8. Pricing policy

Question 1

8. What are the 5 parts a Revenue Management should consider?

Answer 1

• • What to sell.
• • Who to sell to (i.e. target customers).
• • What price to sell at.
• • Terms of sale.
• • Potential for lost revenue.

Question 2

8. What are the three C’s that drive pricing?

Answer 2

Customers
Competitors
Costs

Question 3

8. What is Elasticity of Demand?

Answer 3

The responsiveness of demand for goods or services to changes in the price of those goods or services.
Price Elastic - where a small change in price has a large
impact on demand
Price Inelastic - Where any change in price has a limited impact on demand

Question 4

8. What are some pricing models?

Answer 4

Cost-based Pricing
- Variable costs (marginal)
- Full cost
- Manufacturing costs (absorption costing)
- Activity-based costing (ABC)
- Target return on investment (ROI)
Demand based pricing (airlines, movie theatres)
Value chain pricing (usually ‘extras’ eg. when purchasing a car)
Life cycle revenue management (movies saleability over time)
Target Sales Pricing
Yield based pricing

Question 5

8. Whats the difference between mark up and margin?

Answer 5

Mark up % = (Selling price - COGS) / COGS

Margin % = (Selling price - COGS) / Selling Price

Question 6

8. What is a pricing waterfall?

Answer 6

The amount at invoice price can sometimes go down taking into account all sorts of discounts which ends at the pocket price. The pocket price is very important as its what the company ends up getting paid.

Question 7

8. What is target sales pricing?

Answer 7

It is the highest price point that the organisation believes will generate the required sales volume

Question 8

8. What is yield based pricing?

Answer 8

A form of variable pricing that is aimed at maximising= profits from the sale of perishable goods or services

Question 9

8. What is G-B-B pricing?

Answer 9

Good, Better, Best

To sell to all types of customers at different price points and options. eg. car insurance, air tickets etc