Customer Value in Pricing Strategy

A. Economics Cost, Margin, Supply & Demand, Incentives

B. Customer Value, Willing to Pay, Segment, Purchase Decisions
C. Competitor Market Share, Market Price, Next Best Alternative, Industry Dynamics

Week 1 Practice Quiz: Customer Value Basics

1. Juanita likes to have a smoothie every morning before work. She has been buying
them at a local cafe, but she'd like to save money by making them at home. She needs
to buy the necessary equipment and ingredients. Which of the following purchases will
most likely have the highest Involvement Process (Mental Process/Energy)?
 Blender
 Fruit
 Soy milk
 Yogurt

2. Christine and Paolo are opening their own dental practice. They are on a tight
budget because they are making many purchases to set up the office. Which of the
following purchases would they most likely spend less money on?
 Office signage outside the building
 Lab coats and staff uniforms
 Table and chairs for client consulting room
 Coffee pot in the staff-only workroom

3. A family is building a new shelving system for their family room. They've gone to the
hardware store to buy the necessary materials, but the errand has taken much longer
than expected. The kids are cranky and hungry. Luckily, there are beverages and
energy bars available for sale near the checkout. Despite the fact that the individual
prices of these items are higher than the family usually spends when they buy larger
quantities at other stores, the parents quickly buy each child a snack so they can finish
shopping. What type of decision-making process best describes the snack purchase?
 High involvement, high visibility
 High involvement, low visibility
 Low involvement, high visibility
 Low involvement, low visibility

4. In addition to setting up the office for their new dental practice, Christine and Paolo
also need to purchase an electronic dental record software system. The office has
allocated a relatively small amount for this purchase as it needs a basic software
program that will only be used by a small staff, and the software does not need to
include scheduling or other advanced functionality. How would you best describe the
likely purchasing process for the software?
 Christine and Paolo may be prepared to make many trade-offs in order to meet a
certain price.
 Christine and Paolo will be looking for deals for repeat purchases.
 Christine and Paolo won't invest much time researching prices or product features.
 Christine and Paolo most likely wish to project a certain image and influence people's
perceptions of their practice.
5. Selena's family is purchasing a recreational travel trailer for a trip to the western
United States. How could Technical Value Drivers are product features that provide
technical benefits and are often connected to functional and emotional benefits.
increase the enjoyment of the trip for Selena and her family?
 Selena will be blogging about the trip on her company's website, and one brand trailer
has particularly strong brand recognition and is well-perceived by her followers.
 Selena discovers that one brand of trailer requires no assembly of the interior
cabinets--the kitchen is set up and ready to use immediately.
 Selena learns about the extra large fresh water tank available in one brand of trailer.
 Selena discovers on message boards that owners report few repairs for one brand of
trailer.

6. How should businesses best use customer value to differentiate to Customer

Segments?
 Market and sell to groups of customers with similar wants and needs.
 Cater to individual customer values.
 Find the average customer value and set prices accordingly.
 Price just above a customer's willingness to pay.

7. Consider the demand curve of a popular e-reader. How would you expect the
demand curve to change when the purchasing power of its market population goes
down?
 The demand curve will shift left because people in the market population will be less
able to pay for the e-readers.
 The demand will go down as the price goes down.
 The demand curve will shift right because the e-reader's market population grew.
 There should be no change.
Week 1 Practice Quiz: Customer Value in Developing
Economies
1. Which of the following best describes a company that is well-positioned to expand
into a global market and sell to consumers at the bottom of the income inequality
pyramid?
 The company's products require high overhead costs.
 The company produces a low volume of products.
 The company's leaders need to see the global market effort succeed quickly in order
to support the effort.
 The company has very flexible structures and procedures.

2. You are on a team designing a marketing campaign for a product that will serve
consumers at the bottom of the income inequality pyramid in Guatemala. Your boss
has challenged everyone to come up with a creative and innovative strategy. Which of
the team's suggestions do you think will be most successful?
 Keep features that made the product a success in domestic launches.
 Recruit Guatemala's most famous futbol player to demonstrate the product.
 Avoid customer segmentation in international markets.
 Create a flashy showroom to inspire buzz.

3. You've just been hired at a company that has launched several successful global
market campaigns. One of your first tasks is to analyze previous global market
launches serving consumers at the bottom of the income inequality pyramid. Which of
these strategies do you conclude helped make previous global market product rollouts
successful?
 Avoid local competition by not marketing at the store level.
 Avoid using celebrities in advertisements and local campaigns.
 Create educational packets and other promotions to explain how the new product is
beneficial to consumers.
 Provide demonstrations and free samples at small community events, such as local
fairs.

4. Which of the following is most important for pricing when serving consumers at the
bottom of the income inequality pyramid?
 Engaging aggressively with local competition
 Quickly turning a profit
 Matching customer value drivers and price
 Setting the lowest price compared to the next best alternative

Week 1 Quiz: Understanding Customer Value

1. Gretchen and Beien have purchased their first house and are thrilled to have a
laundry room after using a public laundromat for years.

Which of the following laundry room purchases will most likely be a low involvement
process?
 Laundry detergent

Which of the following laundry room purchases will most likely be a high involvement
process?
 Washer
2. Antonia has joined a new gym where she frequently sees clients, co-workers, and
industry peers, and she has many opportunities to network.

Which of the following athletic clothing or gear purchases would she be more likely to
spend more on?
 Athletic clothing

Which of the following athletic clothing or gear purchases would she most likely spend
less money to acquire?
 Socks

3. A group of new roommates has driven two hours to a popular store that sells ready-
to-assemble furniture.

They've planned and budgeted carefully because they need to buy enough furniture
and goods to furnish their living room and set up their kitchen. These purchases are
very important because they'll be hosting large study groups and preparing meals with
frequent guests in these rooms. What type of decision-making process best describes
these purchases?
 High involvement, high visibility

After they finish shopping, they decide to buy a few snacks to eat in the car on the way
home. What type of decision-making process best describes this purchase?
 Low involvement, low visibility

4. You are the owner of a closet design service, catering to buyers who have a broad
range of consideration sets and product requirements. How might you best price and
market closet systems to allow trade-offs?
 Sell a product line of closet systems
 Minimize potential trade-offs buyers have to make by focusing on a very narrow
consideration set
 Appeal to buyers whose self-image is tied to having a unique and highly specialized
closet
 Minimize the amount of research customers are able to do on your products and
services before they come to the store

4. You are the owner of a furnishing store appealing to buyers who have a broad range
of consideration sets and product requirements. How might you best price and market
furniture to allow trade offs?
 Avoid selling product lines of furniture.
 Minimize potential trade-offs buyers will have to make by focusing on a very narrow
consideration set.
 Maximize potential customers' ability to research and find the prices of products you
sell in your store.
 Appeal to buyers whose self-image is tied to having a unique and highly specialized
furniture.

