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Pricing Strategies A Marketing approach 1st edition Robert M. Schindler - Solutions
Give some examples of typical retail prices, and divide each one into its leftmost digit and its ending digits. How might the distinction between leftmost and ending digits help explain a greater sales drop when a price increases from $1.99 to $2.00 than when it increases from $1.98 to $1.99?
What should a seller want to know about the IRPs of his or her customers? How could the seller use this information?
When would it be in a seller’s interest to increase customer price-level awareness? When would it be in his or her interest to decrease customer price-level awareness?
What are standard price points? How can standard price points be used to influence the market’s response to prices?
How is price advertising likely to affect the role of price in the customer’s decision process?
Describe three methods that a seller can use to decrease customer price-level awareness.
Evaluate the following statement: The Internet makes price information more accessible and thus increases price-level awareness.
What are just-below prices? What are their effects on price-level awareness?
Under what conditions are customers most likely to use price as an indicator of product quality? How does using price to indicate quality affect customer price sensitivity?
Describe a meaning that consumers draw from a price’s ending digits that is favorable to a seller. Describe one that is unfavorable to a seller.
Distinguish between price-level knowledge and price-meaning knowledge.
What is the relationship between price-level knowledge and the market’s response to a price change?
Describe the three prominent sources of price-level knowledge.
Give an example of a research method used to measure price-level knowledge. Give an example of what has been found using this research method.
Describe how factors such as the amount of money involved, price variation over time, and price variation between brands affects price-level awareness.
Explain how price-level awareness can be affected even by products that are not purchased. Give an example of incidental learning.
How might consumers differ in their motivation to carry out price information search? How are these differences likely to affect price-level awareness?
What is a price-origin belief? Give an example of the effect such a belief could have on the customer’s price-level awareness.
A bar soap manufacturer has lowered prices twice in the past few years. From these price decreases, the manufacturer has calculated the price elasticity of the market to be –0.8. Given that the market has turned out to be so price inelastic, the manufacturer has decided to try a modest price
A popular brand of organic milk has been selling at local supermarkets for $5.99 per gallon. Recently, the one-gallon jugs (128 oz.) have been replaced by ¾-gallon jugs (96 oz.), which sell for $4.99. (a) Name and describe the pricing tactic that most likely is being used here. What is this
A large home improvement retailer has run an advertisement for a particular brand-name titanium drill bit set. The headline of the ad is “Was $19.97—Now only $14.97!” (a) What is the external reference price that is mentioned in this ad? (b) Assume that the external reference price mentioned
Consider the college that has two prices for its services. It charges list price (full tuition) to only a small portion of their students. Everyone else gets a discount (scholarship). This college does not set a low price and charge a tuition premium to those few individuals who are not star
Use the concept of framing and the prospect theory value function to explain each of the following phenomena: (a) Gamblers at casino resorts sometimes spend their winnings on lavish luxuries without much concern, considering their winnings to be “free money.” (b) A popular brand of multiple
Distinguish between price awareness and price feelings. What is meant by the phrase pain of paying?
What is an external reference price? How can sellers use external reference prices most effectively?
What might a seller do to frame a price as a gain forgone?
Describe some factors, in addition to size, that can affect the value of a perceived loss or gain.
What is the concept of equity? How does it relate to consumer judgments of the fairness of a price?
Describe some factors, other than the consumer’s impression of the seller’s profits, that contribute to judgments of price fairness.
Using the terms of perceived gains and losses, describe how dangling an offer of a discount may affect the consumer’s response to the discount.
How does seeing oneself as responsible for a perceived gain or loss affect the value of that gain or loss? Why is perceived responsibility an important factor in the consumer’s response to a discount?
What is framing? What is the relation between framing and price format?
On the graph that is used to show the prospect theory value function, what is indicated on the horizontal axis? What is indicated on the vertical axis?
Describe the Weber–Fechner Law. Give an example of it from everyday life.
What is indicated by the lines of the prospect theory value function being curved rather than straight?
What is indicated by the left-side curve of the prospect theory value function being steeper than the right-side curve?
