Self Test #23B: Using the Components of Price

Test #1:
What are the major components of price?

Test #2:
How can a company change its Performance Benefits in order to change its price?

Test #3:
How does the Company use the Basis of Charge in its pricing?

Test #4:
How does the company change its List Price?

Test #5:

What purposes do the Optional Components of Price serve?

Test #6:
In the following examples, determine which price component the company is using to manage its pricing policy: Performance Benefit, Basis of Charge, Discounts and Premiums on the List Price or Optional Price Components.

Mail-order shoppers usually are charged for shipping according to the total price of their order – not the weight or volume of the package being shipped. So, customers who order light products feel cheated.
(SIC 5961 – 1995)

HLW has an incentive-based fee scale for a laboratory it's designing. 10% of the total fee is at risk. Various benchmarks must be hit for HLW to receive all its potential revenue.
(SIC 8900-1996)

New discount travel agents offer up to 10% rebates on the price of an airline ticket to customers who want nothing more than a ticket and a reservation.
(SIC 4700 – 1987)

United Online plans to continue offering 40 hours of free service a month to users. Those who want more service have to pay. Similarly, Bluelight offers its users 12 hours a month of free Net access. After that it charges $9.95 a month.
(SIC 7375 – 2001)

Buy-two get one-free promotions and discount coupons have helped to check market share declines for Winston and Salem.
(SIC 2111 – 1992)

The top eight e-brokers are expected to spend more than $1 billion on advertising over the next year. Many are offering new customers $75 to $100 sign-up bonuses.
(SIC 6211 – 1998)

Inland Steel, taking advantage of a week-old United Steelworkers strike against USX Corp., boosted prices between 2% and 3% for a broad range of flat-rolled steel products. USX currently has a 17% share of the U.S. market.
(SIC 3312 – 1986)

Often high fees on money funds reduce their yields to the point that investors in those funds are getting next to nothing on their cash. Often yields are less than 1% due to expenses. In about half of accounts, fees are waived.
(SIC 6289 – 2001)

Citrus Hill was calcium fortified and by 1989 had the endorsement of the American Medical Women's Association. They charge premium prices of about 11% for the standard product.
(SIC 2037 – 1989)

After the Lotus announcement, Borland announced a brief promotion to sell Quattro for $99.95 (2/3 the normal discount price) to anyone who mails in a cover from a Lotus 1-2-3 manual.
(SIC 7372 – 1988)

By using smaller boxes, Kellogg Co. is increasing cereal prices for the second time in six months, becoming the latest food company to pass along to consumers the soaring prices for ingredients and fuel. On average, cereal-box sizes were reduced by 2.4 ounces, which amounts to a low- to midsingle-digit wholesale price increase
(SIC 2000 – 2008)

Subscribers can now renew their Business Week subscription and send a year-long subscription to another person for only $59.97. That's a savings of 88% off the cover price for both subscriptions.
(SIC 2711 – 2006)

The New Jersey Nets are giving a 10% rebate to new season-ticket buyers—in the form of a gas card.
(SIC 7841 – 2008)

Food Lion has a "frequent filler" card that allows gasoline customers the opportunity to get free products, like bread or milk, from the store.
(SIC 5411 – 1997)

Amgen announced that its cancer drug Vectibix would be priced at $8000 a month but patients would receive it free after co-payments exceeded 5% of their adjusted gross income.
(SIC 2834 – 2007)

Prices have stopped falling, some are going up, in PC industry. Prices soaring in peripherals market. Memory chips in short supply. Sun raised prices $500 – $750 per megabyte despite competition.
(SIC 3571 – 1988)

JM Smucker gives anyone who buys a rival product a coupon for a free Smucker product.
(SIC 2033 – 1989)

Meanwhile personal digital assistant users are to be targeted by Dow Jones with an electronic newspaper, priced comparably to hard copy equivalents. When launched worldwide in 1994, Personal Journal will offer major news stories from each morning's Wall Street Journal, as well as updates throughout the day.
(SIC 2711 – 1993)

Bank of New York doubled its card base this year, to 1.9 million, by offering low-cost cards through the AFL-CIO. This card allows borrowers to suspend payments in the event of a strike.
(SIC 6141 – 1987)

Most banks today no longer offer a grace period for late fees. (SIC 6021 – 1999)

Colleges with fixed-tuition rates say the programs improve retention rates. Besides providing families with some measure of tuition predictability, the cost guarantee at Western Illinois University is intended to encourage students to graduate within four years.
(SIC 8221 – 2004)

Cattle ranchers raising animals with as little as 12% body fat, about 1/3 less than usual. Excel, a Wichita packer, began paying ranchers $2 more per hundredweight for low-fat animals.
(SIC 200 – 1987)

Furr's submitted to Fleming a qualified competitive bid by a competing food wholesaler. Under the terms of the supply contract, if Furr's submits a qualified bid from another supplier to provide a comparable range of products at prices lower than those charged by Fleming (by more than a stated percentage) Fleming can either lower its prices to within the agreed percentage over the competing bid or allow Furr's to accept the competitor's bid .
(SIC 5141 – 1997)

Thomas Group (management consulting) uses performance-based pricing. In some cases, up to 50% of its fees are based on quantifiable results, such as cycle-time reductions, inventory reduction, margin enhancements, profit improvements, or revenue increases.
(SIC 8742 – 1998)

Sun fell on hard times. Rivals like IBM and HP started offering machines with less expensive hardware and software.
(SIC 3571 – 2004)

Syntex introduced a generic version of Naproxyn 2 months before its patent expired, grabbing 68% of the generic market. That forced the generic price to plunge as much as 90% below Naprosyn's, causing very low profit margins.
(SIC 2834 – 1994)

Ford guarantees the trade-in price of its new Merkur Scorpios.
(SIC 3711 – 1987)

Electronic textbooks may present an option for students struggling with rising textbook costs. Typically password protected online access costs about half of the price of a traditional book.
(SIC 2731 – 2006)

In late 1999, Oracle changed its pricing structure and began charging customers according to how many megahertz were used by computers running the databases. Customers hated the change.
(SIC 7372 – 1999)

P&G, seeking to cut its distribution costs, is considering requiring retailers to buy its products only in large quantities, effectively forcing those that need smaller amounts to pay a premium to buy through wholesalers.
(SIC 2840 – 1993)

Hewlett-Packard offers $125 off when you purchase an HP PC and monitor combination.
(SIC 3571 – 1997)

Wind River is pushing to get more gadget makers to use the company's software development tools and raise the performance bar in the industry. Wind River offers royalty-free deals, in which companies pay a higher upfront fee to use the development software rather than a per-unit royalty when their device ships.
(SIC 7372 – 2005)

P&G is cutting discounts and other short-term incentives that wholesalers and retailers have grown to love, to reduce trade loading.
(SIC 2840 – 1992)

Some manufacturers offer discounts for customers who order over the Internet or an intranet system.
(SIC 0000 – 2007)

As home prices surge, sellers have more leverage with traditional real estate agents. Often, they can negotiate a small reduction on the typical 6% fee.
(SIC 6531 – 2005)

Weatherford drilling service firm has had to contend with higher materials prices, which means instituting surcharges for customers. Raw materials costs are up 20%-60%, and concurrent surcharges began in April.
(SIC 1381 – 2004)

Junking its Dreamcast machines, which it introduced a little over a year ago, leaves Sega with a costly inventory of more that two million machines; it plans to slash the $99 price to clear them out.
(SIC 3571 – 2001)

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