5. Melika has an internship at an office downtown. She enjoys eating lunch out twice a
week, but her lunch break is short and she needs to be careful about keeping costs
down. How would you best describe her purchasing process?
 Melika may be looking for lunch specials or collect coupons for making frequent,
habitual purchases.
 Melika wishes to project a certain image and influence people's perceptions of herself
by her lunch decisions.
 Melika is a buyer who will spend a significant amount of time conducting research into
lunch prices and options.
 The price Melika is willing to pay for lunch will be significantly impacted by her
consideration set.
5. Loren is purchasing a gift to present to her father at a celebration of his career and
accomplishments. Expectations are high because there will be many influential guests
and the event will be featured in a magazine. How would you best describe Loren's
likely purchasing process?
 Loren will be looking for deals for repeat purchases.
 Loren most likely wishes to project a certain image and influence people's
perceptions of herself.
 Loren won't invest much time researching prices or product features.
 Loren will be prepared to make many trade-offs in order to meet a certain price.

6. Selena's family is purchasing a travel trailer for a trip to the western United States.
What would most likely make Selena feel that she got the best deal from the seller?
 The functional value drivers were maximized.
 The emotional value drivers were enhanced during the buying experience.
 The technical value drivers were greater than the other drivers.
 The customer surplus was large.

6. Selena's family is purchasing a recreational travel trailer for a trip to the western
United States. Which of the following experiences in the buying process would affect
the emotional value drivers for Selena and her family?
 Selena learns about the premium storage space available in one brand of trailer.
 Selena discovers that one brand of trailer tows particularly well.
 Selena discovers on message boards that owners report few repairs for one brand of
trailer.
 At a sales event, Selena and her family meet owners of the trailer they are thinking of
buying and have their picture taken sitting in the trailer.

7. Patrick and Jen own an indoor moon bounce facility.

Can you predict the most likely outcome if they sell tiered tickets that offer increasing
access to additional play structures and a highly coveted express line option?
 Customers will find that their customer values are no longer met by the tiered ticket
system.
 Most customers will purchase the lowest price tickets.
 The price fence will effectively prevent certain customer groups from purchasing
tickets.
 Many customers will pay more for the additional incentives offered in the highest
ticket tiers.

They currently offer a discount for a group of five or more people, and there are few
restrictions on when or how the passes are used or who is considered a group. How
might the group discount create a problem Patrick and Jen would rather avoid?
 Group discounts don't offer a way for Patrick and Jen to create a price fence.
 The price fence will effectively prevent certain customer groups from purchasing
tickets.
 Customers might trade down and register as a group in order to take advantage of
the discount.
 Individual customers find that their customer values are no longer met.

8. A company is reviewing its marketing and pricing strategies to see if it is doing

enough to differentiate customer value segments. They offer five types of digital
cameras and research shows that most consumers are purchasing the two lowest
priced cameras in the product line. These camera models include the most coveted
features and are popular with a wide range of consumers.

Which of the following strategies might best help the company manage what
customers pay by segment?
 Remove features from the lowest priced camera models.
 Limit features for its higher priced model cameras.
  Make no changes to the product line, as two models are quite popular with
consumers.
 Increase the number of retail and online resources where the cameras can be
purchased.

Which of the following strategies might best help the company manage what
customers pay by segment?
 Make one popular camera model available only at a membership-based warehouse
chain and think about how to further differentiate its product line.
 Add more features to the lowest priced camera models.
 Limit features for its higher priced model cameras.
 Make no changes to the product line, as the two models are quite popular with
consumers.

9. How would the release of a new size cell phone by a popular provider most likely
impact the demand of phone cases in that size?
 Demand for the phone cases will be highest at the choke price.
 The demand will go up as the price goes up.
 There should be no change.
 Demand for the phone cases will go up as demand for the phones increases.

9. Consider the demand curve of a new fitness monitor. How would you expect the
demand curve to change when its market population grows?
 The demand will go down as the price goes down.
 There should be no change.
 The demand curve will shift left as the market population grows.
 The demand curve will shift right as the market population grows.

10. Which of the following best describes a company that is well-positioned to expand
into a global market and sell to consumers at the bottom of the income inequality
pyramid?
 The company produces a low volume of products.
 The company is prepared to spend a lot of time expanding into a global market.
 The company's products require high overhead costs.
 The company has very formalized structures and procedures.
 The company's supply chain costs could be decreased.
 The company's leaders need to see the global market efforts succeed quickly in order
to support the effort.

11. You are part of a team designing and marketing a new product that will launch in
South America. Your company's last global market campaign targeting consumers at
the bottom of the income inequality pyramid failed dismally and the pressure is on to
be successful this time. How will you avoid errors from past launches?
 Avoid customer segmentation in international markets.
 The most important goal is to create an inexpensive and affordable product.
 Identify product design features, such as the name, packaging, and composition, that
meet the needs of consumers.
 Separate marketing and design strategies.

11. You've just been hired at a company that has launched several successful global
market campaigns. One of your first tasks is to analyze previous global market
launches targeting consumers at the bottom of the income inequality pyramid. Which
of these strategies do you conclude helped make previous global market product roll
outs successful?
 Avoid using celebrities in advertisements and local campaigns.
 Avoid small community events, such as local fairs.
 Create educational packets and other promotions to explain how the new product is
beneficial to consumers.
 Make improvements at local stores, such as painting or other enhancements, that
include product advertisements.
12. An international coffee corporation is expanding its coffee shops into developing
economies. Based on your knowledge of Tata and Nano, which of the following will
most likely be successful for image-conscious consumers who wish to make a coffee
shop purchase?
 A premium blend of coffee in a 10 oz size company logo cup for $1.25.
 A premium blend of coffee in a 20 oz size company logo cup for $2.50.
 A generic blend of coffee in a plain 12 oz size cup for $.50.
 A generic blend of coffee in a plain 16 oz size cup for $1.00.

12. Talk Now is creating a mobile phone plan for developing economies. Based on your
knowledge of Tata and Nano, which of the following will most likely be successful for
image-conscious consumers who wish to purchase a mobile phone plan?
 A basic cell phone with limited talk and text for $5 month
 A basic cell phone with unlimited talk and text for $10 month
 A smart phone paired with limited talk, text and data for $20 month
 A smart phone with unlimited talk, text and data for $30 month

Week 2 Practice Quiz: Pricing to the Demand Curve

1. A business is trying to determine how many customer segments they can serve.
Which of these indicates they may have difficulty serving a particular customer
segment?
 Through surveys, interviews, and other means, the company knows what drives value
for their customers.
 The business is small and new to negotiations with channel partners.
 The business has established a marketing and communication plan to reach
customers.
 The company has the capabilities and assets to deliver on the value proposition.

