Which of the Following Is True of Value-Based Pricing

question 131

Multiple Choice

Which of the following is true of value-based pricing?

• A) The targeted value and price drive decisions about what costs can be incurred and the resulting product design.
• B) Value-based pricing is mostly product driven.
• C) Value-based pricing involves setting prices based on the costs of producing, distributing, and selling the product plus a fair rate of return for its effort and risk.
• D) The marketer usually designs a product and marketing program and then sets the price.
• E) A company using value-based pricing designs what it considers to be a good product, adds up the costs of making the product, and sets a price that covers costs plus a target profit.

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Definitions:

Residual Income

The income that remains after deducting all costs, including the cost of capital, from the revenues of a business, investment, or project.

Invested Capital

The total amount of money that has been invested into a company by its owners and creditors, often used in ROI calculations.

Investment Centre

A business unit or division within an organization that is responsible for its own revenues, expenses, and assets, and is evaluated based on its return on investment.

Profit Margin

A financial metric indicating the percentage of revenue that exceeds the cost of goods sold, used to assess a company's financial health.