Pricing Strategy and Price Management
PRICING STRATEGY AND PRICE MANAGEMENT | EXAM
QUESTIONS AND CORRECT ANSWERS | LATEST VERSION
2026/2027
PRICING STRATEGY AND PRICE MANAGEMENT
1. Which element of the marketing mix directly generates revenue for
the firm?
A. Product
B. Promotion
C. Price
D. Place
ANSWER : C. Price
Price is the only element of the mix that brings money in; product, place
and promotion all create costs.
2. Value-based pricing begins with which of the following?
A. Unit cost plus a standard markup
B. A review of competitor price lists
C. An assessment of the economic value customers place on the offering
D. The firm's target return on investment
ANSWER : C. An assessment of the economic value customers place
on the offering
Value-based pricing starts from the customer's perceived value and works
backward to a price, rather than starting from cost.
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, Pricing Strategy and Price Management
3. The main weakness of cost-plus pricing is that it:
A. Ignores customer willingness to pay and competitive conditions
B. Always produces a loss in the long run
C. Is difficult to calculate for most products
D. Is prohibited in regulated industries
ANSWER : A. Ignores customer willingness to pay and competitive
conditions
Cost-plus looks only inward at costs, so it can leave money on the table or
price the product out of the market.
4. In the strategic pricing pyramid, which layer forms the foundation on
which all others rest?
A. Pricing policy
B. Value creation
C. Price and value communication
D. Price level
ANSWER : B. Value creation
Every pricing decision depends on first understanding and creating value
for customers, so value creation sits at the base.
5. Studies of large companies often cite that a 1% improvement in
price, holding volume constant, raises operating profit by roughly:
A. 11%
B. 25%
C. 3%
D. 1%
ANSWER : A. 11%
Because a price gain drops straight to profit, a 1% price increase typically
lifts operating profit by about 11% for an average firm.
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, Pricing Strategy and Price Management
6. In economic value to the customer (EVC) analysis, the reference
value is:
A. The highest price a customer has ever paid
B. The price of the customer's next-best alternative
C. The seller's published list price
D. The seller's total cost of production
ANSWER : B. The price of the customer's next-best alternative
EVC equals the reference value (cost of the next-best alternative) plus the
differentiation value of the product.
7. Differentiation value in an EVC calculation:
A. Equals the seller's gross margin
B. Is ignored in business-to-business markets
C. Can be positive or negative depending on how the product compares
with the next-best alternative
D. Is always positive
ANSWER : C. Can be positive or negative depending on how the
product compares with the next-best alternative
If the product is worse than the alternative on some attribute, that
attribute contributes negative differentiation value.
8. The pocket price is best defined as:
A. The list price before any discounts
B. The invoice price minus all off-invoice discounts and allowances
C. The price a customer remembers paying
D. The manufacturer's variable cost per unit
ANSWER : B. The invoice price minus all off-invoice discounts and
allowances
The pocket price is what the seller actually keeps after leakage such as
rebates, freight allowances and payment-term discounts.
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, Pricing Strategy and Price Management
9. A common pitfall of 'customer-driven' pricing is that it:
A. Trains buyers to negotiate harder because discounts are granted
whenever they object
B. Requires detailed cost accounting
C. Ignores what customers are willing to pay
D. Leads to prices that are always too high
ANSWER : A. Trains buyers to negotiate harder because discounts
are granted whenever they object
When sales staff concede on price whenever buyers push back, customers
learn that complaining earns discounts and margins erode.
10. Pricing aggressively to maximize market share most often risks:
A. Reducing sales volume
B. Higher customer acquisition costs
C. Triggering price wars that lower industry profitability
D. Violating the Robinson-Patman Act
ANSWER : C. Triggering price wars that lower industry profitability
Share-driven pricing invites competitive retaliation, and the resulting
price war usually destroys profit for everyone.
11. A firm facing severe overcapacity that sets price to cover variable
costs and part of fixed costs is pursuing which objective?
A. Product-quality leadership
B. Target return
C. Market skimming
D. Survival
ANSWER : D. Survival
A survival objective accepts a low price as long as it covers variable cost
and contributes something toward fixed cost.
12. Target-return pricing sets the price to:
A. Recover research and development costs in one year
B. Match the lowest competitor price
C. Maximize unit sales
D. Earn a specified return on investment
ANSWER : D. Earn a specified return on investment
Target-return pricing builds the desired ROI into the price calculation.
