L4 Pricing Strategies Flashcards
Why is price considered one of the most important determinants of consumption?
Because it influences consumer purchase decisions and product market positioning
What does Economic Value to Customer (EVC) represent?
EVC represents the estimated value customers place on products or services
What factors contribute to customer value?
Benefits or costs associated with availability, convenience, functionality, relationship, and brand image
Why is market research important in developing a pricing strategy?
It helps assess the value and understand consumer preferences and behaviors
What are the two methods mentioned for assessing customer value?
Qualitative Method and Quantitative Method
What is the significance of User Generated Content (UGC) in pricing strategies?
UGC provides valuable insights into customer needs and preferences for product development
Why may the qualitative method for assessing customer value have errors?
Qualitative Method may have errors in measurement because of the difference between intention and behavior
What types of data can UGC include?
Posts, videos, web logs, and customer navigational details
What is first-degree price discrimination?
It is a pricing strategy that enables personalized pricing based on individual contexts.
How can digital technologies facilitate price discrimination?
They enable price discrimination at more affordable costs through detailed customer data
What is dynamic pricing?
Dynamic pricing is when prices fluctuate based on real-time supply and demand
How can firms apply machine learning in pricing strategies?
By using algorithms to analyze data and predict optimal prices based on customer sentiment and behavior
What is the importance of calculating marginal utility?
It helps determine the benefit gained from consuming one additional unit of a product or service
How does perfect price discrimination affect consumer surplus?
In perfect price discrimination, the producer captures all consumer surplus, leaving consumers with no economic benefit beyond the good or service itself.
What is a potential issue with AI-driven pricing algorithms?
AI-driven pricing algorithms often operate as “black boxes,” making it difficult for consumers and regulators to understand how prices are set.
How might AI-enabled price discrimination contribute to economic inequalities?
AI might charge higher prices to less affluent or less informed consumers based on their willingness to pay more out of necessity.
What is second-degree price discrimination?
Second-degree price discrimination involves charging different prices based on the amount or quantity consumed.
What does “versioning” mean in the context of price discrimination?
Versioning involves offering different versions of a product at different prices based on features.
What is third-degree price discrimination?
Third-degree price discrimination occurs when a company charges different prices to different consumer groups.
What is the “pink tax”?
The “pink tax” refers to the phenomenon where products marketed towards women are often priced higher than similar products marketed towards men.
What is Bundling?
Combining two or more products together and charging one price for the bundle
Why do companies bundle their products with other companies?
Bundling can be a great strategy for lock-in and amplifying network effect, can form oligopoly
