Pricing Strategy & Market Analysis Flashcards

Which of the following pricing tactics is specifically designed to counteract a competitor's aggressive price cut in a key market segment?

Answer: Flanker brand pricing

A flanker brand is a lower-priced offering launched to compete in price-sensitive segments without repositioning or degrading the premium main brand.

What does 'reference price' mean in buyer psychology, and why does it matter for pricing strategy?

Answer: The internal price standard buyers use to judge whether an offered price is fair or attractive

Reference prices are the mental benchmarks buyers use to evaluate offers; pricing strategists shape them through anchoring, list prices, and framing to influence perceived value.

In conjoint analysis for pricing research, what are respondents typically asked to do?

Answer: Choose or rate hypothetical product profiles that vary attributes including price

Conjoint analysis presents respondents with trade-off scenarios across product attribute bundles (including price) to statistically derive the relative value of each attribute.

A company segments its customers into 'price buyers,' 'value buyers,' and 'relationship buyers.' Which segment typically requires the most robust value communication to prevent excessive discounting?

Answer: Value buyers

Value buyers are willing to pay more but need clear, quantified evidence of ROI and benefits; without strong value communication, sales teams often discount unnecessarily to close deals.

Which market condition is MOST likely to lead a rational firm to price below its average total cost in the short run?

Answer: When the price exceeds average variable cost but not average total cost, covering variable costs and contributing to fixed costs

A firm minimizes losses by continuing operations when price covers average variable costs, because shutting down still incurs fixed costs; the contribution offsets some fixed costs.

What is the 'Gabor-Granger' technique primarily used for in pricing research?

Answer: Estimating price elasticity curves by surveying purchase intent at multiple price points

The Gabor-Granger method surveys customers at sequential price points to build a demand curve showing the percentage willing to buy at each price, enabling elasticity estimation.

A firm is considering dynamic pricing. Which of the following is a PRIMARY ethical or reputational risk associated with this strategy?

Answer: Customers may feel exploited if they discover they paid more than others for the same product

Dynamic pricing can trigger customer backlash and perceptions of price gouging or unfairness when buyers discover price variation based on timing, location, or personal data.