2. A company has determined that it needs to focus on one customer segment rather
than trying to serve multiple customer segments. How could they still optimize their
business?
 Maximize surplus in the demand curve.
 Identify and then focus on the premium segment on a demand curve.
 Branch out to un-served demand in segments adjacent to their target segment on the
demand curve.
 Find ways to differentiate their products and pricing within their segment.

3. A company that designs and manufactures mid-century modern furniture is

analyzing the features and prices of its product line. If they also need to understand
hot price points in a market, which tool will offer the best insight?
 Price Piano
i. Determine Price Range
ii. Map Product Line-Up
 iii. Find (a) “Hot” Price; (b) Open Price Opportunity

4. A company that designs skateboards for novice to advanced users has just done a
price piano analysis comparing their products to their major competitors. How might
they react if they find they have a jump in their prices from $25 to $75--which analysis
shows are both market hot price points--but see that many of their competitors have a
skateboard in that range?
 Consider adding a new offering in that range.
 Keep away from that range as it is already occupied by other retailers.
 Find a point of interest where they can sell their $25 board for more.
 Lower the price of the $75 board.

5. What can companies learn about their price setting approach by comparing price
and cost on a Price Ladder?
 Looking at the plots of price and cost can reveal if a company is relying too much on
cost-plus pricing.
 Studying both cost and price helps companies understand the relationship between
price and features.
 Plotting the costs helps companies identify price gaps that exist between market
competitors.
 Examining cost can help companies discover if their internal view of relative value
matches the market's view.

Price Ladder: Product & Price Differentiation

6. If a company has created a very steep downward Incentive Curve, what does this
imply about their product?
 When consumers buy a larger size package, they consume more of the product.
 When consumers buy a larger size package, they still consume about the same
amount of the product.
 When consumers buy a larger size package, they consume less of the product.
 Consumers don't like one of the package sizes.

Incentive Curve: Package Size & Price per Use

Week 2 Practice Quiz: Pricing New Products
1. Your team is choosing a new project management software system and has
developed a list of the necessary specifications and technical requirements of the
software. In this business to business transaction, how will your team most likely
analyze the price of possible software solutions?
 Focus on the initial cost in today's money rather than guessing future expenses.
 Maximize the surplus.
 Avoid an investment mindset.
 Focus on the product when considering costs, and avoid considering other factors
such how it will be to work with the provider.

2. When thinking about how to Use Value-Based Pricing for a new product, how should
a company best get started?
 Develop customer profiles and define the target segment.
 Find the sum of the value drivers.
 Identify the customer's value drivers.
 Determine what product customers will most likely consider to be the next best
alternative.

3. Can you predict a likely outcome if a company prices a product above the
indifference price point?
 A price war could be triggered.
 There will be absolutely no value in this price.
 There will be little demand.
 The cost-plus price will be achieved.

Week 2 Practice Quiz: Pricing Based on Economics

and Customer Value
1. How can you find the optimal price for a segment when you know the demand
function and marginal cost?
 Find the quantity where marginal revenue is equal to marginal cost. Determine the
price defined by the demand curve at that quantity.
 Calculate the revenue.
 Multiply price by quantity.
 Find the inverse demand function.
Week 2 Quiz: Implementing Value-based Pricing
1. FitStyle, a company that makes stylish and affordable athletic shoes, is trying to
determine how many customer segments they can serve. Which of these indicates they
may have difficulty serving a particular customer segment?
 The company has ideas for stretching the brand across value and premium
segments.
 The company has the capabilities and assets to deliver on the value proposition.
 Through surveys, interviews, and other means, the company knows what drives value
for their customers.
 The business has established a marketing and communication plan to reach
customers.

Which of these indicates they may have difficulty serving a particular customer segment?
 The company knows the type of features that drive value for customers and they are
trying to develop the capabilities and assets to provide the features.
 The business has enabling economics.
 Through surveys, interviews, and other means, the company knows what drives value
for their customers.
 The business has established a marketing and communication plan to reach
customers.

2. FitStyle, a company that makes stylish and affordable athletic shoes, has determined
that it needs to focus on one customer segment rather than trying to serve multiple
customer segments.
How could they still optimize their business?
 Maximize surplus in the demand curve.
 Identify and focus efforts on a single product that will appeal to the mass segment.
 Customer surveys and interviews suggest that customers would be willing to buy
multiple pairs of athletic shoes if they liked more than one color and pattern
combination, so FitStyle should try to differentiate their products within their target
segment.
 Branch out to un-served demand in segments adjacent to their target segment on the
demand curve.

 FitStyle should try to differentiate prices for their shoes based on features such as
weight, support, and footbed cushioning.
 Optimize by pricing just above customers' willingness to pay.
 Identify and focus efforts on a single product that will appeal to the mass segment.
 Branch out to un-served demand in segments adjacent to their target segment on the
demand curve.

3. A home baker is transitioning to selling her baked goods to retail stores. She has
done some research on what similar sellers are offering, but she needs to figure out
the best package sizes and prices for her cookies and scones. Which tool will offer the
best insight?
 Incentive Curve

3. A company that designs and manufactures desk organizers and accessories is

analyzing the features and prices of its product line. They want to compare these to the
product prices and features of the main market competitors. Which tool will offer the
best insight?
 Price Ladder
4. Imagine you work at Glow, a company that sells glow in the dark products such as
glow sticks, wands, and accessories. Your team has created a price piano in order to
better understand hot price points in the market. Which of the following actions
represents the best next step based on the results of the price piano?
 Price gaps show you need to better understand the relationship between product
prices and features.
 There are open price points, so you'll use the results to determine new package sizes
and pricing structures.
 You see you have the lowest price point in the market and you plan to lower even
further.
 There are hot price points in the market that aren't covered by your product line, so
you'll decide if you want to match or undercut these prices.
 Competitors are varying their prices for points of interest sales, such as fairs,
concerts, and other events, so your team is going to consider new prices for your
comparable locations.

5. FitStyle, a company that makes stylish and affordable athletic shoes, is thinking of
differentiating its shoes based on weight, support, and footbed cushioning. They've
made a price ladder to compare their current product offerings and prices to their main
competitors.
What data would show where FitStyle may need to add a product offering?
 FitStyle's mid-level shoe option is priced $6 higher than all of their competitors.
 There is a $35 gap between FitStyle's least and most expensive shoe models, while
their competitors have an offering in that price range.
 FitStyle's least expensive shoe is priced $5 lower than all of their competitors.
 When plotting costs, FitStyle is using some customer value-based pricing strategies.

What data would show that FitStyle may need to defend a unique market position?
 FitStyle's mid-level shoe option is priced $6 higher than all of their competitors.
 When plotting costs, FitStyle is using some customer value-based pricing strategies.
 FitStyle's least expensive shoe is priced $5 lower than all of their competitors.
 There is a $35 gap between FitStyle's least and most expensive shoe models, while
their competitors have an offering in that price range.

