Question

50) In pricing her line of Smart Phone Cases, Lucie Loo remembers hearing that she needs to consider three decisions with respect to pricing her product line. She seems to remember that one decision is to identify the lowest-priced product and set the price to drive traffic. Another decision she needs to make is to identify the highest priced product and position it as her premium offering. What is the third decision Lucie needs to make?

estimate the total Economic Value (EV) for the complete product line to ensure she makes a profit

set the price differentials for all other products in the line to reflect their perceived value

ensure that the cross elasticity of demand between the products is positive

set the prices for the rest of the line to minimize product cannibalization

determine the break-even quantity for each item so that she knows how much inventory to have on hand for each item

Answer 1

Ans: Second option: Set the price differentials for all other products in the line to reflect their perceived value.

Explanation: Because Lucie Loo has settled on the pricing of low-end and high-end goods, the remaining pricing of goods will also be based on how much consumers want it or need it, rather than on the actual price. This draws customers and it is worth buying from customers.

Rest incorrect answer because:

Option A: Estimate the total Economic Value (EV) for the complete product line to ensure she makes a profit: This is achieved by deciding on the average price range of the whole product line and not classifying the product line based on the value bid.

Option D: Set the prices for the rest of the line to minimize product cannibalization: It is not appropriate because all the items are for sale and all the product line is to be sold at any time.

Options C&E:

Ensure that the cross elasticity of demand between the products is positive.

Determine the break-even quantity for each item so that she knows how much inventory to have on hand for each item.

Related to the commodity and its demand. Neither of them apply to product line pricing so both disqualify as options

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