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KEY: CB&E Model Pricing OBJ: 20-3 TOP: AACSB Reflective MSC: BLOOMS Application 127. Refer to Apple iPhone. For one fee, the basic AT&T cellular package includes 450 minutes of
cellular calls, with free nights and weekend minutes, unlimited data, visual voice mail, 200 text
messages, rollover minutes, and unlimited mobile-to-mobile service within the AT&T network.
AT&T is using price:
Price bundling means marketing two or more products in a single package for a special price.
Thinking REF: 330 OBJ: 20-3 TOP: AACSB Reflective KEY: CB&E Model Pricing MSC: BLOOMS Application 128. Refer to Apple iPhone. Consumers who agree to the two-year AT&T service contract will be
required to pay a cancellation fee if they leave AT&T prior to the end of the two-year period. This
fee is a consumer:
Consumer penalties are extra fees paid by consumers for violating the terms of a purchase
KEY: CB&E Model Pricing OBJ: 20-3 TOP: AACSB Reflective MSC: BLOOMS Application ESSAY
1. List in order the four steps used to set the right price for a product.
KEY: CB&E Model Pricing Establish pricing goals.
Estimate demand, costs, and profits.
Choose a price strategy to help determine a
Fine-tune the base price with pricing tactics.
OBJ: 20-1 TOP: AACSB MSC: BLOOMS Synthesis 2. What activities occur once the marketing manager has established pricing goals? Why are these
The marketing manager must first estimate quantity demand levels and elasticity of demand,
which allows for an estimate of revenues at a variety of price levels. Next, corresponding costs
should be determined for each price. Then the manager can estimate the amount of profit and
market share that can be earned at each possible price. Alternative pricing policies can be
examined in terms of revenues, costs, and profits. This information becomes the core of the price
policy by determining which price can best meet the firm’s pricing goals.
KEY: CB&E Model Pricing OBJ: 20-1 TOP: AACSB MSC: BLOOMS Synthesis 3. Name and describe the three basic strategies for setting a price on a new good or service. Under what conditions is each of the three basic pricing methods successful?
PRICE SKIMMING. This method is sometimes called a “market-plus” approach to pricing
because it denotes a high price relative to the prices of competing products. Often companies will
use skimming and then lower prices over time. This strategy is successful when (1) the market is
willing to buy the product even though it carries an above-average price, (2) when a product is
well protected legally, (3) when it represents a technological breakthrough, and (4) when it has in
some other way blocked the entry of compet...
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- Fall '13