Chapter 5: Pricing Policy
Policy Evaluation
1. For each of the following pricing policies, state whether or not you think it is a profit-
enhancing, profit-destroying, or neutral policy and explain your rationale.
a) Giving double or triple frequent flyer miles to induce customers to try the airline
on new routes where competitor’s already exist.
b) Giving airline passengers who have a bad experience (e.g. seriously delayed
flight due to equipment problem) bonus frequent flyer miles as compensation,
even though not required legally to do so.
2. A local health club offers is trying to induce new memberships in January as people are
making new resolutions to lose weight. They are considering reducing the rate to
$75/month for the first four months of an annual membership costing $100/month.
Describe at least two alternative policies for inducing trial and explain why you believe
your alternatives are more likely to maximize the club’s revenue over the next year.
3. You are the manufacturer of medical tests used in hospitals for which a typical hospital
will spend $20,000 to more than $100,000 per year. Unfortunately, a problem with your