CPP Pricing Models & Tools 3 — Questions and Answers
Question 1: Which pricing model is most aligned with a 'good-better-best' product line strategy?
- Dynamic pricing
- Versioning / tiered pricing (Correct answer)
- Penetration pricing
- Odd-even pricing
Correct answer: Versioning / tiered pricing
Versioning or tiered pricing creates distinct product versions at different price points to serve multiple willingness-to-pay segments.
Question 2: A regression-based price response model estimates that for every 1% price increase, units sold decrease by 1.8%. What is the price elasticity?
- -0.56
- -1.8 (Correct answer)
- 1.8
- 0.56
Correct answer: -1.8
Price elasticity = % change in quantity / % change in price = -1.8% / 1% = -1.8.
Question 3: In the context of CPQ (Configure, Price, Quote) tools, what is the primary pricing benefit?
- Automating competitor price monitoring
- Ensuring pricing rules and approval workflows are enforced consistently at the point of sale (Correct answer)
- Generating dynamic prices based on real-time demand signals
- Calculating cost-plus prices for new product configurations
Correct answer: Ensuring pricing rules and approval workflows are enforced consistently at the point of sale
CPQ tools enforce pricing guardrails, discount approval workflows, and configuration logic at the quote stage.
Question 4: An airline's revenue management system raises fares as the departure date approaches and seats fill. This is an example of:
- Value-based pricing
- Yield management / dynamic pricing (Correct answer)
- Competitive parity pricing
- Cost-plus pricing
Correct answer: Yield management / dynamic pricing
Yield management dynamically adjusts prices based on remaining inventory and time to maximize revenue per available seat.
Question 5: Which metric does the 'Gabor-Granger' pricing technique directly produce?
- Customer lifetime value at each price point
- A demand curve showing purchase intent at various price levels (Correct answer)
- Price elasticity from panel scanner data
- Optimal bundle composition for maximizing revenue
Correct answer: A demand curve showing purchase intent at various price levels
Gabor-Granger surveys respondents at multiple price points to construct a demand curve of purchase intent vs. price.
Question 6: A company implements 'price banding' for its sales force. What does this control?
- The range of discount percentages sales reps can offer without manager approval (Correct answer)
- The geographic regions where specific prices are allowed
- The time window during which promotional prices are active
- The product bundles that qualify for volume rebates
Correct answer: The range of discount percentages sales reps can offer without manager approval
Price banding defines guardrails — floor and ceiling prices — within which sales reps can negotiate without escalating for approval.
Question 7: In Economic Value Estimation (EVE), the 'differentiation value' component represents:
- The cost savings your product delivers over the reference product
- The monetary worth of features that are better or worse than the reference competitor (Correct answer)
- The customer's willingness to pay above the market average
- The margin premium justified by brand equity alone
Correct answer: The monetary worth of features that are better or worse than the reference competitor
Differentiation value captures the positive or negative monetary worth of all the ways your offering differs from the reference alternative.
CPP Pricing Models & Tools 3
Which pricing model is most aligned with a 'good-better-best' product line strategy?