CPP Pricing Models & Tools 2 — Questions and Answers
Question 1: Which pricing model charges customers a recurring fee regardless of usage volume?
- Consumption-based pricing
- Flat-rate subscription pricing (Correct answer)
- Tiered pricing
- Freemium pricing
Correct answer: Flat-rate subscription pricing
Flat-rate subscription pricing charges a fixed recurring fee independent of how much the customer uses the product.
Question 2: In a Conjoint Analysis, what does 'part-worth utility' represent?
- The total price a customer is willing to pay
- The marginal value assigned to each attribute level (Correct answer)
- The share of preference for a product
- The elasticity of demand for a feature
Correct answer: The marginal value assigned to each attribute level
Part-worth utilities quantify the relative value each attribute level contributes to overall customer preference.
Question 3: A company uses a 'price waterfall' analysis. What does it primarily reveal?
- How list price erodes to realized price through discounts and allowances (Correct answer)
- The relationship between price increases and unit volume changes
- Competitive price positioning across market segments
- Customer lifetime value by pricing tier
Correct answer: How list price erodes to realized price through discounts and allowances
A price waterfall maps every discount, rebate, and allowance that reduces list price down to the actual pocket price.
Question 4: Which tool is best suited for identifying the price at which revenue is maximized given a known demand curve?
- Break-even analysis
- Price optimization software with demand modeling (Correct answer)
- Competitive benchmarking matrix
- Gross margin bridge
Correct answer: Price optimization software with demand modeling
Price optimization software uses demand modeling to identify the revenue-maximizing price point on a demand curve.
Question 5: In a two-part tariff pricing model, revenue comes from:
- Two separate product bundles sold at different prices
- A fixed access fee plus a variable usage charge (Correct answer)
- Prices set in two geographic markets simultaneously
- A base price and a negotiated contract premium
Correct answer: A fixed access fee plus a variable usage charge
Two-part tariffs combine a fixed entry fee (e.g., membership) with a per-unit usage charge.
Question 6: What is the primary purpose of a 'price sensitivity meter' (Van Westendorp) in pricing research?
- To measure competitor price responses to your price changes
- To identify an acceptable price range using four price-perception questions (Correct answer)
- To calculate price elasticity from historical sales data
- To set optimal prices for new product launches using cost data
Correct answer: To identify an acceptable price range using four price-perception questions
The Van Westendorp Price Sensitivity Meter uses four questions to define the range of acceptable prices in customers' perception.
Question 7: A SaaS company moves from per-seat pricing to usage-based pricing. Which outcome is most likely?
- Customer acquisition cost decreases immediately
- Revenue predictability decreases but expansion revenue potential increases (Correct answer)
- Gross margin improves due to lower variable costs
- Churn rate increases because customers pay more per unit
Correct answer: Revenue predictability decreases but expansion revenue potential increases
Usage-based pricing reduces upfront revenue predictability but allows revenue to grow naturally as customers use more.
CPP Pricing Models & Tools 2
Which pricing model charges customers a recurring fee regardless of usage volume?