Explain how the consumer’s IRP determines whether a price is perceived as a single loss, two losses, or a loss and a gain.
What are purchase aggregates? How might a seller use information about them?
When might it be particularly appropriate to decrease the size of a product rather than increase its price?
The managers of a company that leases trucks to shipping companies and other business customers are considering increasing their leasing fees. In order to evaluate this increase, they have asked you to estimate the price elasticity of their product based on historical data. (a) By labeling rows and
A manufacturer of fancy scented bar soaps is interested in the price elasticity shown by her popular lilac variety. She assembled data for each of the past twenty months concerning the number of bars sold, the price, and the number of retail outlets that put the lilac soap on display and then
A manufacturer of beach umbrellas is now considering changing his product€™s price for this summer€™s selling season. He would like to use an historical analysis of sales data to estimate the product€™s price elasticity. Here are the data he has collected:(a) Explain
A manager of a large chain of appliance stores is planning to conduct a pricing experiment to determine the price elasticity of the chain’s line of microwave ovens. He plans to measure sales for the month of February, raise prices by 12 percent on March 15, and then measure sales for the month of
The catalog operation of a large clothing company sends out four regular catalogs per year and one summer sale catalog. Management has recently conducted a pricing test on their line of children’s T-shirts. The test was carried out with their annual summer sale catalog. The T-shirts are usually
The marketing manager of a well-known automobile engine additive suspects that the use of an in-store display affects the price elasticity of his product. Specifically, he suspects that the presence of an in-store display increases the product’s price elasticity relative to no in-store display.
The management of Delicare, a laundry detergent designed specifically for delicate fabrics, decided to test the market’s responsiveness to price changes by hiring a market research firm to carry out an artificial-sales experiment. The market research firm intercepted 650 women in shopping malls
Describe the role of systematic marketing research in predicting the market’s price-change response.
In a sales experiment to estimate price sensitivity, what would be the DV? How might a company come up with the equivalent groups necessary to carry out such a sales experiment?
Describe how a brand price elasticity can be calculated from the results of a sales experiment.
What is a key benefit of having multiple IVs in a sales experiment? What is the main drawback of this?
What are some important strengths and weaknesses of a sales experiment?
What is a sales-surrogate experiment? What are some commonly used surrogates of naturally-occurring sales?
Why is a question to consumers such as “How much would you be willing to pay for this product?” inappropriate for a questionnaire experiment?
Describe some factors that might lead a sales-surrogate experiment to indicate more price sensitivity than actually exists? What are some factors that might lead it to indicate less price sensitivity than actually exists? How might understanding these factors be helpful to the use of
For predicting the market’s price-change response, what are the key factors determining which market research approach should be used?
Distinguish between a DV and an IV in a regression analysis. In the regression approach to predicting price-change response, why is it usually best to have multiple IVs?
Describe the data matrix for the regression approach by indicating what is represented in each of the matrix’s rows and columns.
Discuss the three ways in which the information in the data matrix must be sufficient in order to provide a reasonable estimate of the market’s price-change response.
What are the most common sources of data for the regression approach?
What is a regression coefficient? Describe the meaning of the regression coefficient of a price variable. How would you interpret the sign of a price coefficient?
Give and explain the formula for calculating a brand price elasticity from the regression coefficient of a price variable.
What are the key strengths and weaknesses of the regression approach?
Describe the essential elements in the design of a two-group controlled experiment.
Assume you are involved in price planning for a manufacturer of backpacks who sells to consumers through various channels of distribution. (a) Describe two market segments that should be charged different prices for these items. Explain why different prices would be appropriate. (b) Suggest two
A small chain of bagel shops currently prices its bagels at $0.99 apiece. The manager of the chain recognizes the value of price segmentation and is considering how he might charge lower prices to his high-volume customers. (a) Design an order-size discount pricing structure that could accomplish
A number of group-buying websites, such as Groupon and BuyWithMe, offer consumers a large discount on a popular product if enough other consumers agree to purchase the product. (a) Describe the price-segmentation fence being used by the sellers of items offered on these websites. (b) Describe an
A company sells two products, Product A and Product B. Assume that the variable costs for each product are $7. In a particular market, men and women value the two products as follows:(a) If management is considering offering a bundle containing both products, what is the maximum price that could be
Describe two important aspects of a firm’s price structure.
