Chapter 3: Pricing Policy PRICE

Question 1

What are 5 implications for Price Policy resulting from specific services?

Answer 1

1) Difficult cost allocations in pricing
2) Heterogeneity in pricing
3) Pricing with consideration of deductibles of service consumer
4) Price as an indicator of quality
5) Difficulty in determining willingness to pay

Question 2

What are the goals of Pricing Policy?

Answer 2

Maximise profitability
Market penetration
Cost recovery
Customer Retention
Competitive Advantage

Question 3

Define Price Calculation, Price Cap and Price Floor

Answer 3

Price Calculation: based on fixed and variable costs
Price Cap: minimum price that covers costs & avoids losses
Price Floor: highest price customers are willing to pay

Question 4

What is the Product Lifecycle?

Answer 4

1) Introduction Phase
2) Growth Phase
3) Maturity Phase

Question 5

What are the 2 segments of Price Differentiation?

Answer 5

It increases profits…

Question 6

Give 3 examples of Price Differentiation

Answer 6

Time-based: peak/off-peak
Location based: urban/rural
Customer segment

Question 7

What are the 3 forms of Direct Price Differentiation?

Answer 7

1) First degree: each customer charged the max they are willing to pay
2) Second degree: based on quantity or package
3) Third degree: diff price for diff customer groups

Question 8

What is Price Bundling?

Answer 8

It is combining multiple services into 1 package for reduced price

Question 9

What is non-linear pricing?

Answer 9

When prices vary depending on usage and quantity