Page 4 of 55
PRICING STRATEGY AND PRICE MANAGEMENT | EXAM
QUESTIONS AND CORRECT ANSWERS | LATEST VERSION
2026/2027
PRICING STRATEGY AND PRICE MANAGEMENT
1. Which element of the marketing mix directly generates revenue for
the firm?
A. Product
B. Promotion
C. Price
D. Place
ANSWER : C. Price
Price is the only element of the mix that brings money in; product, place
and promotion all create costs.
2. Value-based pricing begins with which of the following?
A. Unit cost plus a standard markup
B. A review of competitor price lists
C. An assessment of the economic value customers place on the offering
D. The firm's target return on investment
ANSWER : C. An assessment of the economic value customers place
on the offering
Value-based pricing starts from the customer's perceived value and works
backward to a price, rather than starting from cost.
Page 1 of 55
, Pricing Strategy and Price Management
3. The main weakness of cost-plus pricing is that it:
A. Ignores customer willingness to pay and competitive conditions
B. Always produces a loss in the long run
C. Is difficult to calculate for most products
D. Is prohibited in regulated industries
ANSWER : A. Ignores customer willingness to pay and competitive
conditions
Cost-plus looks only inward at costs, so it can leave money on the table or
price the product out of the market.
4. In the strategic pricing pyramid, which layer forms the foundation on
which all others rest?
A. Pricing policy
B. Value creation
C. Price and value communication
D. Price level
ANSWER : B. Value creation
Every pricing decision depends on first understanding and creating value
for customers, so value creation sits at the base.
5. Studies of large companies often cite that a 1% improvement in
price, holding volume constant, raises operating profit by roughly:
A. 11%
B. 25%
C. 3%
D. 1%
ANSWER : A. 11%
Because a price gain drops straight to profit, a 1% price increase typically
lifts operating profit by about 11% for an average firm.
Page 2 of 55
, Pricing Strategy and Price Management
6. In economic value to the customer (EVC) analysis, the reference
value is:
A. The highest price a customer has ever paid
B. The price of the customer's next-best alternative
C. The seller's published list price
D. The seller's total cost of production
ANSWER : B. The price of the customer's next-best alternative
EVC equals the reference value (cost of the next-best alternative) plus the
differentiation value of the product.
7. Differentiation value in an EVC calculation:
A. Equals the seller's gross margin
B. Is ignored in business-to-business markets
C. Can be positive or negative depending on how the product compares
with the next-best alternative
D. Is always positive
ANSWER : C. Can be positive or negative depending on how the
product compares with the next-best alternative
If the product is worse than the alternative on some attribute, that
attribute contributes negative differentiation value.
8. The pocket price is best defined as:
A. The list price before any discounts
B. The invoice price minus all off-invoice discounts and allowances
C. The price a customer remembers paying
D. The manufacturer's variable cost per unit
ANSWER : B. The invoice price minus all off-invoice discounts and
allowances
The pocket price is what the seller actually keeps after leakage such as
rebates, freight allowances and payment-term discounts.
Page 3 of 55
, Pricing Strategy and Price Management
9. A common pitfall of 'customer-driven' pricing is that it:
A. Trains buyers to negotiate harder because discounts are granted
whenever they object
B. Requires detailed cost accounting
C. Ignores what customers are willing to pay
D. Leads to prices that are always too high
ANSWER : A. Trains buyers to negotiate harder because discounts
are granted whenever they object
When sales staff concede on price whenever buyers push back, customers
learn that complaining earns discounts and margins erode.
10. Pricing aggressively to maximize market share most often risks:
A. Reducing sales volume
B. Higher customer acquisition costs
C. Triggering price wars that lower industry profitability
D. Violating the Robinson-Patman Act
ANSWER : C. Triggering price wars that lower industry profitability
Share-driven pricing invites competitive retaliation, and the resulting
price war usually destroys profit for everyone.
11. A firm facing severe overcapacity that sets price to cover variable
costs and part of fixed costs is pursuing which objective?
A. Product-quality leadership
B. Target return
C. Market skimming
D. Survival
ANSWER : D. Survival
A survival objective accepts a low price as long as it covers variable cost
and contributes something toward fixed cost.
12. Target-return pricing sets the price to:
A. Recover research and development costs in one year
B. Match the lowest competitor price
C. Maximize unit sales
D. Earn a specified return on investment
ANSWER : D. Earn a specified return on investment
Target-return pricing builds the desired ROI into the price calculation.
Page 4 of 55
