VERSIONING

Question 1

a pricing strategy where firms offer multiple versions of a product with different features and prices to segment customers based on their willingness to pay.

Answer 1

VERSIONING

Question 2

18 INSIDE VERSIONING

Answer 2

PRICE TO BENEFIT STRATEGY
CHALLENGES AND CONSIDERATIONS
MARGINAL COST IN VERSIONING
PROSPECT THEORY
EXTREME AVERSION
ORDER AND NUMBER EFFECTS
DISCOUNTING IN PRICING
PRICE DIFFERENTIAL
MIXED VERSIONING
ADD-ON PRICE STRUCTURE
FEATURE BASE PRICE
BUNDLING
FEATURE BUNDLING
PRICE SEGMENTATION
STRATEGIC BUNDLING
BUYER’S MENTAL ARITHMETIC OF BUNDLES
LEGAL ISSUES
TRADEOFFS IN ADD-ON, VERSION, AND BUNDLE PRICING

Question 3

Marketers must determine WHICH FEATURES SHOULD BE USED TO ENHANCE A PRODUCT and which can be omitted to deprive a product of certain benefits but still remain within the category.

Answer 3

PRICE TO BENEFIT STRATEGY

Question 4

• Must balance features to avoid cannibalization (e.g., customers choosing lower-priced versions).
• RISK of leaving money on the table if the highest version is under priced.

Answer 4

CHALLENGES AND CONSIDERATIONS

Question 5

Versioning is profitable when marginal costs of enhanced versions are low.

Answer 5

MARGINAL COST IN VERSIONING

Question 6

It EXPLAINS HOW PEOPLE make decisions between alternatives involving risk. A key takeaway is loss aversion: losses are felt more intensely than gains.

Answer 6

PROSPECT THEORY

Question 7

This theory proposes 3 value curve

Answer 7

CONCAVE
CONVEX
STEEPER

Question 8

diminishing sensitivity (for gains)

Answer 8

CONCAVE

Question 9

people are more sensitive to losses (for losses)

Answer 9

CONVEX

Question 10

this illustrates loss aversion (the loss side)

Answer 10

STEEPER

Question 11

Consumers often AVOID both the cheapest and most expensive options. This is known as the compromise effect.

Answer 11

EXTREME AVERSION

Question 12

Offering a __ __ __ to make the middle-priced product more attractive

Answer 12

HIGH END DECOY

Question 13

NUMBER & ORDER effects: Items listed first or last tend to get more attention (primacy and regency).

Answer 13

ORDER EFFECTS

Question 14

NUMBER AND ORDER effects: Prices ending in .99 feel cheaper than rounding up, even if the difference is only one cent.

Answer 14

NUMBER EFFECTS

Question 15

People discount the value of rewards that are delayed.

Answer 15

DISCOUNTING IN PRICING

Question 16

3 PRICE DIFFERENTIALS

Answer 16

CONSTANT PRICE DIFFERENTIALS
DIVERGENT DIFFERENTIALS
CONVERGENT DIFFERENTIALS

Question 17

Each product level INCREASES BY THE SAME AMOUNT (e.g., $100, $200, $300)

Answer 17

CONSTANT PRICE DIFFERENTIALS

Question 18

Price gaps grow at each step (e.g., $100, $250, $500)

Answer 18

DIVERGENT DIFFERENTIALS

Question 19

Prices GET CLOSER AT THE TOP END (e.g., $100, $180, $220)

Answer 19

CONVERGENT DIFFERENTIALS

Question 20

This refers to the practice of OFFERING MULTIPLE VERSIONS of a product that differ in features and pricing.

Answer 20

MIXED VERSIONING

Question 21

Companies can employ add-on pricing by offering a base version of a product at a lower price while providing options for additional features or accessories at an extra cost.

Answer 21

ADD ON PRICE STRUCTURE

Question 22

3 FEATURE BASED PRICING

Answer 22

FEATURE DEPRIVATION
FEATURE ENHANCE VERSION
ZONE OF INDIFFERENCE

Question 23

Some products are designed to INTENTIONALLY LACK CERTAIN FEATURES which can create a differentiation strategy.

Answer 23

FEATURE DEPRIVATION

Question 24

Companies often provide UPGRADED VERSIONS of products that include multiple features, encouraging consumers to select enhanced models that meet more complex needs.

Answer 24

FEATURE ENHANCED VERSIONS

Question 25

This concept helps visualize how customers perceive the value and price of DIFFERENCE versions of a product, often illustrated as a graph indicating how perceived benefits relate to pricing.

Answer 25

ZONE IN DIFFERENCE

Question 26

2 BUNDLING

Answer 26

PRICE BUNDLING BUNDLING

Question 27

In general, bundling is a loosely applied term. However, pricing, as discussed here and defined by many authors, specifically deals with the SALE OF TWO OR MORE distinct products at a single, bundled price.

Answer 27

PRICE BUNDLING

Question 28

Is a pricing strategy that allows customers to purchase different products TOGETHER at a price lower than buying each one separately.

Answer 28

BUNDLING

Question 29

Price bundling is not the same as feature bundling (sometimes also referred to as PRODUCT BUNDLING).

Answer 29

FEATURE BUNDLING

Question 30

3 PRICE SEGMENTATION

Answer 30

PRICE SEGMENTATION WITH BUNDLING PRICE BUNDLING HETEROGENEITY

Question 31

It is a strategy that takes advantage of differing preferences among customers.

Answer 31

PRICE SEGMENTATION WITH BUNDLING

Question 32

It is a strategy that benefits from heterogeneity in demand-specifically, demand that is contrasting between products.

Answer 32

PRICE BUNDLING

Question 33

demand implies that different customers value different items differently

Answer 33

HETEROGENEITY

Question 34

is an effective pricing strategy that combines different products or services into one package at a lower price than if purchased separately.

Answer 34

STRATEGIC BUNDLING

Question 35

Bundling has also been examined with respect to buyers' mental arithmetic.

Answer 35

BUYERS MENTAL ARITHMETIC OF BUNDLES

Question 36

Bundling is generally a legally accepted practice, there are rare but notable instances in which bundling can have negative legal ramifications.

Answer 36

LEGAL ISSUES

Question 37

the three pricing structures, add-ons, versions, and bundles, takes advantage of heterogeneity in customer willingness to pay to define price segments and improve profitability.

Answer 37

TRADEOFFS IN ADD ON, VERSION AND BUNDLE PRICING