6. Your team at Glow, a company that sells glow in the dark products such as glow
sticks, wands, and accessories, is looking for ways to optimize prices on glow
products sold at concert venues.
How could an incentive curve show your team that you should consider some changes
to price or unit sizes?
 The slope of your popular glow stick packages goes down between each package
size.
 Sales of your necklace and bracelet glow packs have a steep downward slope as
package sizes get larger.
 Glow charm accessories, an add-on feature for your necklaces, don't have the same
downward slope trajectory as other items in the product line.
 An incentive curve comparison shows your new cat ear glow headbands, which are
rated more favorably by consumers, are priced higher than your rival's glow
headbands.

 Sales of your necklace and bracelet glow packs have a steep downward slope as
package sizes get larger.
 The slope of your popular glow stick packages goes down between each package
size.
 Glow charm accessories, an add-on feature for your necklaces, have the same
downward slope trajectory as other items in the product line.
 Your new cat ear glow headbands are rated more favorably than your rival's plain
glow headbands, and looking at the incentive curve comparisons your price points
are very similar.
7. Your team is choosing a new project management software system and has
developed a list of the necessary specifications and technical requirements of the
software. In this business to business transaction, how will your team most likely
analyze the price of possible software solutions?
 Minimize the surplus.
 Consider the total cost of ownership, including maintenance and replacement parts.
 Focus on the product when considering costs, and avoid considering other factors
such how it will be to work with the provider.
 Avoid an investment mindset.

8. Your company sells computers and other digital devices, and it is branching out to
televisions now too. You are on the pricing team and need to find a value-based price.

How could you best define your target segment?

 Focus solely on your television specifications and potential consumers.
 Identify your mass segment and avoid investing time in developing individual
customer profiles.
 Identify and find the sum of all of the customer value drivers for the television.
 Visit stores, interview customers as they make purchase decisions, and conduct
quantitative surveys to understand both consumers and businesses.

You've identified the next best alternative, which has comparable features except your
television won't come with a remote control. Instead, you'll provide an app that allows
customers to use their smartphones as a remote. As a new industry leading feature,
the app would likely be a positive customer value driver, and your company will save
money since you won't have to produce remote controls. Since this is a new feature,
how could you most successfully identify a reference price point?
 Identify the production savings and the increased customer value to build a
constructive next best alternative price
 Find the sum of the value drivers.
 Match the reference price to the market leader's price.
 Identify the second most likely offering in your new product line.

9. Your pricing team for a new line of televisions has found the justifiable price range
between the cost of the television and the indifference price point.

How could you further narrow that range to find a value-based price?
 Narrow the justifiable price range to the most likely price range.
 The most optimal pricing point is the reference price point.
 Find the minimum margin price.
 Conduct a conjoint analysis.

Now that you have found the indifference price point, what additional technique could
you use to test the profitability of this price point?
 Calculate the profit maximum price point using gross margin price data.
 Conduct a conjoint analysis.
 Find the minimum margin price.
 The most optimal pricing point is the reference price point.
10. How can you find the optimal price for a segment when you know the demand
function and marginal cost?
 Find the quantity where marginal revenue is equal to marginal cost. Determine the
price defined by the demand curve at that quantity.
 Calculate the revenue.
 Multiply price by quantity.
 Find the inverse demand function.

10. How can you find the overall profitability for a segment when you know the demand
function and marginal cost?
 Find the quantity where marginal revenue is equal to marginal cost. Determine the
price defined by the demand curve at that quantity.
 Find the inverse demand function.
 Multiply the margin by quantity.
 Multiply price by quantity.

11. Which of the following best describes a company that is well-positioned to expand
into a global market and sell to consumers at the bottom of the income inequality
pyramid?
 The company's supply chain costs could be decreased.
 The company has very formalized structures and procedures.
 The company produces a low volume of products.
 The company's leaders need to see the global market efforts succeed quickly in order
to support the effort.

11. A group of new roommates has driven two hours to a popular store that sells ready-
to-assemble furniture. After they finish shopping, they decide to buy a few snacks to
eat in the car on their drive home. What type of decision-making process best
describes this purchase?
 Low involvement, low visibility

12. You've just been hired at a company that has launched several successful global
market campaigns. One of your first tasks is to analyze previous global market
launches targeting consumers at the bottom of the income inequality pyramid. Which
of these strategies do you conclude helped make previous global market product roll
outs successful?
 Make improvements at local stores, such as painting or other enhancements, that
include product advertisements.
 Avoid small community events, such as local fairs.
 Create educational packets and other promotions to explain how the new product is
beneficial to consumers.
 Avoid using celebrities in advertisements and local campaigns.

12. A company is reviewing its marketing and pricing strategies to see if it is doing
enough to differentiate customer value segments. They offer five types of digital
cameras and research shows that most consumers are purchasing the two lowest
priced cameras in the product line. These camera models include the most coveted
features and are popular with a wide range of consumers.
Which of the following strategies might best help the company manage what
customers pay by segment?
 Make one popular camera model available only at a membership-based warehouse
chain and think about how to further differentiate its product line.
 Add more features to the lowest priced camera models.
 Limit features for its higher priced model cameras.
 Make no changes to the product line, as the two models are quite popular with
consumers.
Week 3 Practice Quiz: Obtaining WTP from Surveys
1. Your team needs to gather information on customers' willingness to pay for a new
sports drink. Which of these would be a concern you'd have about the effectiveness of
conducting a survey?
 Your team needs to consider price as well as many other product attributes.
 Your team doesn't have a lot of time to gather data.
 Your team has a small budget.
 Your team has a lot of resources available to gather information.

2. Your company has created a new sports drink. You are going to conduct a survey to
measure customers' willingness to pay. Which of the following would be the best
question to include in your survey?
 At what price would this drink be so inexpensive that you would doubt its quality?
 How much would you pay for this drink?
 How much would you pay for this drink if it had more electrolytes than any of the
popular brands on the market?
 Would you pay more for this drink if it had all organic ingredients?

3. Your company has completed its survey on its new sports drink. How could it
calculate the potential profit at each price point?
 Multiply the margin by the cumulative percentage of people willing to pay a certain
price.
 Find the overall percentage of respondents willing to pay each price point.
 Find the sum of the percentage of people who find the price is not too low and the
percentage of people who find the price is too high.
 Subtract the cost from the price.

4. Your company has completed its survey on sports drinks. How would you interpret
the results below?
 The optimal price is $3.50.
 The optimal price is $4.
 The optimal price is $4.50.
 The optimal price is $6.

