Session 17

Question 1

Characteristics of price (6)

Answer 1

1. Only element of marketing mix directly producing revenue
2. Most flexible marketing mix element
3. Top factor in consumer choice
4. Money/value exchanged for ownership or use of a product
5. Could include non-monetary payments
6. Value is subjective

Question 2

What factors does good pricing include? (6)

Answer 2

1. Economics
2. Psychology
3. Statistics
4. Operations Research
5. Computer science
6. Courage

Question 3

What is price floor equal to?

Answer 3

Cost to the firm

Question 3

What is price ceiling equal to?

Answer 3

Value to the consumer (willingness to pay)

Question 3

4 factors that affect price

Answer 3

1. Price sensitivity
2. Competition and competitors’ prices
3. Stage in the PLC
4. Industry practices & law/regulations

Question 4

What are aspects related to price sensitivity (4)

Answer 4

1. Availability and awareness of substitutes
2. Ease of comparison
3. Expense (relative to value bundle)
4. Shelf-life/ability to stockpile

Question 5

Competition and competitors’ prices: 4 types of markets

Answer 5

1. Pure monopoly
2. Oligopoly
3. Monopolistic competition
4. Pure competition

Question 6

What is measure of price sensitivity?

Answer 6

Price elasticity

Question 7

How to guess price sensitivity without data? (4)

Answer 7

1. Availability and awareness of substitutes
2. Ease of comparison
3. Expense (relative to value bundle)
4. Shelf life (ability to stockpile)

Question 8

How does total expenditure affect price sensitivity?

Answer 8

• If you spend more on a product, you tend to be more price sensitive

Question 9

How does fraction of total cost affect price sensitivity?

Answer 9

If item larger % of total cost, you are more price sensitive

Question 10

see slide 25-26

Question 11

Pricing objectives (5)

Answer 11

1. Profit
2. Sales
3. Brand image
4. Survive competition
5. Social responsibility (public goods)

Question 12

What is ROI formula?

Answer 12

ROI = additional profit/investment

Question 13

What is mkt share formula?

Answer 13

MS (mkt sh) = own sales/category or industry sales

Question 14

On what factors to base price (4)?

Answer 14

1. Cost
2. Competitors
3. Value to customers
4. Desired profit

Question 15

What are cost-oriented (1) and competitor-oriented (2) approaches (with description)?

Answer 15

1. Standard markup (typical markup % for particular category)
2. Above, at, or below competition (prices dictated by competitors)
3. Loss-leader pricing (pricing far below competition or even variable costs)

Question 16

What are value-oriented approaches (with description)? (6)

Answer 16

1. Skimming (high price in begining and lowering prices as time passes)
2. Penetration (price low at the launch of the product)
3. Prestige (Price high to signal quality/reinforce brand positioning)
4. Price lining (create different products at various price levels)
5. Dynamic pricing (continuous matching between demand and supply)
6. Pay what you want (consumer chooses price)

Question 17

What are profit-oriented approaches (with description)? (3)

Answer 17

1. Target profit pricing (aim for a particular total profit)
2. Target return-on-sale pricing (aim for particular % return)
3. Target return-on-investment pricing (aim for particular ROI)

Question 18

What are psychological-oriented approaches (with description)? (5)

Answer 18

1. Price-ending effects/odd-even pricing
2. Reference prices
3. Price quantity effects
4. Price quality inferences (e.g., wines, perfumes)
5. Endowment effect (sense of ownership increases willingness to pay
   e.g. test drives)

Question 19

Types list prices (2…)

Answer 19

1. One price or flexible pricing
2. Dynamic pricing

Question 20

Two types of price adjustments

Answer 20

Discounts and Allowances

Question 21

Types of discounts (3)

Answer 21

1. Seasonal
2. Quantity
3. Cash

Question 22

1 type/example of allowance?

Answer 22

Trade-in (B2C)