Assignment
A. What are the three possible starting points for the process of setting an initial price that are described in this chapter?
B. Suppose that you have a service business such as house painting. Describe how you would use cost-plus pricing in developing an estimate for a potential customer.
C. Describe how you would research industry norms on gross margins to inform your company's decisions regarding pricing-related profit goals.
D. Cost-based pricing is sometimes justified by arguing that it ensures that a company receives a good profit on the products that it sells. Describe a problem with this justification. What does this problem have to do with the main disadvantage of cost-based pricing?
E. What is parity pricing? How does it differ from other forms of competition-based pricing?
F. What might make it difficult to determine the prices of one's competitors? When such difficulties occur, what could be done to surmount them?
G. Describe the concept of a product's VTC. Why is the monetary estimation of this value important for price setting?
H. Describe the concept of a product's reference value. How would you calculate the reference value for a consumer product whose package size is different than the package sizes of all of its competing products?
I. What is the difference between a positive differentiating factor and a negative one? Is it possible for an item to simultaneously have both positive and negative differentiating factors?
J. Which would be more prudent: pricing an item above its VTC, exactly at its VTC, or below its VTC? Explain your reasoning.
K. Describe a situation where different market segments would have different VTCs for the same product.
L. If a company uses customer-based pricing, does that mean that costs and the prices of competing products are not taken into account?