L6: Value capture - Pricing

Question 1

4Ps in the marketing mix

Answer 1

1. Price
2. Place
3. Product
4. Promotion

Question 2

Factors that influence price-setting

Answer 2

• customer’s perceived value
• other internal and external conditions
• costs

Question 3

Pricing methods and their relation to the factors

Answer 3

Other internal and external conditions:

• costs
• customer’s perceived value

Competition-based pricing

• Value-based pricing
• costs-based pricing

Question 4

Cost-based pricing

Answer 4

• Based on accounting data of product costs (for development, production, distribution, marketing, sales, etc.)
• Problems with cost-based pricing is that customers’ value perception and competition are neglected

Why is it used that often?

• easy to implement
• relative certain

Question 5

Two methods of Cost-based pricing

Answer 5

1. Cost-plus pricing (full cost pricing)
2. Break-even pricing
   - cost and revenue even out

Question 6

Competition-based pricing (e.g. Airbus vs. Boing)

Answer 6

• Competitors’ offers, prices, and strategies are considered; both current and prospective ones
• Competitor analyses is important since customers often consider competing products in their buying decisions.

Question 7

Value-based pricing

Answer 7

• Pricing is based on the market perception (the customers)
• setting a price in accordance with what the customer think the product is worth

• Market research methods

• Experiments (with one/several treatment and a control group)
• Conjoint analysis

• Process
- Start point is customer value and the endpoint is the price

Question 8

Cost-based vs. Value-based pricing

Answer 8

Cost-based:
Product -> Customer

Value-based:
Customer -> Product

Question 9

Pricing strategies for new products

Answer 9

1. Price skimming

2. Price penetration

Question 10

Price skimming

Answer 10

• High initial price that is used to gain market share

Conditions:

• High product quality and perception
• Competitors are unable to offer same/very similar product at lower price

Question 11

Price penetration

Answer 11

• Low initial price that is used to gain market share

Conditions:

• price sensitive market
• growth potential
• economics of scale are possible

Question 12

Pricing strategy for products in a portfolio

Answer 12

• Product line pricing 
(e.g. different computer models)
• Add-on products
(e.g. cars)
• Related products
(e.g. game console and games)
• Byproducts
(e.g. sell waste product of production of the real product)
• Bundling
(e.g. Microsoft Office Suite)

Question 13

Pricing strategy for price adjustment

Answer 13

• Discounts
(boost sales)
• Segmented pricing
• Psychological pricing 
• Sales supporting pricing 
• Geographical pricing 
• Dynamic Pricing

Question 14

Dynamic Pricing

Answer 14

• is used when the price varies continuously (e.g. fuel)

High Demand + Low Demand = High Price

Question 15

B2B vs. B2C

Answer 15

People involved:
• Buying center with different people (B2B)
• single person (B2C)

Relative price level :
• lower for B2C products than B2B

Psychological aspects:
• more common in B2C pricing

Price negotiations:
• more common in B2B than in B2C