# Pricing Strategy Quiz

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## Week- 1

1.
Question 1
Imagine a retailer considering a 33-percent-off sale on blenders currently priced at \$54. The retailer pays \$29 per blender from the manufacturer. How much has the volume to increase for the sale to maintain profits?

1 point

• 248%
• 24%
• 496%
• 49%

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2.
Question 2
Consider a wind turbine manufacturer. Currently, a 1.5 MW wind turbine has a price of \$1.7M and \$1.3M in variable cost. If the manufacturer considers raising the price by 3%, what would be the allowable volume loss to at least maintain profits? (Please provide your answer in percentage without including the % sign. You can add an approximate or up to 1 decimal point)

1 point

 11.31

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3.
Question 3
Wild Blue Preserves makes 15 different jams and jellies. They set up a small shop in a local mall to sell their products alongside other prepared foods. A jar of wild blueberry jelly costs \$1.50 per 250 ml jar to produce. The mark-up pricing percentage Wild Blue Preserves plans to use is 100 per cent. What would be the final price using cost-based pricing?

1 point

 3

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4.
Question 4
An established producer of beef jerky decides to use market penetration pricing at a local convenience store. A study of other convenience stores shows a price range for jerky of \$2.00 to \$3.00 per 100 g package. Considering the seller would like to enter the market aggressively to gain market share, what would be the appropriate price for a 100 g package?

1 point

• Between \$2 and \$3
• Less than \$2
• More than \$3

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5.
Question 5
What is the price elasticity if a price increase of 15% leads to a unit sales drop of 20%? (Please use one or two decimals)

1 point

 1.33

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6.
Question 6
Assume that a product has a price elasticity of -0.7. In order to reduce unit sales by 20%, what would the necessary price increase be? (Give your answer either as an estimate or to within one decimal place. The answer should be as a percentage, but do not include the % sign)

1 point

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7.
Question 7
A product is being priced at 100€ and is being sold 3,000 times. The price elasticity is estimated to be -2.0. By how much would the revenues change when increasing the price by 5%? (Negative if a decrease and positive if an increase)

1 point

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8.
Question 8
Let’s imagine you own a Porsche dealership that has been authorized to sell the new 911, which has a suggested retail price of \$70,000. Dealerships commonly adjust price substantially upwards or downwards in response to local demand conditions. You think the demand for the 911 looks as follows in your market:

Table: Price/Sales Volume relationship

Price (\$) Sales Volume
0 600
10,000 540
20,000 480
30,000 420
40,000 360
50,000 300
60,000 240
70,000 180
80,000 120
90,000 60
100,000 0
Given that you can purchase the Porsche 911 for \$60.000, how would you price the Porsche 911 to maximize profits?

1 point

• \$60,000
• \$70,000
• \$80,000
• \$90,000
• \$100,000

## Week- 2

1.
Question 1
Which of the following is correct about profit?

1 point

Profit = Revenues – Variable Costs – Fixed Costs

Profit = Revenues – Costs

All of the mentioned

Profit = (Units Sold * Price) – (Units Sold * Variable Cost) – Fixed Cost

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2.
Question 2
If our company raises prices while the competition maintains prices, what will happen most likely with our sales volume?

1 point

Increase

Drop

Remain unchanged

Other

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3.
Question 3
As the marketing manager for the Samsung S6 you are responsible for setting prices in the Spanish market. You have decided that using market data to find the profit maximizing price is the right approach. You therefore ask your marketing research department for the necessary information.

After a couple of days they inform you that the fixed cost of production is €200,000 and that the variable cost is €200 per phone. They also have been able to collect sales data for the past year. It seems the price had changed four times over the past year.

With this information, which would be the optimal price to sell the Samsung S6?

1 point

€460

€450

€490

€400

€425

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4.
Question 4
As far as you can remember, there has always been a rivalry between Mercedes and BMW. Thus, as the pricing manager at Mercedes, you always have to keep an eye on BMW’s prices and sales figures. This is especially important when revising the prices at Mercedes.

Your boss has asked you to analyze whether the current price still is at optimal levels or whether it should be changed. In order to answer this question you received the following data from your colleagues in the marketing department.

Mercedes Price € 35,900 34,745 33,500 33,200
BMW Price € 34,000 34,000 34,000 34,000
Relative Price (Merc / BMW) 1.06 1.02 0.99 0.98
Mercedes Market Share 18% 20.5% 21% 21.1%
You are also told that the total luxury car market in the US has a volume of 1.626.667 cars sold. The price you currently charge is \$34.745. Should this price be changed if it is your objective to maximize revenues? If so, to what price?

1 point

It should be changed to \$33,500

It should be changed to \$33,200

It should be changed to \$35,900

No, it should stay at \$34,745

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5.
Question 5
As a marketing manager at Toyota you are being charged with setting the price for the new Auris. You conducted a Gabor Granger exercise and got the following information:

€25,000 42% 38% 13% 7%
€27,000 46% 39% 11% 4%
€29,000 52% 38% 8% 2%
You know that your market has a potential of 100.000 cars. You are interested in finding the price which maximizes your revenues. What would be the correct price?

1 point

€25,000

€27,000

€29,000

Another price

## Week- 3

1.
Question 1
Disney offers both hotel rooms and entrance to their theme parks at their resorts. Consider four different market segments with willingness to pay for rooms and theme park, as well as market shares shown below. Assume a market size of 5,000 individuals per day.

Segment Room Theme Park Market Share
Amusement Park Lover \$200 \$150 20%
Luxury Lover \$300 \$50 10%
Conference Devotee \$325 \$5 20%
Disney Devotee \$50 \$200 50%
Disney prices the Room at \$300 and Theme Park at \$150. These are not bundled, and can be purchased separately.

What is the total revenue earned under this scenario for one day?

1 point

\$1,350,000

\$1,275,000

\$600,000

\$975,000

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2.
Question 2
Consider now a scenario in which Disney considers selling a bundle. You still have the four different market segments and a total market size of 5,000 individuals per day. Here again the data as in the previous question:

Segment Room Theme Park Market Share
Amusement Park Lover \$200 \$150 20%
Luxury Lover \$300 \$50 10%
Conference Devotee \$325 \$5 20%
Disney Devotee \$50 \$200 50%
Disney prices the Room at \$325, Theme Park for \$200 and Room + Theme Park for \$350. Customers can only choose one of the packages.

What is the total revenue earned under this scenario for one day?

1 point

\$1,375,000

\$1,275,000

\$975,000

\$1,350,000

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3.
Question 3
Lets consider again the willingness to pay for a hotel room and theme park entrance for the four market segments. Also assume as before a market size of 5,000 individuals per day.

Segment Room Theme Park Market Share
Amusement Park Lover \$200 \$150 20%
Luxury Lover \$300 \$50 10%
Conference Devotee \$325 \$5 20%
Disney Devotee \$50 \$200 50%
Which would be the optimal price to maximize revenue for the Room and Theme Park, without considering the possibility of bundling?

1 point

Room: \$200

Theme Park: \$150

Room: \$300

Theme Park: \$150

Room: \$200

Theme Park: \$200

Room: \$300

Theme Park: \$200

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4.
Question 4
Assume that before the launch of iPhone in 2007, Apple had conducted an experiment examining 2,400 consumers to assess the potential demand of iPhones across different price points. First, they divided them among iPod owners (1,200 of them, half the sample), and non-iPod owners. They were all offered the opportunity to pre-order one 4GB iPhone at a specified price. One third of the participants were offered a price of \$299 (low); one third a price of \$399 (medium); and one third a price of \$499 (high). In the table below you’ll see what percentage of each group pre-ordered the corresponding iPhone.

