CRA Retail Pricing Strategy & Optimization 2 — Questions and Answers
Question 1: Dynamic pricing allows retailers to adjust prices in real time based on which of the following factors?
- Only vendor invoice cost changes
- Demand fluctuations, competitor pricing, and inventory levels (Correct answer)
- Predetermined seasonal calendars set annually
- Average shopper income in the trade area
Correct answer: Demand fluctuations, competitor pricing, and inventory levels
Dynamic pricing algorithms respond to real-time signals — demand, competition, and stock levels — to maximize revenue per unit.
Question 2: Cross-price elasticity of demand measures how the demand for Product A changes when the price of Product B changes. A positive cross-price elasticity indicates the two products are:
- Complementary goods
- Substitute goods (Correct answer)
- Inferior goods
- Inelastic goods
Correct answer: Substitute goods
Positive cross-price elasticity means when Product B's price rises, demand for Product A increases — they can replace each other, making them substitutes.
Question 3: A 'high-low' pricing strategy differs from EDLP primarily in that it:
- Never uses coupons or digital promotions
- Regularly cycles between higher regular prices and temporary promotional price reductions (Correct answer)
- Focuses exclusively on premium product assortments
- Avoids price matching with competitors
Correct answer: Regularly cycles between higher regular prices and temporary promotional price reductions
High-low pricing alternates between elevated everyday prices and frequent promotional reductions to create urgency and excitement.
Question 4: Zone pricing in retail refers to:
- Setting the same price for all products within a single category
- Charging different prices for the same product in different geographic areas or store clusters (Correct answer)
- Applying bulk pricing discounts based on order quantity
- Pricing items differently based on their placement in the store aisle
Correct answer: Charging different prices for the same product in different geographic areas or store clusters
Zone pricing allows retailers to vary prices by store group or geographic cluster to reflect local competitive conditions and demand.
Question 5: A retail price ending in $0.99 instead of $1.00 is an example of which psychological pricing tactic?
- Price anchoring
- Charm pricing (Correct answer)
- Prestige pricing
- Decoy pricing
Correct answer: Charm pricing
Charm pricing uses prices just below a round number (e.g., $9.99 vs. $10.00) to make items appear significantly cheaper to consumers.
Question 6: When analyzing the impact of a vendor cost increase on retail pricing decisions, a CRA analyst should consider which of the following first?
- Immediately raising retail prices by the full cost increase amount
- Assessing price elasticity and competitive positioning before adjusting the retail price (Correct answer)
- Reducing order quantities to offset the cost increase without changing price
- Discontinuing the item if margins drop below 30%
Correct answer: Assessing price elasticity and competitive positioning before adjusting the retail price
Before passing cost increases to consumers, analysts must evaluate how elastic demand is and whether competitive context allows for a price increase.
Question 7: Which metric directly reflects the profitability efficiency of retail inventory and is commonly used to evaluate whether pricing and turnover are aligned?
- Average Unit Retail (AUR)
- Gross Margin Return on Investment (GMROI) (Correct answer)
- Sell-Through Rate (STR)
- Inventory Days of Supply (DOS)
Correct answer: Gross Margin Return on Investment (GMROI)
GMROI combines gross margin percentage with inventory turnover, showing how many dollars of gross profit are generated per dollar of inventory investment.
CRA Retail Pricing Strategy & Optimization 2
Dynamic pricing allows retailers to adjust prices in real time based on which of the following factors?