CPP Pricing Strategy & Market Analysis 2

Question 1

A company notices that lowering its price by 10% increases unit sales by 25%. What does this indicate about demand elasticity?

Accepted Answer

Elastic demand

Answer

When a 10% price decrease leads to a 25% quantity increase, the price elasticity of demand exceeds 1 in absolute value, indicating elastic demand.

Question 2

Which pricing strategy sets a high initial price to 'skim' early adopters before lowering the price over time?

Accepted Answer

Price skimming

Answer

Price skimming targets early adopters willing to pay a premium, then sequentially captures more price-sensitive segments as the price declines.

Question 3

In competitive pricing analysis, what is a 'price band'?

Accepted Answer

The range between the lowest and highest competitor prices in a market

Answer

A price band represents the competitive price range from the lowest to highest competitor prices, helping firms position their own price within the market.

Question 4

A firm uses value-based pricing. Which input is MOST critical to setting the price?

Accepted Answer

Customer's willingness to pay based on perceived benefits

Answer

Value-based pricing anchors the price to the economic value customers receive, specifically their willingness to pay driven by perceived benefits.

Question 5

What does a 'competitive parity' pricing strategy mean?

Accepted Answer

Setting prices equal to or in line with the primary competitor

Answer

Competitive parity means aligning your price with leading competitors to avoid price-based competitive disadvantage while competing on other dimensions.

(CPP) Certified Pricing Professional Practice Test

(CPP) Certified Pricing Professional Practice Test

CPP Pricing Strategy & Market Analysis 2