CPP Competitive Intelligence & Price Benchmarking 2 — Questions and Answers
Question 1: A company is a 'price follower.' What does this mean in competitive strategy terms?
- It sets prices before competitors and monitors responses
- It adjusts its prices in response to changes made by the market price leader (Correct answer)
- It charges the lowest price in the category at all times
- It ignores competitor prices and focuses solely on cost recovery
Correct answer: It adjusts its prices in response to changes made by the market price leader
A price follower lacks sufficient market power to set prices independently and instead reacts to the pricing moves of the dominant competitor.
Question 2: The 'price sensitivity' of a market segment is MOST directly measured by:
- Gross margin of the segment
- Price elasticity of demand for the segment (Correct answer)
- Number of competing products in the segment
- Average customer tenure in the segment
Correct answer: Price elasticity of demand for the segment
Price elasticity of demand (% change in quantity / % change in price) directly quantifies how responsive a segment's purchasing behavior is to price changes.
Question 3: When performing a competitive win/loss analysis, which factor MOST indicates that pricing was the primary reason for a lost deal?
- The buyer selected a product with fewer features
- The buyer explicitly cited competitor price and matched specs as the deciding factor (Correct answer)
- The salesperson failed to follow up after the proposal
- The competitor offered a longer warranty period
Correct answer: The buyer explicitly cited competitor price and matched specs as the deciding factor
When buyers cite price on comparable offerings as the tipping point, pricing is the primary driver — differentiating true price losses from value or execution losses.
Question 4: A CPP analyst observes that a competitor reduced price by 10% with no change in product. Under an oligopoly, the BEST initial response is typically to:
- Immediately match the price cut to protect volume
- Analyze whether the move is a signal, mistake, or competitive assault before responding (Correct answer)
- Raise your price to signal quality superiority
- File an antitrust complaint with the FTC
Correct answer: Analyze whether the move is a signal, mistake, or competitive assault before responding
Knee-jerk price matching can trigger destructive price wars; first diagnosing the intent and context of the competitor's move leads to better-calibrated responses.
Question 5: In price benchmarking, 'like-for-like' comparisons require:
- Using only public list prices without adjustments
- Controlling for product configuration, terms, and quantity to ensure valid comparisons (Correct answer)
- Comparing prices only within the same fiscal quarter
- Using a single currency without purchasing power adjustment
Correct answer: Controlling for product configuration, terms, and quantity to ensure valid comparisons
Valid price comparisons must normalize for differences in specifications, volume tiers, payment terms, and service inclusions to avoid misleading conclusions.
Question 6: Which tool provides a structured way to track competitor price moves, promotions, and terms over time for market intelligence?
- Activity-based costing model
- Competitive price tracking matrix / intelligence database (Correct answer)
- Internal budget variance report
- Customer satisfaction survey
Correct answer: Competitive price tracking matrix / intelligence database
A competitive price tracking matrix logs competitor prices, terms, and promotions systematically over time, enabling trend analysis and strategic response planning.
CPP Competitive Intelligence & Price Benchmarking 2
A company is a 'price follower.' What does this mean in competitive strategy terms?