Chapter 10 - Pricing: Understanding and Capturing Customer Value

Which of the following statements does not apply to the description of​ prices?

A. Price is the amount of money charged for a product or a service. *B. In recent decades price factors have gained increasing importance. C. Pricing is the​ number-one problem facing many marketing executives. D. Historically, price has been the major factor affecting buyer choice. E. Price remains one of the most important elements that determine a​ firm's market share.

Which of the following statements does NOT describe​ price?

A. Price is the sum of all the values that customers give up to gain the benefits of having or using a product or service. B. Price remains one of the most important elements that determine a​ firm's market share and profitability. C. Prices can be changed quickly. *D. Price is the only element in the marketing mix that represents costs. E. Price is one of the most flexible marketing mix elements.

For streaming video companies, operating the web portal is an example of __________________ while royalties for each view is an example of ___________________.

A. a variable cost; a base cost B. variable cost; a fixed cost *C. a fixed cost; a variable cost D. a price ceiling; a price floor E. inelasticity; elasticity

If Netflix should want to charge a price premium for its streaming service, it would need to employ a __________________ strategy by adding content or features that others simply can't match.

A. cost based B. variable price *C. value-added D. competition- based E. good-value

In the past, Netflix's superior library of titles allowed the company to freely engage in value-based pricing. Now, other companies like Disney and Apple are posing a significant threat to Netflix's dominance. This may require Netflix to shift to a strategy of _________________.

A. differentiated pricing B. cost-plus pricing C. break-even pricing *D. competition-based pricing E. good-value pricing

With the influx of highly competitive video streaming options, there is the credible threat of video streaming services becoming commodities. This has the effect of making demand for streaming video ________________.

A. explode B. invert *C. elastic D. inelastic E. exceed supply

For Amazon, Disney, and Apple, streaming video is a small component of a big portfolio of businesses. This puts pressure on Netflix as it relies on streaming video entirely in order to _______________________.

A. grow its portfolio of content B. outdo the competition C. capture market share *D. generate profits E. continue as market leader

The goal of the​ competition-based pricing is​ __________.

A. to increase​ customers' price perceptions B. to increase value and lower prices to beat competition C. to match​ competitors' prices *D. not to match or beat​ competitors' price E. to beat​ competitors' prices

Under​ __________, the market consists of many buyers and sellers trading in a uniform commodity.

*A. pure competition B. target competition C. oligopolistic competition D. monopolistic competition E. a pure monopoly

​__________ uses​ buyers' perceptions of value as the key to pricing.

A. Good-value pricing B. Cost-based pricing C. Value-added pricing D. High-low pricing *E. Customer value-based pricing

​__________ reverses the usual process of first designing a new​ product, determining its​ cost, and then​ asking, "Can we sell it for​ that?"

A. Good-value pricing B. Value-added pricing *C. Target costing D. Cost-based pricing E. Customer value-based pricing

Fixed Costs (Overhead)

Costs that do not vary with the quantity of output produced

Value-Based Pricing versus Cost-Based Pricing

Value-based pricing reverses this process. The company first assesses customer needs and value perceptions. It then sets its target price based on customer perceptions of value.

Demand Curve

a curve that shows the number of units the market will buy in a given time period at different prices that might be charged

Price Elasticity

a measure of the sensitivity of demand to changes in price

Cost-Plus Pricing (Markup Pricing)

adding a standard markup to the cost of the product

Value Added Pricing

attaching value-added features and services to differentiate a company's offers and charging higher prices

Variable Costs

costs that vary with the quantity of output produced

Good Value Pricing

offering just the right combination of quality and good service at a fair price

Target Costing

pricing that starts with an ideal selling price, then targets costs that will ensure that the price is met

Customer Value-Based Pricing

setting price based on buyers' perceptions of value rather than on the seller's cost

Break - Even Pricing (Target Return Pricing)

setting price to break even on the costs of making and marketing a product, or setting price to make a target return

Competition-Based Pricing

setting prices based on competitors' strategies, prices, costs, and market offerings

Cost Based Pricing

setting prices based on the costs of producing, distributing, and selling the product plus a fair rate of return for effort and risk

Experience Curve (Learning Curve)

the drop in the average per-unit production cost that comes with accumulated production experience

Pure Competition

the market consists of many buyers and sellers trading in a uniform commodity, such as wheat, copper, or financial securities

Monopolistic Competition

the market consists of many buyers and sellers trading over a range of prices rather than a single market price

Oligopolistic Competition

the market consists of only a few large sellers

Pure Monopoly

the market is dominated by one seller

Total Costs

the sum of the fixed and variable costs for any given level of production