Revenue Management

Question 1

Define value-based pricing.

Answer 1

Setting a product’s price based on its perceived value.

Question 2

List the factors affecting price sensitivity.

Answer 2

1. Unique value effect
2. Substitute awareness effect
3. Business Expidenture effect
4. End benefit effect
5. Total expidenture effect
6. Price quality effect
7. Hidden fees

Question 3

Describe the decoy effect.

Answer 3

An addition of a third option that is less attractive in price can make the other two options more attractive.

Question 4

Define differential pricing.

Answer 4

Setting different prices based on factors such as location, customer type, etc.

Question 5

List some examples of differential pricing.

Answer 5

1. Limited-time available in the sales cycles (eg. happy hour)
2. Coupons or rebates
3. Price match guarantee
4. Specific channel of distribution

Question 6

List some customer characteristics.

Answer 6

1. Affiliations
2. Where the customer lives
3. Traits
4. Purchasing history

Question 7

Describe negotiation.

Answer 7

Producer and consumer can create a unique and time limited price agreement.

Question 8

Describe dynamic pricing

Answer 8

Different prices are set based on demand.

Question 9

Define versioning.

Answer 9

Offering a range of products that are based on a core product.

Question 10

Three methods of creating a versioned product.

Answer 10

1. Premium
2. Stripped down
3. Meet unique customer