Second Sem | Chapter 1

Question 1

is the value that is put to a product or service and is the result of a complex set of
calculations, research and understanding and risk-taking ability.

Answer 1

Price

Question 2

takes into account segments, ability to pay, market conditions, competitor
actions, trade margins and input costs, amongst others. It is targeted at the defined customers
and against competitors.

Answer 2

Pricing strategy

Question 3

Objectives of Pricing

Answer 3

Cost-plus pricing
Customer-driven pricing
Share-driven pricing

Question 4

The most common pricing procedure because it carries an aura of
financial prudence, which means pricing every product or service to yield a fair return
over all costs, fully and fairly allocated.

Answer 4

Cost-plus pricing

Question 5

Policy of letting pricing be dictated by competitive conditions.

Answer 5

Share-driven pricing

Question 6

consistent with value-based pricing.

Answer 6

Customer-driven pricing

Question 7

Disadvantage: It is impossible to determine a product’s unit cost before determining its
price because unit costs change with volume.

Answer 7

Cost-plus pricing

Question 8

Its purpose is to price more profitably by capturing more value, not necessarily
by making more sales.

Answer 8

Customer-driven pricing

Question 9

Trade-off forms:
● Willingness to lower price to exploit a market opportunity to drive volume.
● Willingness to give up volume by raising prices, which is a difficult decision.

Answer 9

Share-driven pricing

Question 10

requires ensuring that products and services include just those features that
customers are willing to pay for, without those that unnecessarily drive up cost by more than
they add to value.

Answer 10

Strategic Pricing

Question 11

Principles of strategic Pricing

Answer 11

Value-based
Proactive
Profit-driven

Question 12

means that differences in pricing across customers and changes over
time reflect differences or changes in the value to customers.

Answer 12

Value-based

Question 13

means that company evaluates its success at price management by what
it earns relative to alternative investments rather than by the revenue its generates
relative to its competitors

Answer 13

Profit-driven

Question 14

means that companies anticipate disruptive events and develop strategies in
advance to deal with them.

Answer 14

Proactive

Question 15

Its objective is profitability.

Answer 15

Strategic Pricing

Question 16

Problems:
● Sophisticated buyers are rarely honest about how much they are actually willing
to pay for a product.
● There is even more fundamental problem with pricing to reflect customers’
willingness-to-pay.

Answer 16

Customer-driven pricing

Question 17

Five levels of the strategic pricing pyramid

Answer 17

Value creation
Price structure
Price and value communication
Pricing policy
Price level

Question 18

refers to the overall satisfaction that a customer receives from using a product or service
offering.

Answer 18

Value

Question 19

represents the total cost savings or income enhancements that a
customer accrues as a result of purchasing a product.

Answer 19

Monetary value

Question 20

refers to the many ways that a product creates innate satisfaction
for the customer.

Answer 20

Psychological value

Question 21

is calculated as the price of the customer’s best alternative
(the reference value) plus the worth of whatever differentiates the offering from the alternative
(the differentiation value).

Answer 21

Product’s total economic value

Question 22

Price setting should be an iterative and cross-functional process led by marketing that
includes several key actions:

Answer 22

1. Set appropriate pricing objectives.
2. Calculate price-volume trade-offs.
3. Estimate the likely customer response by assessing the drivers of price sensitivity that are
   unrelated to value.

Question 23

Product – cost – price – value – customers

Answer 23

Product led

Question 24

Customers – value – price – cost – product

Answer 24

Customer led

Question 25

refers to rules or habits, either explicit or cultural, that determine how a company varies
its prices when faced with factors other than value and cost to serve that threaten its ability
to achieve its objectives.

Answer 25

Pricing policy

Question 26

should be a straightforward activity.

Answer 26

Price level

Question 27

one of the most challenging tasks for marketers
because of the wide variety of product types and communication vehicles.

Answer 27

Price and Value Communication

Question 28

Most common price structure is a price per unit and is perfectly adequate for commodity
products and services.

Answer 28

Price stracture

Question 29

Alternative Approaches to Value Creation:

Answer 29

Product led
Customer led

Question 30

Value creation

Answer 30

Economic value
Offering design
Segmentation

Question 31

Price stracture

Answer 31

Metrics
Fences
Controls

Question 32

Price and value communication

Answer 32

Communication
Value selling tools

Question 33

Pricing policy

Answer 33

Negotiation tactics
Criteria for discounting

Question 34

Price level

Answer 34

Price setting

Question 35

depends on the alternatives that the customers have available to satisfy the
same need.

Answer 35

Economic value

Question 36

The value at the heart of pricing strategy is not use value, but is what economists call

Answer 36

exchange value or economic value.

Question 37

the utility gained from the product.

Answer 37

economists call this as use value