Chapter 13 | Building the Price Foundation

Question 1

Value Formula

Answer 1

Value = Perceived Benefits / Price
(Pay More, Get More)

Question 2

Profit Equation

Answer 2

Profit = Total Revenue ? Total Costs = (Unit Price ? Quantity Sold) ?(Fixed Cost + Variable Cost)

Question 3

6 Steps in Setting Price: Step 1 objective is __

Answer 3

Step 1- Identify Pricing Objectives
1. Profit -
*managing for long-run profits
*managing for current profit
*TARGET RETURN (ROI)

Question 4

Managing for Long-Run Profits

Answer 4

Low prices, Increase Market Share

Question 5

Managing for Current Profit

Answer 5

High Price for Short Run

Question 6

Pricing Objective #2

Answer 6

Sales

Question 7

Pricing Objective #3

Answer 7

Market Share ($ or #)

Question 8

Pricing Objective #4

Answer 8

Unit Volume (#)

Question 9

Step Two in Setting Price

Answer 9

Estimate Demand and Revenue

Question 10

Formula for Price Elasticity of Demand

Answer 10

Price Elasticity of Demand (E) = Percentage Change in Quantity Demanded / Percentage Change in Price

Question 11

The Marketing Objective for a product in the _____ stage of the product life cycle is to create consumer awareness & stimulate trial.

Answer 11

Introduction Stage

Question 12

During the introduction stage of the product life cycle, a(n) ______ strategy may be used. This pricing strategy charges a high price to recoup the costs of product development.

Answer 12

Skimming Pricing (strategy)

Question 13

To handle products in the decline stage of the product life cycle, companies often use either
_____ or ______.

Answer 13

Deletion or Harvesting.