Deck 11: Managing Successful Products, Services, and Brands

Question 1

In starting to set a final price:
Think about your customers and competitors and set three possible prices.

Answer 1

In monopolistic competition, there are many sellers who offer differentiated products to the buyers. Although there are various non-price factors to compete, firms in monopolistic markets also face some competition over price range they set.
Considering a monopolistic market, following three prices for different units of good sold have been set.

Question 2

For Washburn, what are examples of ( a ) shifting the demand curve to the right to get a higher price for a guitar line (movement of the demand curve) and ( b ) pricing decisions involving moving along a demand curve.

Answer 2

a. Movement of the demand curve.  Movement of the demand curve to the right occurs with the signature guitars-establishing an inelastic, price-insensitive demand for the product.
b. Moving along a demand curve.  Movement along a demand curve is illustrated byBill Abel's analysis of whether he should set the unit price of the new line of guitars at $299, $329, or $349.  These points are simply different points on the same demand curve, not on different demand curves.

Question 3

What are some similarities and differences between skimming pricing, prestige pricing, and above-market pricing

Answer 3

Similarities
The similarities between skimming pricing, prestige pricing, and above-market pricing are as follows:
• Each approach involves setting a premium price for a product. These hope that the consumers will relate high quality with high price.
• Each pricing strategy is most effective when the demand for the product is inelastic, consumers are not price sensitive.
Difference
• A skimming price strategy is generally used when there are no competitively positioned products, as well as prices, to be used as benchmark.
• An above-market price approach requires a competitive reference price or point.
• Prestige pricing strategy, on the other hand, involves a greater subjective element than the other two strategies.

Question 4

In starting to set a final price:
Assume a fixed cost and unit variable cost and ( a ) calculate the break-even points and ( b ) plot a break-even chart for the three prices specified in step 2.

Question 5

In Washburn's factory, what is the break-even point for the new line of guitars if the retail price is ( a ) $349, ( b ) $389, and ( c ) $309 Also, ( d ) if Washburn achieves the sales target of 2,000 units at the $349 retail price, what will its profit be

Question 6

Touché Toiletries, Inc., has developed an addition to its Lizardman Cologne line tentatively branded Ode d'Toade Cologne. Unit variable costs are 45 cents for a three-ounce bottle, and heavy advertising expenditures in the first year would result in total fixed costs of $900,000. Ode d'Toade Cologne is priced at $7.50 for a three-ounce bottle. How many bottles of Ode d'Toade must be sold to break even

Question 7

Assume that the merger with Parker leads to the cost reductions projected in the case. What will be the ( a ) new break-even point at a $349 retail price for this line of guitars and ( b ) new profit if it sells 2,000 units

Question 8

What would be your response be to the statement, "Profit maximization is the only legitimate pricing objective for the firm "

Question 9

If for competitive reasons, Washburn eventually has to move all its production back to Asia, ( a ) which specific costs might be lowered and ( b ) what additional fixed and variable costs might it expect to incur

Question 10

How would the price equation apply to the purchase price of ( a ) gasoline, ( b ) an airline ticket, and ( c ) a checking account

Question 11

In starting to set a final price:
List two pricing objectives and three pricing constraints.

Question 12

What factors are most likely to affect the demand for the lines of Washburn guitars ( a ) bought by a first-time guitar buyer and ( b ) bought by a sophisticated musician who wants a signature model.

Question 13

Under what conditions would a camera manufacturer adopt a skimming price approach for a new product A penetration approach