Title: Pricing Strategy Fundamentals — LearnCoachAssist

Q: What is pricing strategy?
A: The set of methods and principles a business uses to set the price of its products or services to achieve specific business objectives.

Q: What is the primary goal of pricing strategy?
A: To capture value, generate revenue, and align price with customer perception, costs, and competition.

Q: Name the three core factors that determine price (the "three C's" of pricing).
A: Customer, Cost, and Competition.

Q: What is cost-based pricing?
A: A pricing method where the selling price is determined by adding a fixed markup percentage to the product's cost.

Q: What is the formula for cost-plus (markup) pricing?
A: Selling Price = Unit Cost × (1 + Markup Percentage).

Q: What is value-based pricing?
A: Setting price primarily based on the perceived value to the customer rather than on the cost of production.

Q: What is competition-based pricing?
A: Pricing determined mainly by analyzing competitors' prices, often matching, undercutting, or positioning relative to them.

Q: What is demand-based pricing?
A: Pricing adjusted according to the level of customer demand for a product at different times or segments.

Q: What is dynamic pricing?
A: A strategy where prices fluctuate in near real-time based on market demand, supply, competitor prices, or customer profile.

Q: What is penetration pricing?
A: Setting a low initial price to enter a market quickly and attract customers, then potentially raising it later.

Q: What is price skimming?
A: Setting a high initial price to capture consumers willing to pay a premium, then lowering it over time.

Q: What is premium pricing?
A: Keeping prices deliberately high to signal quality, exclusivity, or luxury status.

Q: What is economy pricing?
A: Keeping prices low by minimizing costs, targeting price-sensitive customers.

Q: What is psychological pricing?
A: Using price points and presentation to influence customer perception, e.g. $9.99 instead of $10.

Q: What is charm pricing?
A: Setting prices just below a round number (e.g. $99.95) to make the price seem significantly lower.

Q: What is prestige (round-number) pricing?
A: Using round numbers (e.g. $100, $500) to convey quality and exclusivity.

Q: What is odd-even pricing?
A: Setting prices ending in odd numbers to suggest a bargain, or in even numbers to suggest quality.

Q: What is bundle pricing?
A: Selling multiple products or services together as a package at a single combined price.

Q: What is captive pricing?
A: Pricing the base product low but charging higher prices for necessary add-ons, consumables, or accessories.

Q: What is freemium pricing?
A: Offering a basic product or service for free while charging for premium features, content, or usage.

Q: What is tiered pricing?
A: Offering several product or service packages at different price points, each with progressively more features.

Q: What is subscription pricing?
A: Charging customers a recurring fee (weekly, monthly, annually) for continued access to a product or service.

Q: What is usage-based (consumption) pricing?
A: Charging customers based on how much of the product or service they actually use.

Q: What is flat-rate pricing?
A: Charging a single fixed price regardless of usage or customer characteristics.

Q: What is per-seat pricing?
A: A pricing model where the customer pays for each individual user or "seat" that accesses the product.

Q: What is price lining?
A: Offering a limited number of set price points (e.g. good, better, best) across a product line.

Q: What is versioning?
A: Offering differentiated versions of a product (e.g. basic, pro, enterprise) at different price points.

Q: What is yield management?
A: Adjusting prices to allocate a fixed, perishable capacity to different customer segments to maximize revenue.

Q: What is price discrimination?
A: Charging different prices to different customer groups for essentially the same product or service.

Q: Name the three conditions required for successful price discrimination.
A: (1) Market power, (2) ability to segment the market, (3) prevention of resale between segments.

Q: What is first-degree (perfect) price discrimination?
A: Charging each individual customer their maximum willingness to pay.

Q: What is second-degree price discrimination?
A: Charging different prices based on the quantity purchased or the version chosen (e.g. bulk discounts, product tiers).

Q: What is third-degree price discrimination?
A: Charging different prices to distinct customer groups (e.g. students, seniors, geographic regions).

Q: What is two-part (two-part tariff) pricing?
A: Charging a fixed fee plus a per-unit variable fee (e.g. gym membership + class fees).

Q: What is peak (off-peak) pricing?
A: Charging higher prices during high-demand periods and lower prices during low-demand periods.

Q: What is geographic pricing?
A: Adjusting prices based on the customer's location, region, or country.

Q: What is transfer (FOB) pricing?
A: Pricing charged between divisions of the same company, often used in international trade.

Q: What is export pricing?
A: The price a manufacturer charges for goods sold to a foreign market.

Q: What is the difference between list price and net price?
A: List price is the published/retail price; net price is what the customer actually pays after discounts, rebates, and adjustments.

Q: What is a discount?
A: A reduction from the list price offered to certain customers or under certain conditions.

Q: What is a trade discount?
A: A discount given to channel partners (wholesalers, retailers) off the list price.

Q: What is a quantity discount?
A: A price reduction based on the volume purchased.

Q: What is a cumulative (loyalty) quantity discount?
A: A discount that grows as total purchases over a period accumulate, rewarding repeat business.

Q: What is a non-cumulative quantity discount?
A: A discount applied to a single large order but not carried forward to future orders.

Q: What is a cash discount?
A: A reduction in price offered to buyers who pay quickly (e.g. "2/10 net 30").

Q: What is a seasonal discount?
A: A price reduction offered during off-peak seasons to stimulate demand.

Q: What is a promotional (sales) discount?
A: A temporary price reduction used to drive short-term sales or clear inventory.

Q: What is a rebate?
A: A partial refund returned to the buyer after the purchase has been completed, rather than a reduction at point of sale.

Q: What is an allowance?
A: A price reduction given in exchange for performing a specific activity, such as promoting or displaying the product.

Q: What is the difference between a discount and a markdown?
A: A discount is offered by the seller; a markdown is initiated by the seller to lower the original price (e.g. for clearance).

Q: What is MSRP?
A: Manufacturer's Suggested Retail Price — the price a manufacturer recommends a retailer charge.

Q: What is MAP pricing?
A: Minimum Advertised Price — the lowest price a retailer is allowed to advertise for a product.

Q: What is the difference between MAP and MSRP?
A: MSRP is a suggested price; MAP is a minimum price the manufacturer requires retailers to advertise.

Q: What is price elasticity of demand?
A: A measure of how much the quantity demanded of a product changes in response to a change in its price.

Q: What is the formula for price elasticity of demand?
A: Price Elasticity = % Change in Quantity Demanded / % Change in Price.

Q: What does elastic demand mean?
A: A small change in price causes a proportionally larger change in quantity demanded (elasticity magnitude > 1).

Q: What does inelastic demand mean?
A: A change in price causes a proportionally smaller change in quantity demanded (elasticity magnitude < 1).

Q: What is unit elastic demand?
A: A 1% change in price causes an exact 1% change in quantity demanded (elasticity = 1).

Q: What factors make demand more price-elastic?
A: Many substitutes, large share of customer budget, non-essential goods, long time horizon, narrow market definition.

Q: What factors make demand more price-inelastic?
A: Few or no substitutes, small share of budget, necessities, short time horizon, brand loyalty, addiction.

Q: What is cross-price elasticity of demand?
A: The percentage change in quantity demanded of one good divided by the percentage change in price of another good.

Q: What does a positive cross-price elasticity indicate?
A: The two goods are substitutes (demand for one rises when the other's price rises).

Q: What does a negative cross-price elasticity indicate?
A: The two goods are complements (demand for one falls when the other's price rises).

Q: What is income elasticity of demand?
A: The percentage change in quantity demanded divided by the percentage change in consumer income.

Q: What does positive income elasticity indicate?
A: The good is a normal good — demand rises as income rises.

Q: What does negative income elasticity indicate?
A: The good is an inferior good — demand falls as income rises.

Q: How does price relate to total revenue when demand is elastic?
A: Price and total revenue move in opposite directions: lowering price increases revenue.

Q: How does price relate to total revenue when demand is inelastic?
A: Price and total revenue move in the same direction: raising price increases revenue.

Q: What is the optimal price for revenue when demand is unit elastic?
A: Any price change keeps total revenue constant; revenue is maximized at the price where elasticity = 1.

Q: What is Veblen good behavior?
A: Demand for a luxury good increases as its price increases, due to its status or conspicuous-consumption appeal.

Q: What is the Giffen good paradox?
A: A rare case where demand rises as price rises for an inferior good with no substitutes, contrary to standard theory.

Q: What is the law of demand?
A: All else equal, when the price of a good rises, the quantity demanded falls, and vice versa.

Q: What is the demand curve?
A: A graph showing the relationship between the price of a good and the quantity demanded at each price.

Q: What is the supply curve?
A: A graph showing the relationship between the price of a good and the quantity producers are willing to supply at each price.

Q: What is market-clearing (equilibrium) price?
A: The price at which the quantity supplied equals the quantity demanded.

Q: What happens to price when demand exceeds supply?
A: Price tends to rise until equilibrium is restored.

Q: What happens to price when supply exceeds demand?
A: Price tends to fall until equilibrium is restored.

Q: What is the difference between fixed and variable costs?
A: Fixed costs do not change with output (rent, salaries); variable costs change with output volume (materials, commissions).

Q: What is marginal cost?
A: The additional cost incurred by producing one more unit of a product.

Q: What is marginal revenue?
A: The additional revenue earned by selling one more unit of a product.

