Pricing Strategy & Market Analysis Flashcards
7 cards from real CPP practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Pricing Strategy & Market Analysis flashcards as text
Which segmentation variable is MOST commonly used as the basis for price discrimination in airline ticket pricing?
Answer: Time of purchase relative to departure date
Airlines use advance purchase timing as a primary price-discrimination lever, charging less for tickets bought well in advance and more for last-minute purchases.
What is 'price waterfall' analysis used for?
Answer: Identifying all discounts and allowances that erode the list price to the actual pocket price
A price waterfall maps every discount, rebate, freight allowance, and off-invoice item that reduces the invoice price down to the true pocket price realized.
In the context of pricing strategy, what does 'commoditization' threaten?
Answer: Firms' ability to differentiate and maintain price premiums
Commoditization occurs when buyers perceive competing products as interchangeable, driving purchases purely on price and eroding differentiation-based margins.
A company practicing 'razor and blade' pricing sells the base product cheaply to lock in high-margin consumable purchases. Which metric is MOST important to track for this model?
Answer: Customer lifetime value (CLV) across blades and razors
In razor-and-blade models, the profit comes from recurring consumable sales, so total CLV (blades + razors) is the key profitability measure, not the entry-product margin.
Which of the following is a key indicator that a market is suitable for price skimming at launch?
Answer: A significant segment of early adopters with inelastic demand
Price skimming works when a large enough early-adopter segment values novelty and performance highly enough to pay a premium before price-sensitive buyers enter.
What is the primary risk of using a cost-plus pricing approach in a competitive market?
Answer: It ignores market demand and competition, potentially mispricing the product
Cost-plus pricing is internally focused and may produce prices that are too high (losing share) or too low (leaving money on the table) relative to what the market will bear.
A product has a price elasticity of -2.5. If the firm raises the price by 4%, what is the expected percentage change in quantity demanded?
Answer: -10%
Percentage change in quantity = price elasticity × percentage change in price = -2.5 × 4% = -10%, meaning demand falls by 10%.