises are turning
to yield management system technique to adjust prices. This technique uses complex
mathematical software to profitably fill unused capacity by discounting early purchases,
limiting early sales at these discounted prices, and overbooking capacity.

5. B. Cost
-sometimes, the firms or franchises take action to minimize or ignore the importance of
demand and decide to price their product solely on the basis of costs. Because in the
target market, costs strictly determined the changes values in price
Markup Pricing and Break-Even Analysis
-this is the most popular method used to establish a selling price, does not directly
analyze the cost of the production. Instead, this method uses the cost of buying the
product from the producer, plus amounts the profit and for the expenses not otherwise
accounted for. The total determines the selling price.
Most of the firms or franchises like KFC, McDonald, or Pizza Hut in the whole
worldwide country across the globe, their manager are very emphasize on their sales or
make sales as their main objectives. This sales has a very strong relationship with their
cost of production whereas it will induce the formation of break-even analysis which
determines what sales volume must be reach before the firms break even and no profits
are earned.
E. Other Determinants The Price
other than demand and costs that determines the price setting, there are many other factor
that KFC faces like stages in product life cycle, the competition, demand for large
customer, product distribution strategy, and perceived quality. But, we will discuss only
the factor of competition, promotional and demand for the large customer.
Competition
As for demand and costs to yield the product, competition is one of the biggest factor that
could affect the pricing decision. Although a firms or franchises may not have any
competition at first, the high prices it charges may eventually induce another firms to
enter the market.
Promotion Strategy

6. Price is often used as a promotional tool to increase consumer interest. KFC have gone
through many steps in promotion in order to advertise their product with special menu
with special great price. KFC’s programme, ‘Ultimate Family Connection’ is to get
parents to commit to the weekly sharing of a meal and interactive activity with their
children. Another promo is ‘Kids Laptop Pack Meals’ with gifts and games for every
meal will give an opportunity to the customer and KFC itself as they received great
perceived value from the customer.
Pricing can be a tool for a trade promotion as well.
Demands For Large Customers
Large customers such as KFC, McDonald, A&W, Burger King, KwikPrint and other
service business often make specific pricing demands that the supplier must agree to. All
of these service business especially KFC are making greater-than-ever demands on their
supplier to cover the heavy discounts and markdowns on their own selling floors. They
want the suppliers to guarantees their stores’ profit margins, and they insist on cash
rebates if the guarantees isn’t meet.
F. HOW FIRMS OR FRANCHISES SET THE PRICE OF THE PRODUCT
Setting the right price of a product consist of 3 step process: (1) establish pricing goals.
(2) estimate demand, costs, and profits. (3) choose a price strategy to help determine a
base price. All the steps will discuss briefly below.
A. Establish pricing goals
-the first step in setting the right price is to establish pricing goals. Remember that the
pricing objectives fall into 3 categories which is profit oriented, sales oriented, and status
quo. These goals are derived from the firm’s overall objectives. For example, one of the
franchise firm in a country like KFC has stated their objective to be the dominant sales
leader in an franchising industry, then KFC will pursue a sales-oriented market share

7. pricing goals by study and learn the pattern of other firms or franchise like McDonald,
Pizza Hut, Ayamas etc.
B. Estimate Demand, Costs, And Profits
-after establishing pricing goals, firms should estimate total revenue at a variety of prices.
KFC itself had determined corresponding costs for each price of their product. They
ready to estimate how much profit, how much market share can be earned at each
possible price. These data are very important to develop their price policy. Managers in
one firms or franchises can spot the options in light of revenues, costs, and profits which
are useful to determine which price can be meet the firm’s or franchise’s pricing goals.
C. Choose A Price Strategy
- price strategy is define as a basic, long-term pricing framework, which establishes the
initial price for a product and the intended direction for price movements over the product
life cycle. For example, KFC set their price strategy as a competitive price in a specific
market segment, based on a well-defined positioning strategy. They set the price of their
product to optimize profits at similar selling volumes among of all competitor. In either
price-elastic markets or where marginal costs are low, that is a mistake. Further, many
firms or franchises look only at their own prices rather than what it costs a customer or
end user to acquire and employ the offering. While not every offering can be more
attractive at a lower total cost to the customer or end user, many will. They need to
increase their testing by increase their promotional to identify opportunities and to
expand volume profitably through changed pricing structures.