Week 3 Case Quiz: Adios Junk Mail

1. Based on your analysis of the data in the case worksheet, what is the price that the
highest percentage of consumers think is okay?
 $10
 $26
 $32
 $49

2. Based on your analysis, how many customers would Adios have if they keep their
price at $15 per year?
 538
 5,380
 26,900
 538,000

3. Based on your analysis, at what price would Adios make the most profit?
 $18
 $35
 $49
 $51

4. How do you think Adios should price its service?

  Increase what they're currently charging, but not to the price indicated by survey data
analysis
 Increase the price to the maximum indicated by the surveys to optimize profits
 Decrease the price to maximize sales and bring in more customers
 Keep the price the same because the product is performing well

Week 3 Practice Quiz: Conjoint Analysis

1. What types of products and services are less suited for Conjoint Analysis?
 Products or services that require customers to make trade-offs
 Products or services that require emotional decisions
 Products or services with many complex parts, such as service agreements, product
efficiency, brand recognition, and historical product success
 Products and services that have clear and distinct attributes

2. You are reviewing some possible questions for an upcoming Conjoint Analysis.
Which of the following would you leave out of the analysis?
 Which of these three products do you like best?
 What are your ideal product specifications?
 How old are you?
 What is your median household income?

3. Which of these product descriptions best designate attribute levels for a conjoint
analysis of winter coats?
 800-fill down
 Lightweight
 All-weather
 Easy care

4. How can you use conjoint analysis output data to identify attribute trade-offs
customers will make?
 Find the sum of the utilities for each product.
 Calculate the spread between the highest and lowest preferred level of an attribute.
 Find and compare the sum of the utilities for the two products being compared.
 Compare the difference between the two attributes that a customer could choose.

5. Which of the following would you be unable to answer by analyzing conjoint

analysis output data?
 How much more will customers be willing to pay if two features not included in the
conjoint analysis attributes are added to a product?
 How much will individuals be willing to pay we increase the sun protective factor of
our hats by 10%?
 How much will a certain customer segment be willing to pay if we include 4K ultra
high definition in our televisions?
 How much will customers be willing to pay if we fill our coats with 15% less down?

6. Specialized conjoint analysis software can do many types of propensity modeling.

How could the software best be used in this application?
 Find the likelihood that an individual would buy a product with specified attributes
 Predict the market share of an individual product across a broad number and type of
industries
 Predict market share in a highly volatile market
 Calculate changes in market share for very competitive markets
Week 3 Quiz: Measuring Customer Preferences
1. Imagine you've just joined a company that is setting prices for a new product and
needs to measure willingness to pay. Why might you try to convince your team to
conduct a survey?
 Your team has a lot of resources available to gather information on customer
preferences.
 Your team needs to consider price as well as many other product attributes.
 Your team has a lot of time to gather data.
 Your team doesn't have a large budget for gathering information.
 Your team needs some information quickly.

2. You work for a company that has created wooden blocks based on famous
architectural sites. You are going to conduct a survey to measure customers'
willingness to pay. Which of the following would be the best question to include in your
survey?
 How much would you pay for these blocks?
 Would you pay more for these blocks if they were hand painted?
 How much would you pay for these blocks if they included a wooden storage box?
 At what price would these blocks be so expensive that it wouldn't be worth it to buy
them?
 At what price would these blocks be so inexpensive that you would doubt their
quality?

3. Your company has completed its survey on wooden blocks based on famous
architectural sites. How would you interpret the results below?
 The optimal price is $40.
 The optimal price is $45.
 The optimal price is $50.
 The optimal price is $75.

3. Your company has completed its survey on wooden blocks based on famous
architectural sites. Analyzing the results below, how could you explain why the price
that the maximum number of respondents chose isn't the optimal price?
 That price has higher costs.
 That price won't cover the costs.
 That price doesn't have the highest margin.
 That price doesn't maximize profits.

4. Your team needs to gather information on your target segments' willingness to pay
for leather ankle boots. What would be the best way to get this information?
 Administer a survey because it is important to simulate and consider the store
shopping experience.
 Conduct a survey because you only need price preferences plus your own data on
cost.
 Do a conjoint analysis so you can consider price plus the warmth, comfort, and other
attributes of the boots.
 Do a conjoint analysis because you need to understand which features of the boots
consumers are willing to trade off.
4. You work for a performing arts center that is a venue for concerts, plays, dance
performances, and other events. The owners are considering the possibility of creating
annual season passes in addition to the single performance tickets currently offered.
How could you best find out your target segments' preferences and willingness to pay
for these annual tickets?
 Administer a survey because it is important to understand the customer experience.
 Conduct a survey because you can directly ask customers what they'd be willing to
pay for the annual season passes and what they would think of that type of access.
 Do a conjoint analysis because you don't have a large budget or much time to
prepare your proposal.
 Do a conjoint analysis so you can consider price plus attributes of the season passes
such as preferences for seating levels, additional access to private areas of the
facility, and meals and beverages.

5. Conjoint analyses are done in a variety of business applications. Which of the

following products would be most appropriate for a conjoint analysis?
 Clothing
 Personalized jewelry
 Computers
 Restaurants

 Image purchases
 Purchases requiring trade-offs and more complex decisions
 Impulse buys
 Emotional purchases

6. Which of these product descriptions best designate attribute levels for a conjoint
analysis of sheets?
 Long-staple Egyptian cotton
 Generously cut
 Soft sheets
 Safe and environmentally friendly materials

 Light bulb with an 11,000 hour lifespan

 Light bulb that emits soft light
 Energy-efficient light bulb
 Bright light bulb

7. Take another look at the conjoint analysis output data on golf balls. Which of these
best describe the product customers would prefer between a High Flyer ball that
travels 15 yards farther than the average ball and costs $6.99 per pack and a Magnum
Force ball that travels 10 yards farther than the average ball and costs $4.99?
 The High Flyer ball with those attribute levels has an overall utility of 1.14.
 Customers prefer the High Flyer ball that travels 15 yards farther the average ball and
costs $6.99 per pack.
 Customers prefer the Magnum Force ball that travels 10 yards farther the average
ball and costs $4.99.
 Customers find that price is the most important attribute when comparing golf balls
with these product attributes.

7. Take another look at the conjoint analysis output data on golf balls. Which of these
best describe the product customers would prefer between a High Flyer ball that
travels 15 yards farther and costs $4.99 per pack and a Magnum Force ball that travels
10 yards farther and costs $6.99?
 The High Flyer ball with those attribute levels has an overall utility of 1.62.
 Customers prefer the Magnum Force ball that travels 10 yards farther than the
average ball and costs $6.99.
 Customers prefer the High Flyer ball that travels 15 yards farther than the average
ball and costs $4.99 per pack.
  Customers find that price is the most important attribute when comparing golf balls
with these product attributes.

8. Imagine you work for a company that is just starting to produce golf balls. You have
the conjoint analysis output data below, and you are trying to determine just how
important price is to customers. What is the decision weight of price?
 24%
 43%
 46%
 70%

8. Imagine you work for a company that is just starting to produce golf balls. You have
the conjoint analysis output data below, and you are trying to determine just how
important brand recognition is to customers. What is the decision weight of brand?
 24%
 32%
 33%
 56%

9. Imagine you are on a team that is designing reusable water bottles. You are currently
thinking of a model that has a capacity of 24 oz, keeps beverages cold for 12 hours,
and costs $32.

Use the conjoint analysis output data below to find customers' increased willingness
to pay for a water bottle that keeps beverages cold for an 6 additional hours.
 57%
 0.16
 $7.41
 $7.82

Use the conjoint analysis output data below to find customers' increased willingness
to pay for a 6 oz increase in the capacity of the water bottle.
 0.17
 60.7%
 $7.46
 $7.89

10. Your team is in the middle of a debate about whether or not they can use demand
forecasting to predict the probability that an individual will buy your new wall-mount
bottle opener. You've been listening carefully during the meeting but haven't weighed
in yet. Which of the following points convinces you that your team shouldn't use
demand forecasting?
 The product development time for the bottle opener is very short.
 Your team isn't expecting much of a competitive market reaction.
 You are working with a well-established marketing firm and have access to software
to estimate a multinomial logit model.
 You have known and stable competitors.

10. Your team has conducted its first conjoint analysis and is in the middle of a debate
about whether or not they can use demand forecasting to predict the market share of a
new wall-mount bottle opener. You've been listening carefully during the meeting but
haven't weighed in yet. Which of the following points convinces you that your team
shouldn't use demand forecasting?
 Your market competitors are well known.
 Your team isn't expecting much of a competitive market reaction.
 You are working with a well-established marketing firm and have access to software
to estimate a multinomial logit model.
 Your competitors will need to be evaluated on different dimensions because their
products are very different.
11. An international coffee corporation is expanding its coffee shops into developing
economies. Based on your knowledge of Tata and Nano, which of the following will
most likely be successful for image-conscious consumers who wish to make a coffee
shop purchase?
 A premium blend of coffee in a 10 oz size company logo cup for $1.25.
 A premium blend of coffee in a 20 oz size company logo cup for $2.50.
 A generic blend of coffee in a plain 12 oz size cup for $.50.
 A generic blend of coffee in a plain 16 oz size cup for $1.00.

11. Selena's family is purchasing a recreational travel trailer for a trip to the western
United States. Which of the following experiences in the buying process would affect
the emotional value drivers for Selena and her family?
 Selena learns about the premium storage space available in one brand of trailer.
 Selena discovers that one brand of trailer tows particularly well.
 Selena discovers on message boards that owners report few repairs for one brand of
trailer.
 At a sales event, Selena and her family meet owners of the trailer they are thinking of
buying and have their picture taken sitting in the trailer.

12. How can you find the optimal price for a segment when you know the demand
function and marginal cost?
 Find the quantity where marginal revenue is equal to marginal cost. Determine the
price defined by the demand curve at that quantity.
 Calculate the revenue.
 Multiply price by quantity.
 Find the inverse demand function.

12. Imagine you work at Glow, a company that sells glow in the dark products such as
glow sticks, wands, and accessories. Your team has created a price piano in order to
better understand hot price points in the market. Which of the following actions
represents the best next step based on the results of the price piano?
 Price gaps show you need to better understand the relationship between product
prices and features.
 There are open price points, so you'll use the results to determine new package sizes
and pricing structures.
 You see you have the lowest price point in the market and you plan to lower even
further.
 Competitors are varying their prices for points of interest sales, such as fairs,
concerts, and other events, so your team is going to consider new prices for your
comparable locations.
Week 3 Practice Quiz: Mental Accounting
1. Your coworker seems incredulous when you mention how much of an impact the
"fish brain" has on human behavior. Which of these is the best example you could
provide of peoples' "fish brains"?
 Jamela performed her gymnastics routine ten times without error but can't stop
thinking about the one time she performed the routine with a few flaws--and she's
sure that will happen again at her next competition.
 Coretta misplaced her car keys and wallet while ice skating, but she's thrilled that
she ended up finding her wallet and only had to replace her keys.
 Franco isn't that disappointed that his condo sold for $2000 less than he paid
because he just earned a $2000 year-end bonus.
 After narrowly avoiding a fender bender during her morning commute, Sue is late for
work and misses a meeting, but she spends the rest of the day grateful and happy
that she was so lucky.

2. Your coworker agrees that many people are pessimists and expect the worst, but
he's still not sure how this has anything to do with pricing and value perception. How
could you explain it using an example of how people feel about receiving and spending
money?
 People feel worse about winning some money that has a loss associated with it
compared to winning the same amount of money with no loss.
 People would rather have a series of small losses than a big one.
 People don't like waiting for rewards.
 People don't care how many times they win, as long as they win.

3. You are a health insurance consultant, and you work with small businesses to advise
them on the most cost effective and comprehensive coverage for their employees. You
currently bill clients in small increments throughout the consultancy period. How
might you use your knowledge of mental accounting to bill in a way that makes your
clients feel best about paying for your services?
 Try to add on another product or service each time you reach a billing cycle.
 Don't make any changes, because billing in small increments is the best strategy.
 Avoid comparing the price of your service to other firms, because you don't want to tip
the client off that there are others providing the same service.
 Give clients a total bill for your services when you present a summary of the most
cost-effective and comprehensive plan available for their business.

Week 3 Practice Quiz: Consumer Price Perceptions

1. Imagine you work for a company that designs and manufactures mid-century
modern furniture. Your team needs to price a new sofa. Which of the following offers
would customers be likely to prefer?
 Sell the sofa for $2100, include a set of free throw pillows (retail value $100), and
offer free delivery.
 Sell the the sofa for $1900 and a $100 delivery fee.
 Sell the the sofa for 20% off the price of $2500.
 Sell the sofa for the retail price of $2000.

2. A coworking office space has members sign up for recurring monthly rental
payments, and they don't send monthly payment reminders or give members a
reminder that their rental space is renewing each month. Using your knowledge of
mental accounting, how would you best explain the company's strategy?
 The company wants to encourage members to be more risk seeking in the gain
domain.
 The company doesn't want to remind members of their payments or to encourage
them to evaluate their consumption experience with each payment transaction.
  The company wants to influence members' perceptions of the absolute value of the
rental space.
 The company doesn't want to call attention to any surcharges that need to be applied
to the account.

