Exam 7: Pricing and Value Creation

There are four types of pricing approaches. Which of the following is not a pricing approach?

The pricing approach where prices are set based on what customers believe to offer value is called:

Sunday newspapers (in Britain, France, Thailand, Sweden) often contain numerous supplements (e.g. fashion, entertainment, property) to make the newspaper appear greater value for money. These are called:

This occurs in very large organizations where there is considerable internal dealing between different divisions of the company and across national boundaries.

Value is defined as 'the regard that something is held to deserve; importance, worth or usefulness of something; principles or standards of behaviour; one's judgement of what is important in life; the numerical amount denoted by an algebraic term; a magnitude, quantity, or number'.

These are costs which vary according to the number of units of product made or service sold.

This is the price band against which customers judge the purchase price of offerings in their own minds.

________ is an assumption that quality increases as price increases and that, in general, price reflects quality.

Fixed costs are costs that vary according to the number of units of product made or service sold. For example, with the production of Burger King cheeseburger meals, when sales and demand decrease, fewer raw goods such as cheeseburger ingredients, product packaging, and novelty items such as toys are required.

The general idea that price indicates quality assumes that the prices are objectively determined by market force. This is referred to as 'perceived value'.

This approach is fairly standard for high-technology offerings or for those offerings that require substantial research and development cost input initially.

The market penetration pricing approach is used for fast-moving consumer goods and consumer durables, where the new offering introduced is not demonstrably different from existing formulations.

These act as cues, usually indicating to a potential customer that there is a bargain to be had. Consequently this entices the customer to purchase.

A cost-oriented approach is where prices are based on price sensitivity and levels of demand.

The pricing approach where prices are set based on costs is called: