CPM CPM B2B Pricing & Channel Management 2 — Questions and Answers
Question 1: Transfer pricing in a multinational company is primarily concerned with:
- Setting prices for transactions between related entities in different tax jurisdictions (Correct answer)
- Pricing products transferred between warehouses
- Setting channel partner margins for cross-border sales
- Determining MSRP in foreign markets
Correct answer: Setting prices for transactions between related entities in different tax jurisdictions
Transfer pricing governs intra-company pricing to ensure arm's-length standards and comply with tax regulations across jurisdictions.
Question 2: In B2B distribution, a 'MAP policy' (Minimum Advertised Price) is designed to:
- Prevent channel partners from advertising prices below a floor set by the manufacturer (Correct answer)
- Set the maximum price a distributor can charge end customers
- Establish cost-plus pricing for all distributors
- Determine the minimum order quantity
Correct answer: Prevent channel partners from advertising prices below a floor set by the manufacturer
MAP policies protect brand value and distributor margins by preventing below-floor advertising, though they do not control the actual transaction price.
Question 3: Which pricing structure is most appropriate when selling a complex B2B solution with high implementation variability?
- Time-and-materials or outcome-based pricing (Correct answer)
- Standard list price with fixed discounts
- Everyday low pricing (EDLP)
- Keystone pricing (double cost)
Correct answer: Time-and-materials or outcome-based pricing
Complex solutions with variable scope are best priced on time-and-materials or tied to measurable outcomes, aligning cost with actual value delivered.
Question 4: A distributor's 'street price' is best described as:
- The actual transaction price end customers pay, which may differ from list or MAP (Correct answer)
- The price printed on the distributor's catalog
- The manufacturer's suggested retail price
- The transfer price from manufacturer to distributor
Correct answer: The actual transaction price end customers pay, which may differ from list or MAP
Street price reflects real-world market prices at the point of sale, often below list due to negotiation, promotions, or competition.
Question 5: In B2B pricing, 'earned' discounts differ from 'given' discounts in that earned discounts:
- Are tied to specific buyer behaviors or commitments such as volume or early payment (Correct answer)
- Are granted at the discretion of the salesperson
- Apply uniformly to all customers regardless of behavior
- Are mandated by contract law in commercial transactions
Correct answer: Are tied to specific buyer behaviors or commitments such as volume or early payment
Earned discounts create incentive alignment — the buyer receives a price benefit only in exchange for a behavior that benefits the seller.
Question 6: When evaluating channel profitability, which metric best captures the true cost to serve a channel partner?
- Channel contribution margin after all off-invoice costs, deductions, and service costs (Correct answer)
- Gross margin on channel sales
- Net revenue minus COGS
- Volume times average selling price
Correct answer: Channel contribution margin after all off-invoice costs, deductions, and service costs
True channel profitability requires subtracting off-invoice allowances, co-op advertising, returns, freight, and service costs from gross margin.
CPM CPM B2B Pricing & Channel Management 2
Transfer pricing in a multinational company is primarily concerned with: