Pricing Strategy

1. Why is pricing more critical to the bottom line (profit) than sales volume?
   Explain the underlying logic of why it is possible that a 1% increase in price (with no change in sales volume) contributes over 3 times more profit than a 1% increase in sales volume (without a price increase) for the average company.
2. Why is the customer's perceived value of a product typically less than the true economic value (TEV)?
   a. How might a marketer establish a perceived value close or equal to the TEV?
   b. What must be done well for a firm to successfully raise its prices?
3. It is clear that the value-based pricing approach results in substantially higher profits than any other approach, yet most companies still use the cost-oriented pricing approach. Why?

Sample Solution