3. A cycling studio is thinking about changing its payment structure. Using your
knowledge of consumer price perceptions, which payment structure would customers
most likely prefer?
 Pay-by-class fee structure
 Pay for a 5-class pass up front
 Pay for a 15-class pass up front
 Monthly invoices for the number of classes taken

Week 4 Practice Quiz: Mental Shortcuts that Affect

Pricing
1. You are responsible for creating a handout about an opportunity for American high
school students to travel abroad to France. How might you best design this handout in
order to address consumers' mental shortcuts and price perceptions?
 Apply anchoring strategies to only the price.
 Avoid comparisons to other types of trips or the cost of past trips.
 Save the best product information for the end of the brochure.
 Start with the best trip attributes and then end with the price.

2. You own a kitchen supply store specializing in tableware and appliances for home
cooks. Your sales team is gathering to plan the details for an upcoming sale. Which of
the following discount framing would customers likely respond to best?
 Offer a 20% off sale on tea party baskets with tea bags, mugs, and an assortment of
gourmet baked goods
 Offer a 15% off sale on a $125 bread knife
 Provide a free matching mug ($15 value) when customers buy a $150 handpainted
pie dish
 Put an $85 enamel casserole dish on sale for $10 off

3. You've just been hired to design sale flyers for a sporting goods store. On your first
day, you look through a stack of recent sales flyers to become familiar with previous
sales and the style of the flyers. Which of the following stands out as something you'd
like to improve in your first flyer?
 Sale prices almost always ended with the number 9, such as $79, $119, and $229.
 Previous flyers listed the sale price to the right of the regular price.
 Old flyers had a visual contrast between the sale price and the regular price.
 Previous flyers used a larger size font for the sale price.

4. Can you predict the most likely outcome if a company sells the following three
television models?
Option 1 - Direct-lit LED, 60 Hz refresh rate, 2 HDMI inputs, $495
Option 2 - Edge-lit LED, 120 Hz refresh rate, 4 HDMI inputs, $795
Option 3 - Direct-lit LED, 60 Hz refresh rate, 3 HDMI inputs, $995
 Most customers will prefer Option 1.
 Most customers will prefer Option 2.
 Most customers will prefer Option 3.
 There isn't enough information available to make a prediction.
Week 4 Quiz: Consumer Psychology
1. Your company used to charge $120 for a graphic calculator but offered a $20 rebate.
For back-to-school promotions this year, your team decided to sell the same calculator
for $100. Your team is shocked that sales went down. How could you use your
knowledge of mental accounting to explain a possible cause for the reduction in sales?
 People feel better if they have a win or gain paired with a loss.
 People don't care how many times they win, as long as they win.
 People don't like waiting for rewards.
 People would rather have a series of small losses than a big one.

1. Your teammates have never studied psychology and seem skeptical that it could
play a role in pricing blenders. However, everyone can see that sales have gone down
since your company stopped running commercials that highlighted and built
excitement for a blender that includes multiple free accessories. How might you
explain why those advertisements were so effective with your customers and drove
sales higher?
 People would rather have a series of small losses than a big one.
 People don't like waiting for rewards.
 People like to feel that they are getting a series of wins.
 People don't care how many times they win, as long as they win.

2. A karate school for youth and adults has just conducted a client survey after its
successful second year of business. Some customers noted that costs increased
significantly in the second year. Owners are puzzled because cost increases between
the first and second year were intentionally quite small. The only change implemented
the second year was that uniform, prop, and performance fees were billed separately
throughout the year rather than up front in an annual registration fee, as they were the
first year. How would you best explain the impact mental accounting is having on
customers' perception of the school's costs?
 Customers are experiencing the frequent payments as multiple losses, and even
though the overall amount is only slightly higher, they feel disproportionately
dissatisfied.
 Customers need more explanation of the fees, because they are actually
experiencing multiple wins with the new billing process.
 Customers feel that they are getting a deal with the payments broken into smaller,
discrete chunks.
 Customers are calculating and coding the distributed payments the same way that
they did with the single payment the first year.

2. Selena and her family decided to purchase a recreational travel trailer that was
priced higher than its competitors, but the company offered a rebate and had a chart
that showed how the features and price of their trailer compared favorably to their
competitors. How might mental accounting have played a role in Selena's decision?
 The recreational travel trailer company integrated gains.
 Once the recreational travel trailer company sold Selena a high-ticket item, it was
easy for them to have Selena integrate the losses in her head.
 The recreational travel trailer company consolidated losses for Selena.
 Selena and her family experienced multiple wins with the rebate and the feeling that
they are getting a great deal for the features they wanted in a trailer.
3. A performing arts center that is a venue for concerts, plays, dance performances,
and other events has just made annual season passes available. When customers
purchase the annual season passes online, they then have an opportunity to purchase
other items such as a designated parking spot and access to a luxury lounge. Why
might this strategy be effective?
 Customers like to have losses separated.
 Customers are mentally integrating the losses from these additional items offered at
checkout.
 Customers like to feel that they are getting a bonus or a good deal.
 Customers like to have a loss paired with a gain.

3. A large fitness center has conducted a major review of its pricing and member
services. Owners decided to increase membership rates while also increasing access
to an indoor pool and children's play facility. Why might this move appeal to
customers?
 The fitness center has paired a loss with a gain.
 The fitness center customers will experience multiple losses.
 The fitness center has separated losses.
 The fitness center would have been better off integrating losses.

4. Imagine you work for Glow, a company that sells glow in the dark products such as
glow sticks, wands, and accessories. Your team needs to price a new glow wedding
package. Which of the following offers would customers be likely to prefer?
 Sell the the wedding package for $260 and a $10 shipping rate.
 Sell the the wedding package for $285 and include a free bonus pack of 100 glow
candles (retail value of $15).
 Sell the wedding package for $360, offer a 25% off discount, and include free
shipping.
 Sell the wedding package for the retail price of $270.

4. Imagine you work for FitStyle, a company that makes stylish and affordable athletic
shoes. Your team needs to price the newest running shoe. Which of the following
offers would customers be likely to prefer?
 Sell the shoes for $100 and offer 25% off the purchase.
 Sell the shoes for $70 and charge $5 for shipping.
 Sell the shoes for the retail price of $75.
 Sell the shoes for $100, offer 25% off the purchase, and provide free shipping.

5. A fitness center has members sign up for recurring monthly dues payments, and
they don't send monthly payment reminders or give members notice when their
membership is extending an additional year. Using your knowledge of mental
accounting, how would you best explain the fitness center's strategy?
 The fitness center wants to influence members' perceptions of the absolute value of
the membership.
 The fitness center doesn't want to call attention to surcharges.
 The fitness center wants to encourage members to be more risk seeking in the gain
domain.
 The fitness center doesn't want to remind members how much they are paying in
each transaction.

5. A children's gym and activity center has members sign up for recurring monthly
dues payments, and they don't send monthly payment reminders or give members a
reminder that their membership is rolling into another month. Using your knowledge of
mental accounting, how would you best explain the center's strategy?
 The center wants to encourage members to be more Risk Seeking in the loss
domain.
 The center doesn't want to remind members of their payments or to evaluate their
consumption experience with each payment transaction.
 The center doesn't want to call attention to surcharges.
  The center wants to influence members' perceptions of the absolute value of the
membership.