Q: What is the profit-maximizing output rule?
A: Produce where marginal revenue equals marginal cost (MR = MC).

Q: What is contribution margin?
A: Price per unit minus variable cost per unit — the amount each unit contributes to covering fixed costs and generating profit.

Q: What is break-even price?
A: The price at which total revenue equals total cost, so profit is zero.

Q: What is the break-even formula in units?
A: Break-even Units = Fixed Costs / (Price − Variable Cost per Unit).

Q: What is markup?
A: The amount added to cost to set the selling price, expressed as a percentage of cost.

Q: What is margin?
A: Profit as a percentage of the selling price (as opposed to markup, which is profit as a percentage of cost).

Q: How do you convert margin to markup?
A: Markup = Margin / (1 − Margin).

Q: What is target-return (target-profit) pricing?
A: Setting price to achieve a specified rate of return on investment at an expected sales volume.

Q: What is ROI in pricing context?
A: Return on Investment — the profit earned on the capital invested, often used as a target-return pricing benchmark.

Q: What is perceived value?
A: The customer's assessment of a product's worth, based on benefits received versus alternatives available.

Q: What is the value triangle?
A: A framework: the price the customer pays must exceed the cost to serve and be less than the perceived value created.

Q: What is a reference price?
A: The price a customer has in mind based on past purchases, competitors, or context, against which new prices are compared.

Q: What is price signaling?
A: Using price to communicate something about product quality, exclusivity, or positioning.

Q: What is the price-quality heuristic?
A: A consumer's tendency to assume higher-priced products are of higher quality.

Q: What is anchoring in pricing?
A: The cognitive bias where the first price seen heavily influences perception of subsequent prices.

Q: What is decoy pricing (asymmetric dominance)?
A: Adding a third, less attractive option to a choice set to push customers toward a higher-priced target option.

Q: What is the rule of 100 in advertising?
A: When a product's price is under $100, advertise the percentage discount; when over $100, advertise the dollar amount saved.

Q: What is loss-leader pricing?
A: Selling a product at a loss (or very low margin) to attract customers who will then buy other, more profitable items.

Q: What is every-day low pricing (EDLP)?
A: Maintaining consistently low prices over time instead of relying on frequent promotions.

Q: What is high-low pricing?
A: Charging higher regular prices but running frequent promotions and discounts to drive traffic.

Q: What is a price war?
A: Mutual, successive price cuts by competitors trying to undercut each other, often compressing industry margins.

Q: What typically triggers a price war?
A: A new low-cost entrant, excess industry capacity, or a competitor's aggressive price cut.

Q: What is price leadership?
A: A situation where one dominant firm sets the price and other competitors follow.

Q: What is predatory pricing?
A: Setting prices below cost with the intent of driving competitors out of business, then raising prices later.

Q: Why is predatory pricing often illegal?
A: It violates antitrust laws in many jurisdictions, as it can harm competition and consumers long term.

Q: What is limit pricing?
A: Setting a price low enough to deter new competitors from entering the market.

Q: What is experience curve pricing?
A: Setting prices based on the assumption that costs fall as cumulative production experience grows.

Q: What is the experience curve effect?
A: The observation that unit costs decline by a fixed percentage (e.g. 20-30%) each time cumulative output doubles.

Q: What is the difference between value-based and cost-plus pricing?
A: Value-based sets price from customer value; cost-plus sets price from internal cost plus a markup.

Q: What is willingness to pay (WTP)?
A: The maximum price a customer is willing to pay for a product or service.

Q: What is Van Westendorp's Price Sensitivity Meter?
A: A market research technique that asks four questions to find acceptable price ranges: too cheap, cheap, expensive, too expensive.

Q: What is the Gabor-Granger method?
A: A pricing research technique that asks consumers how likely they are to buy at various price points to estimate demand curves.

Q: What is conjoint analysis?
A: A statistical method that determines how customers value different features of a product, useful for setting feature-based prices.

Q: What is a price floor?
A: A government- or seller-imposed minimum price below which a product cannot be sold.

Q: What is a price ceiling?
A: A government-imposed maximum price above which a product cannot legally be sold.

Q: What happens when a price ceiling is set below the equilibrium price?
A: A shortage develops because quantity demanded exceeds quantity supplied.

Q: What happens when a price floor is set above the equilibrium price?
A: A surplus develops because quantity supplied exceeds quantity demanded.

Q: What is the difference between skimming and penetration pricing?
A: Skimming starts high and lowers over time to capture premium buyers; penetration starts low to build market share.

Q: What is the difference between EDLP and high-low pricing?
A: EDLP holds prices low and steady; high-low uses high regular prices with frequent promotional discounts.

Q: What is the difference between bundling and tying?
A: Bundling sells multiple products together; tying requires buying one product in order to buy another.