1. What are the differences between cost-based and value-based pricing?

2. Pricing is based on customer perceptions of value and costs in addition to other internal factors. Discuss these other internal factors and how they might affect the pricing of a new Sony MP# player.

Explain why elasticity of demand is such an important concept to marketers who sell a "commodity product."

3. Why is product bundling pricing effective?

4. You are an owner of a small independent chain of coffee houses competing head-to-head with Starbucks. The retail price your customers pay for coffee is exactly the same as at Starbucks. The wholesale price you pay for roasted coffee beans has increased by 25%.

You understand that you cannot absorb this increase and that it must be passed on to your customers. However, you are concerned about the consequences of an open price increase. Discuss three alternative price-increase strategies that address your concerns.