Explain the difference between using product features as a price-segmentation fence and offering an array of product features that are priced appropriately with respect to their VTCs.
What is a feature-dependent premium? Describe how such a premium is key to the ability of a product-enhancing feature to accomplish price segmentation.
Under what conditions might it be appropriate to use a product-diminishing feature to accomplish price segmentation?
Describe how offering two products together in a bundle can accomplish price segmentation. What conditions would be necessary for this price-segmentation fence to be effectively used?
What are the factors that may lead the best price for a product to differ between market segments?
When a product’s best price differs between market segments, why is it preferable to use price segmentation rather than to charge a single compromise price?
What is a price-segmentation fence? What are the two goals of such a fence?
Explain how a price-segmentation fence involving a customer characteristic differs from one involving a characteristic of the purchase situation.
Economists refer to price segmentation as “price discrimination.” Does this mean that every price-segmentation technique is considered to be unfair?
Explain how price segmentation is accomplished when a price is determined by negotiation.
Describe four pricing techniques that involve the use of purchase quantity as a price-segmentation fence.
What are some constraints on the use of purchase quantity as a price-segmentation fence?
A dance studio currently charges customers $25 for a half-hour dance lesson. The studio employs a large number of dance instructors who are paid only for the lessons they give and receive $10 per lesson. The studio currently spends $18,000 per month for rent and could increase its dance space by
In 1989, Sears, Roebuck and Co., then America’s largest retailer, announced it was adopting an EDLP policy. Over the next year, sales and profits dropped, and Sears returned to its previous pricing policy. What are some reasons why EDLP may have failed for Sears?
Ed Oakley is interested in expanding his successful lawn service into a neighboring town. Several competing services are well-entrenched in this town, charging $25 to $30 for each mowing of an average-sized lawn and $300 to $350 per season for fertilizing and lawn treatments. Most customers use the
Consider again the description of the eighty-room hotel in the chapter and the table in Figure 11.7. (a) Using the information in Figure 11.7, determine the maximum number of advance-purchase discounts to allow for the Monday in question if the discount price were $125 rather than $100. (b) Given
A buyer for a chain of garden stores is deciding on prices for the chain’s extensive line of potted plants. Management has indicated that the target gross margin for these items should be 40 percent. Last year, markdown reductions amounted to 17 percent of the total dollar sales revenue received
A manufacturer is about to introduce into the market a new type of upright vacuum cleaner with a patented curved handle that makes housework easier on the homemaker’s back. The limited market research available has indicated that the VTC for this product ranges from $46 to $70. If the
What is peak-load pricing? What characteristics of market demand make a service product an appropriate candidate for this price-segmentation technique?
What are trade promotions? What are two price-segmentation rationales of trade promotions?
Describe the conditions that would make the use of advance-purchase discounts appropriate.
Explain the concept of expected revenue. Describe how historical data on full-price demand can be used to calculate expected revenues.
How can expected revenue information be used to help determine the number of units that could be sold at an advance-purchase discount?
What is an historical booking curve? How can it be used in decisions concerning how many advance-purchase discounts to offer?
When an airline offers standby fares to travelers with a military or student ID, what price-segmentation fences are being used?
What are retail markdowns? How can the expected level of markdown reductions be used to calculate a product’s initial gross margin?
Explain how sequential skimming is an example of price segmentation.
What are the two main criteria for the appropriateness of sequential skimming? Why should the number of price decreases in sequential skimming be sharply limited?
Use the concepts of VTC, costs, and price sensitivity to explain why a service product’s best price is likely to be higher during periods of peak product demand.
Distinguish between capacity costs and operating costs. What is the argument against using off-peak sales to subsidize new-capacity expenditures?
Explain how high/low pricing can be an effective method to accomplish price segmentation.
What is EDLP? What are the factors that can help high/low pricing be successful in the presence of EDLP competition?
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