Pricing Strategy Reviewer: Chapter 3
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Questions and Answers

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?

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

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

    <p>They are motivated by considerations of value delivered</p> 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.

    <p>False</p> 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.

    <p>False</p> 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.

    <p>True</p> Signup and view all the answers

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

    <p>False</p> 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.

    <p>True</p> Signup and view all the answers

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