The Optimal Price

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The Optimal Price
The supplier, in turn, must obtain some measure of a buyer’s reaction to AP
prices. In Chapter 12, we elaborate on “buyer profiles,” which are sometimes referred to as “buyer fact sheets.” These are diaries in which suppliers and salespersons record information on buyers’ purchasing habits, as well as, invariably, reactions to AP prices. Eventually, suppliers and salespersons can accurately gauge the influence AP prices have on various buyers. However, suppliers and salespersons use certain predictable eactions
to AP prices to their advantage when selling the products and services to buyers for the first time. Some of the ways that buyers’ and sellers’ attitudes affect the purchasing process are discussed in the following paragraphs.

• For the most part, novice buyers, and particularly novice managers, overrate AP prices. The AP price is, after all, a number, something that can be compared and measured. Inexperienced shoppers are more apt to grasp a number until they gain sufficient practice in relating AP prices to EP costs, quality, and supplier services. Top management is usually aware of the tendency to focus on numbers, which probably explains why buyers are expected to have previous experience in other areas of the hospitality firm. This previous experience generally helps buyers relate AP prices to overall value. How AP Prices Influence Buyers 219 AP price is converted
to EP cost Buyer is quoted an AP price Value is acceptable Value is unacceptable EP cost is related to quality and supplier services
Overall value is determined Renegotiate AP price or seek
other suppliers’ AP prices FIGURE 10.1 The conceptual process a buyer can use to relate AP price to value.


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