MM 3 Pricing - Custom Scholars
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MM 3 Pricing

question
Why Pricing is Important
answer

-Obtains value back

-Matches brand positioning

-Affects demand

-Can be used as a segmentation tool

question
Demand
answer
tends to decrease as price increases
question

Elasticity

answer
How much does demand (units sold) increase (or decrease) with a price change?
question
inelastic demand
answer
implies that customer will purchase even if price increases
question
price sensitivity
answer

Greater When...

-Don’t care much about the purchase

-Don’t have strong preferences

-Don’t have strong brand loyalty

-Have limited income

question
cost-plus princing
answer
Unit Cost/1-X%(Where X% is the intended return)
question
Conjoint Analysis
answer

Show product combinations with price; ask “Which do you most prefer?” “Next?”

question

Psychology of Pricing

answer
Our Prediction = Our Model + E (Epsilon)
question

Compromise Effect

answer
The inner/middle choice between two extremes is attractive
question

Referent Pricing

answer
People compare price to some referent, either an externally available price or an internally stored price
question
price discrimination
answer
the business practice of selling the same good at different prices to different customers (illegal)
question

Segment Pricing

answer
modified versions of a product are marketed to different segments for different prices (legal)
question

Yield Management

answer
using price and scheduling to manage demand
question

Two-Part Tariffs

answer
Charge a fixed and variable usage fee
question

Coupons

answer

Redemption rate- 1%

only relevant to coupon clippers

question

Game Theory

answer
is used to estimate likely results of price cuts and competitive response
question

Auctions

answer

English auctions: bids start low & increase

Dutch auctions: bids start high & decrease

question

Value

answer
not a good idea to compete on price
1 of 18
question
Why Pricing is Important
answer

-Obtains value back

-Matches brand positioning

-Affects demand

-Can be used as a segmentation tool

question
Demand
answer
tends to decrease as price increases
question

Elasticity

answer
How much does demand (units sold) increase (or decrease) with a price change?
question
inelastic demand
answer
implies that customer will purchase even if price increases
question
price sensitivity
answer

Greater When...

-Don’t care much about the purchase

-Don’t have strong preferences

-Don’t have strong brand loyalty

-Have limited income

question
cost-plus princing
answer
Unit Cost/1-X%(Where X% is the intended return)
question
Conjoint Analysis
answer

Show product combinations with price; ask “Which do you most prefer?” “Next?”

question

Psychology of Pricing

answer
Our Prediction = Our Model + E (Epsilon)
question

Compromise Effect

answer
The inner/middle choice between two extremes is attractive
question

Referent Pricing

answer
People compare price to some referent, either an externally available price or an internally stored price
question
price discrimination
answer
the business practice of selling the same good at different prices to different customers (illegal)
question

Segment Pricing

answer
modified versions of a product are marketed to different segments for different prices (legal)
question

Yield Management

answer
using price and scheduling to manage demand
question

Two-Part Tariffs

answer
Charge a fixed and variable usage fee
question

Coupons

answer

Redemption rate- 1%

only relevant to coupon clippers

question

Game Theory

answer
is used to estimate likely results of price cuts and competitive response
question

Auctions

answer

English auctions: bids start low & increase

Dutch auctions: bids start high & decrease

question

Value

answer
not a good idea to compete on price

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