CPP Pricing Strategy & Market Analysis 3 — Questions and Answers
Question 1: A SaaS company charges $10/month for up to 5 users and $18/month for up to 15 users. This is an example of which pricing structure?
- Bundle pricing
- Tiered pricing (Correct answer)
- Freemium pricing
- Usage-based pricing
Correct answer: Tiered pricing
Tiered pricing offers distinct packages at different price points, each with expanded features or usage limits, targeting different customer segments.
Question 2: What is the primary goal of a 'market development' pricing strategy when entering a new geographic market?
- Maximize short-term margin
- Set prices to build market share and trial quickly (Correct answer)
- Mirror home-market prices exactly
- Focus exclusively on premium segments
Correct answer: Set prices to build market share and trial quickly
When entering new markets, lower penetration-oriented prices accelerate customer acquisition and establish a foothold before competitors respond.
Question 3: Which analysis technique plots a product's market share against market growth rate to inform pricing and investment decisions?
- Perceptual mapping
- BCG Growth-Share Matrix (Correct answer)
- Conjoint analysis
- Price sensitivity meter
Correct answer: BCG Growth-Share Matrix
The BCG matrix classifies products as Stars, Cash Cows, Question Marks, or Dogs based on market share and growth, guiding portfolio pricing strategy.
Question 4: A pricing analyst observes that a competitor reduced prices by 15% but gained only 5% in market share. This suggests the market is experiencing:
- High price elasticity
- Inelastic demand driven by strong brand loyalty (Correct answer)
- A supply-side shortage
- Perfect price transparency
Correct answer: Inelastic demand driven by strong brand loyalty
When large price cuts yield small share gains, it indicates buyers are not highly sensitive to price, often due to brand preference, switching costs, or habit.
Question 5: In B2B pricing, what is the 'economic value to the customer' (EVC) model primarily used for?
- Calculating the break-even point for a new product
- Quantifying the total financial benefit a customer gains versus the next best alternative (Correct answer)
- Determining the optimal advertising spend
- Setting transfer prices between subsidiaries
Correct answer: Quantifying the total financial benefit a customer gains versus the next best alternative
EVC measures the maximum price a rational buyer should pay by adding the value differential over the next best alternative to the reference price.
Question 6: Which of the following best describes 'price architecture'?
- The physical layout of price tags in retail stores
- The structured set of prices, tiers, and options across a product portfolio (Correct answer)
- A legal framework for anti-price-fixing compliance
- The IT infrastructure supporting dynamic pricing systems
Correct answer: The structured set of prices, tiers, and options across a product portfolio
Price architecture defines how a company organizes its prices across product lines, tiers, and options to guide customers toward the desired purchase behavior.
Question 7: A company sells a product for $100 with a variable cost of $60. If it wants to achieve a 30% contribution margin ratio, what price should it charge (assuming the same variable cost)?
- $78
- $86 (Correct answer)
- $114
- $130
Correct answer: $86
Contribution margin ratio = (Price - Variable Cost) / Price; solving $60 = Price × (1 - 0.30) gives Price = $60 / 0.70 ≈ $85.71, closest to $86.
CPP Pricing Strategy & Market Analysis 3
A SaaS company charges $10/month for up to 5 users and $18/month for up to 15 users.
This is an example of which pricing structure?