1 point

\$299 for iPod non-owners

\$399 for iPod owners

\$499 for iPod non-owners

\$399 for iPod owners

\$299 for iPod non-owners

\$499 for iPod owners

\$399 for iPod non-owners

\$499 for iPod owners

\$299 for iPod non-owners

\$299 for iPod owners

\$399 for iPod non-owners

\$399 for iPod owners

\$499 for iPod non-owners

\$299 for iPod owners

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5.
Question 5
Assume the following willingness to pay for three customer segments for their first five visits to a movie theater:

Visits Segment A Segment B Segment C
First 9.00 10.00 12.00
Second 6.00 7.50 10.00
Third 3.50 5.50 8.00
Fourth 2.00 4.00 6.00
Fifth 1.10 1.50 3.50
Which would be the revenue if we could optimize the price for each visit?

1 point

\$67.50

\$64.50

\$40.00

\$49.00

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6.
Question 6
You just recently joined American Express in their credit card business. More specifically you have assumed the responsibility for the Spanish market. One of the responsibilities is to decide how many versions of a credit card to offer and at what price. Everything is on hold until you decide what to do.

To help you with your decision, you obtained estimates of the market potential for the different versions under consideration and the respective cost of launching the product in the market and deliver the necessary service.

Find below the corresponding segments and their willingness to pay for each of the versions of the credit cards

What would be the optimal price for each version?

1 point

Standard: €20

Gold: €70

Standard: €30

Gold: €40

Standard: €30

Gold: €70

Standard: €20

Gold: €40

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7.
Question 7

Segment Segment size Standard Gold
Individuals 200,000 €20 €40
Corporate 100,000 €30 €70
Assume further that the Standard American Express has a marketing expense of €50,000 and a variable cost of €5, and that the Gold American Express has a marketing expense of €150,000 and a variable cost of €15.

If you would have to launch only one product, which one would you launch? At what price?

1 point

Gold: €70

Standard: €20

Gold: €40

Standard: €30

## Week- 4

1.
Question 1
Are consumers more likely to rely on price as a quality indicator for products they purchase frequently or for products they purchase the first time?

1 point

First time products

Products purchased frequently

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2.
Question 2
Imagine you are the marketing manager overseeing television sets. Currently you have two products in your portfolio: one at a price of \$399 and another at \$499. In order to drive sales of the existing products, at what price would you launch a third television set?

1 point

A television set at \$699

A television set at \$449

A television set at \$249

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3.
Question 3
You have just recently been hired as a sales representative and today you will have your first meeting with a client. Your company offers multiple products at different prices – from cheap to expensive. When presenting to the client the overall product portfolio, how to best present the options?

1 point

Start at the lowest priced item

Start at the highest priced item

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4.
Question 4
Assume that Apple is currently offering the following two versions of the iPod:

A B
Price \$400 \$300
Storage Capacity 30 GB 20 GB
In this case, some consumers will prefer alternative A for its greater storage capacity while others will prefer alternative B for its lower price. According to the theory of the decoy effect, what product are customers likely to choose when offered the following three alternatives:

A B C
Price \$400 \$300 \$450
Storage Capacity 30 GB 20 GB 25 GB
1 point

According to the theory of the decoy effect customers are likely to chooose A

According to the theory of the decoy effect customers are likely to chooose B

According to the theory of the decoy effect customers are likely to chooose C

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5.
Question 5
According to prospect theory, do consumers prefer losing \$5 twice or \$10 once?

1 point

\$10 Once

\$5 Twice

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6.
Question 6
According to prospect theory, do consumers prefer a \$5 discount on a \$500 product or \$50 product?

1 point

\$500

\$50

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7.
Question 7
According to the relationship between price and demand, at what price would you expect to sell the largest volume of a product?

1 point

\$64

\$54

\$59

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8.
Question 8
Why do price endings influence consumers in their decision making?

1 point

Due to the image effect

Due to the level effect

Due to the level and image effect

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9.
Question 9
In case we would like our customers to feel less pain of paying should we encourage cash or credit card payments?

1 point

Credit card payments

Cash payments

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