Exam 8: Value-Based Pricing and Pricing Strategies

To use single-segment pricing,a company bases the price of a product on the costs of manufacturing and marketing the product,not on the attractive savings the customers realize over the life of the product.

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Question 1

Correct Answer:

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Price is the most visible cost of any purchase.List the seven types of non-price life-cycle costs.How can an understanding of these costs enable a business to charge a higher price than the competition?

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Question 2

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The seven types of non-price life cycle costs are:
(1)acquisition costs
(2)financing costs
(3)holding costs
(4)installation costs
(5)usage costs
(6)repair/maintenance costs
(7)disposal costs/value
A company will tend to remain focused on price until it begins to understand how customers acquire,finance,use,maintain and dispose or re-sell its product when compared to competing products.As you look deeper into the costs of ownership,you will likely find opportunities for good customer savings and value creation.For example,in a highly price-competitive market,a company can work at lowering the non-price life cycle costs compared to competitors.Thus,a business may be able to charge a higher price and still deliver a greater economic value to customers.

Calculate the price elasticity if a business maintains its current gross profit with a 5 percent price reduction and a 20 percent volume gain.

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Question 3

Correct Answer:

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The break-even volume for a company is ________.

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Question 4

In ________ pricing,the price is set on the basis of the value that customers realize when they compare the price and benefits of the company's product with those of a key competitor's product.

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Question 5

The break-even market share for a company is ________.

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Question 6

Which of the following is a favorable condition for implementing penetration pricing?

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Question 7

When the total contribution produced by a pricing strategy is lower,overall profits will also be lower because fixed costs are deducted from the total contribution.

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Question 8

Which of the following is the primary objective of penetration pricing?

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Question 9

GTB Electronics enters a new market and needs to set its pricing strategy for the market.Which of the following is a favorable condition for implementing skim pricing?

(Multiple Choice)

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Question 10

In ________,the price of a product is set to provide customers with an attractive savings after considering the life-cycle costs of acquiring,owning,using,maintaining,and disposing of a product.

(Multiple Choice)

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Question 11

A business with a competitive price and a large value advantage is most likely to ________.

(Multiple Choice)

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Question 12

To calculate break-even volume,operating income in the formula is ________.

(Multiple Choice)

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Question 13

Which of the following is true of the value-in-use pricing method?

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Question 14

Market-based pricing does not consider what the customer would be willing to pay for product performance,but depends on the costs of manufacturing the product.

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Question 15

Which of the following is most likely to occur when price is inelastic?

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Question 16

The market demand for a certain product from Silkskin Cosmetics is 10,000 units.The market share is 20%.The average selling price of a unit is $10 and the average cost price is $5.Calculate the gross profit for the product.

(Multiple Choice)

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Question 17

When sales figures for one of the products of Silkskin Cosmetics,a moisturizer,began to fall with low margins and declining volumes,the company decided to raise the price of the moisturizer.As volumes fell further,the company continued to raise prices,thus increasing margins,until it reached a price at which customers refused to buy the product.This pricing strategy is known as ________ pricing.

(Multiple Choice)

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Question 18

A price elasticity of -2 means that a price reduction of one percent will result in ________.

(Multiple Choice)

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Question 19

When the management team noted the increased interest in bikes as a mode of commuting,bicycle manufacturer Sensta introduced utility bikes aimed at the urban commuter.In which of the following cases is the company following a multiple-segment pricing strategy?

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Question 20

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To use single-segment pricing,a company bases the price of a product on the costs of manufacturing and marketing the product,not on the attractive savings the customers realize over the life of the product.

Price is the most visible cost of any purchase.List the seven types of non-price life-cycle costs.How can an understanding of these costs enable a business to charge a higher price than the competition?

Calculate the price elasticity if a business maintains its current gross profit with a 5 percent price reduction and a 20 percent volume gain.

The break-even volume for a company is ________.

In ________ pricing,the price is set on the basis of the value that customers realize when they compare the price and benefits of the company's product with those of a key competitor's product.

The break-even market share for a company is ________.

Which of the following is a favorable condition for implementing penetration pricing?

When the total contribution produced by a pricing strategy is lower,overall profits will also be lower because fixed costs are deducted from the total contribution.

Which of the following is the primary objective of penetration pricing?

GTB Electronics enters a new market and needs to set its pricing strategy for the market.Which of the following is a favorable condition for implementing skim pricing?

In ________,the price of a product is set to provide customers with an attractive savings after considering the life-cycle costs of acquiring,owning,using,maintaining,and disposing of a product.

A business with a competitive price and a large value advantage is most likely to ________.

To calculate break-even volume,operating income in the formula is ________.

Which of the following is true of the value-in-use pricing method?

Market-based pricing does not consider what the customer would be willing to pay for product performance,but depends on the costs of manufacturing the product.

Which of the following is most likely to occur when price is inelastic?

The market demand for a certain product from Silkskin Cosmetics is 10,000 units.The market share is 20%.The average selling price of a unit is $10 and the average cost price is $5.Calculate the gross profit for the product.

A price elasticity of -2 means that a price reduction of one percent will result in ________.

When the management team noted the increased interest in bikes as a mode of commuting,bicycle manufacturer Sensta introduced utility bikes aimed at the urban commuter.In which of the following cases is the company following a multiple-segment pricing strategy?

Customer Focus, customer Performance, and Profit Impact

Marketing Metrics and Marketing Profitability

Market Potential, market Demand, and Market Share

The Customer Experience and Value Creation

Market Segmentation and Segmentation Strategies

Competitive Position and Sources of Advantage

Product Positioning, branding, and Product Line Strategies

Marketing Channels and Channel Mapping

Marketing Communications, social Media, and Customer Response

Portfolio Analysis and Strategic Market Planning

Offensive Strategies

Defensive Strategies

Building a Marketing Plan

Marketing Metrics,performance,and Strategy Implementation

Market-Based Management and Financial Performance

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