Pricing Strategy Reviewer: Chapter 3

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What is the concept behind the Switching-Cost Effect?

Buyers are less sensitive to the price of a product as the added costs of switching a supplier decreases

Buyers are more sensitive to the price of a product as the added costs of switching a supplier decreases

Buyers are less sensitive to the price of a product as the added costs of switching a supplier rises (correct)

Buyers are more sensitive to the price of a product as the added costs of switching a supplier rises

What does the Difficult-Comparison Effect suggest about economic value?

It assumes that customers do not consider economic value in their purchase decisions

It assumes that customers always make rational decisions based on economic value

It assumes that customers can actually compare what the alternative suppliers have to offer (correct)

It assumes that customers cannot compare what the alternative suppliers have to offer

Why do customers in the real world resort to heuristics and mental shortcuts according to the text?

Because they do not care about making informed decisions

Because they do not have enough time to make informed decisions or understand consequences of poor choices (correct)

Because they have perfect information about all alternatives

Because they always make rational decisions based on economic value

What is true value according to the text?

What is perceived by consumers who are fully informed of alternatives and understand differentiation benefits Signup and view all the answers

According to market research on willingness-to-pay, what is the assumption about purchase decisions?

They are motivated by considerations of value delivered Signup and view all the answers

Customers in the real world are fully informed of alternatives and act in rational ways according to the text.

False Signup and view all the answers

Buyers are more sensitive to the price of a product as the added costs of switching a supplier rises according to the Switching-Cost Effect.

False Signup and view all the answers

The Competitive-Reference Effect assumes that customers rely heavily on heuristics and other mental shortcuts to guide their decision process.

True Signup and view all the answers

The Difficult-Comparison Effect suggests that customers can easily compare what the alternative suppliers have to offer.

False Signup and view all the answers

The assumption in market research on willingness-to-pay is that purchase decisions are motivated by considerations of value delivered.

True Signup and view all the answers

Pricing Strategy Reviewer: Chapter 3

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Questions and Answers

What is the concept behind the Switching-Cost Effect?

What does the Difficult-Comparison Effect suggest about economic value?

Why do customers in the real world resort to heuristics and mental shortcuts according to the text?

What is true value according to the text?

According to market research on willingness-to-pay, what is the assumption about purchase decisions?

Customers in the real world are fully informed of alternatives and act in rational ways according to the text.

Buyers are more sensitive to the price of a product as the added costs of switching a supplier rises according to the Switching-Cost Effect.

The Competitive-Reference Effect assumes that customers rely heavily on heuristics and other mental shortcuts to guide their decision process.

The Difficult-Comparison Effect suggests that customers can easily compare what the alternative suppliers have to offer.

The assumption in market research on willingness-to-pay is that purchase decisions are motivated by considerations of value delivered.

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