Chapter 28

Question 1

Price Discrimination:

Answer 1

Trying to sell to diff customer segments at diff prices. Charge high price to customer that have INELASTIC demand vs customer with elastic demand.

How does business discriminate based on diff type of customers:
- It needs to be arbitrage free, customer cant purchase at low price and resell at high price.

• Airlines try to figure out which one is business customer, retail customer, leisure customer, and its difficult so they try to find patterns and price tickets accordingly

Question 2

Tiered

Answer 2

Price based on volume of purchase

Question 3

Dynamic

Answer 3

Allow price to fluctuate by time of day (peak and off-peak season)

Question 4

Auction

Answer 4

Auction: auction off limited quantity (ebay)

Question 5

Penetration

Answer 5

Penetration: Staring low price, get market acceptance, small then jack up price (Netflix)

Question 6

Freemium

Answer 6

Freemium : give product free, but those things that make product attractive have a price

Question 7

Hidden Rev

Answer 7

Hidden Rev : Online content may be “free” but generate revenue through ads. For example, an internet search is free to the user while the search engine’s revenue comes from selling user data.

Question 8

Network effects

Answer 8

Network effects refer to the increase in the value of a network as its user base grows. Examples of this include WhatsApp, eBay, and Facebook.

-Network effects support an initial strategy of penetration pricing.
-Network effects capitalize on both size and scope.
-Some networks are two-sided or multi-sided—such as Airbnb, which has a multitude of hosts and guests.

Question 9

Crowdsourcing

Answer 9

Crowdsourcing models benefit from user contributions—content in the case of Wikipedia, traffic conditions and events in the case of Waze, and product improvements or new applications in the case of open-source software.

Question 10

Bundling

Answer 10

Combo multiple products that customers often buy together. Example, furnishes with apt rental…

Question 11

Razor

Answer 11

Selling low priced equipment with high margin add-on/follow-up purchases like ink/toners for printers.

Question 12

Value Proposition

Answer 12

Refers to how customers will value the attributes of a product or service, leading them to purchase it.

Question 13

Value chain

Answer 13

refer to how the firm executes it value prop (ie how it creates value)

Question 14

Supply Chain

Answer 14

refers to the processes involved in creating a product.

Question 15

Conventional Business MOdel

Answer 15

Existed for some time and make up most models.

Include natural resource producers, manufacturers, distributors, retailers, brokers, banks, service providers, and software’s.

Question 16

Contract manufacturers or private labels

Answer 16

Firms produce products to be marketed by others (Costco’s Kirkland signature brands)

Question 17

Value-added resellers

Answer 17

firms distribute a product but also offer product installation, customization, service and/or support.