6. A catering company asks customers to pay for their events in two payments, with
the second payment due six weeks prior to the event date. Using your knowledge of
consumer price perceptions, why might customers prefer to pay the balance in
advance?
 The customers can now base their purchase decision solely on economic rather than
psychological outcomes.
 The customers can pay in advance and then focus on enjoying the experience at the
event rather than worrying about paying for it later.
 Paying in advance gives customers the option to pay with cash.
 Customers will most likely not prefer to pay in advance because they'll get less
psychological benefit from their consumption experience.

6. A cycling studio switched from a pay-by-class fee structure to a pre-paid pass with
5, 10 or 20 classes. Why might customers prefer the pre-paid passes?
 The customers can now base their purchase decision solely on economic rather than
psychological outcomes.
 Pre-paid options give customers the option to pay with cash.
 The customers can now pay for classes in advance and then focus on enjoying their
classes rather than conducting a financial transaction each time they visit the studio.
 Customers will most likely not prefer the pre-paid passes because they'll get less
psychological benefit from their consumption experience.

7. A cycling studio has gained a loyal following and thinks they'll be able to raise class
prices in order to increase their profits. Which of these approaches would most likely
cause customers to have a negative psychological reaction to the price increases?
 Offer a free personal assessment or coaching session so customers can choose the
best classes or learn strategies to improve their performance.
 Notify customers that you'll be raising rates but will also be able to provide additional
parking spaces.
 Create a new cycling class or service that isn't available elsewhere.
 List the new prices on the website and brochures, but otherwise don't call attention to
the price increase.

7. A yoga studio has gained a loyal following and thinks they'll be able to raise class
prices in order to increase their profits. Which of these approaches would most likely
cause customers to have a negative psychological reaction to the price increases?
 Offer a new service to customers by allowing them to store a personal yoga mat at
the studio.
 Notify customers that you'll be raising rates but will also be able to provide expanded
locker room and changing areas.
 Announce the new rates along with information about the new yoga mats, blocks, and
straps that will be available during classes.
 Email current customers with news of the rate increases, and provide no justification
for the price change.

8. How would you best improve the following listing for a sport jogging stroller?
 $599
 16"" air-filled tires
 front and rear suspension systems
 hand and parking brakes
 easy fold design
 reclining seats
 adjustable handlebar

 Add preferable attributes.

 List the product attributes from least to most positive.
 The attributes and price are in the best possible order.
  List product attributes first and the price last.

8. How would you best improve the following listing for baby diapers?
 soft and gentle for baby's skin
 easy to tell when wet or soiled
 unscented
 $34.99

 The attributes and price are in the best possible order.

 List the price first.
 List the price first and include the quantity.
 List the product attributes from least to most positive.

9. You own a market and campground supply shop just outside a very popular camping
destination. You are planning a sale for an upcoming summer holiday weekend that will
be very busy. Which of the following types of discounts or price reductions would
customers most likely prefer?
 Include a free flashlight with the purchase of a backpack
 Bundle a collection of healthy snacks and more indulgent treats for hiking outings and
offer a 15% off sale on the whole bundle
 Put a $70 hammock on sale for $10 off
 Offer a 15% off sale on a $225 GPS unit

 Bundle pre-cooked camp meals (salad, bread, stew, and chocolate chip cookies), and
offer a 30% off sale on the cookies
 Put a $25 weather alert module on sale for $3 off
 Offer a 20% more free sale on mixed candies
 Offer a 10% off sale on a $115 camp heater

10. When Gretchen and Beien went shopping for their first washing machine and dryer,
they were pretty overwhelmed with the number of options. They researched carefully
before narrowing their choices down to one brand. Their preferred brand has three
washers:
1. high-efficiency washer with 4.2 capacity and maximum spin speed of 700 for
$779
2. high-efficiency washer with 4.2 capacity and maximum spin speed of 660 for
$479
3. high-efficiency washer with 4.5 capacity and maximum spin speed of 700 for
$679

Using your knowledge of price decoys, how would you categorize the washers?
 Option 1 is the price decoy.
 Option 1 is the middle product.
 Option 2 is the price decoy.
 Option 3 is the inferior product.

10. Imagine you are on a team responsible for pricing blenders. Your current product
lineup includes two blenders with distinct features:
 Blender 1: 56 oz. blender with a plastic jar for $59
 Blender 2: 72 oz. blender with a glass jar for $99
The lower priced blender is the top seller. Which of the following would most likely
improve sales of the $99 model?
 Add a third blender to your lineup that is 56 oz., has a plastic jar, is available in five
colors, and is priced at $139 .
 Offer an extended warranty for an additional $25
 Add a third blender to your lineup that is 32 oz., has a plastic jar, and is priced at $49.
 Add a 60 oz blender to the lineup for $69.
11. Your company sells computers and other digital devices, and it is branching out to
televisions now too. You are on the pricing team and need to find a value-based price.
You've identified the next best alternative, which has comparable features except your
television won't come with a remote control. Instead, you'll provide an app that allows
customers to use their smartphones as a remote. As a new industry leading feature,
the app would likely be a positive customer value driver, and your company will save
money since you won't have to produce remote controls. Since this is a new feature,
how could you most successfully identify a reference price point?
 Find the sum of the value drivers.
 Identify the production savings and the increased customer value to build a
constructive next best alternative price
 Match the reference price to the market leader's price.
 Identify the second most likely offering in your new product line.

11. A company that designs and manufactures desk organizers and accessories is
analyzing the features and prices of its product line. They want to compare these to the
product prices and features of the main market competitors. Which tool will offer the
best insight?
 Price Ladder

12. Take another look at the conjoint analysis output data on golf balls. Which of these
best describe the product customers would prefer between a High Flyer ball that
travels 15 yards farther than the average ball and costs $6.99 per pack and a Magnum
Force ball that travels 10 yards farther than the average ball and costs $4.99?
 The High Flyer ball with those attribute levels has an overall utility of 1.14.
 Customers prefer the High Flyer ball that travels 15 yards farther the average ball and
costs $6.99 per pack.
 Customers prefer the Magnum Force ball that travels 10 yards farther the average
ball and costs $4.99.
 Customers find that price is the most important attribute when comparing golf balls
with these product attributes.

12. Imagine you are on a team that is designing reusable water bottles. You are
currently thinking of a model that has a capacity of 24 oz, keeps beverages cold for 12
hours, and costs $32.

Use the conjoint analysis output data below to find customers' increased willingness
to pay for a water bottle that keeps beverages cold for an 6 additional hours.
 57%
 0.16
 $7.41
 $7.82