Exam 13: Pricing Products and Services

When microwave ovens were in the introduction stage of the product life cycle, some consumers were willing to pay exorbitant prices for the innovative ovens. Taking advantage of this strong consumer desire, marketers set the price for microwave ovens at the highest initial price that customers with a very strong desire for the product were willing to pay. Marketers of microwave ovens were using a ___________pricing strategy.

A custom kitchen cabinet storeowner wishes to use target profit pricing to establish a price for a typical section of cabinets. Assume variable cost is $200 per unit, fixed cost is $44,000, and the storeowner desires a target profit of 20 percent of sales on an annual volume of 400 cabinets. What price should be charged for a typical cabinet section?

The assumption that demand is elastic at a number of price points, but is inelastic between these price points leads to which approach to pricing?

Which pricing constraint is demonstrated by the following statement: "Most public utilities must petition regulatory commissions in order to obtain a rate increase"?

"The customer is our enemy; the competitor is our friend." That's the unofficial world-view of $11-billion-in-sales Archer Daniels Midland (ADM), according to FBI mole-executive Mark Whitacre in an interview. Given this information, which of the following illegal pricing practices would ADM have been most likely to engage in?

The manager of a small gasoline station observes that while gasoline sales have been steady, the service side of the business has fallen off, and mechanics are often idle. He decides to offer a promotion - an oil change for $10 with a coupon mailed to 800 households in a 2-mile radius from his station. The $10 will just cover the costs of the oil change, and the cost of printing and mailing is $1,000. He hopes the promotion will increase regular maintenance service calls, which averages to $40. (Materials and labour per job cost $30.)If two hundred customers used the coupon, what will be the total cost of the promotion? (Disregard any opportunity costs.)

Brake-O is a franchise company that repairs brakes in cars and trucks. A radio ad for the company warned potential customers to "not fall prey to bait-and-switch schemes." The ad was telling potential customers to:

Rick's Bike Shop allows customers to use a credit card for purchases. The shop pays 3 percent of the sale to the credit card company. To promote more business, Rick decides to offer a lower price to customers paying cash-that price being 3 percent less than the standard list price. Rick is giving his customers a(n):

VIZIO based its pricing strategy on volume distribution. They sell their TVs with all of the following except:

Value-pricing is:

When Teresa went into the furniture store to buy a new sleeper sofa, she thought the prices quoted by the salesperson were too high, so she prepared to leave. As she neared the door, the salesperson asked if she would be interested in buying the sofa if the price was $150 lower. Teresa returned to the store, purchased the sofa, and felt like she had gotten a good deal. The furniture store uses:

There are a lot of skateboards on the market, but the BMW Streetcarver is the only one with stabilizers and wheel design based on BMW's automobile. This technology gives the BMW Streetcarver better control at high speeds and around sharp turns than any other brand. The skateboard is priced at $495, which leaves many consumers (especially young males)who might want to buy the Streetcarver unable to afford it. This inability to pay for the high-priced BMW-made skateboard shows the effects of ________ on sales.

Pharmacist and new father Kenneth Kramm wanted his son to take his medicine, but it was a battle. As a result, Kramm developed FLAVORx, a liquid medicine-flavouring system that can mask the taste or smell of medicine. FLAVORx tastes of strawberry or grape and has no effect on the medicinal value of the drug to which it is added. It is the first product of its kind. Because Flavorx is in the _______stage of the product life cycle, the price of the medicine-flavouring system should be_______ than the price That would usually be charged.

One problem in the interstate trucking industry is the number of trucks that return after making a delivery with an empty truck. There is a website where independent interstate truckers can look for loads that they can carry with them on their return trip. Because the trucks would be returning empty (and inefficiently), truckers, who use this website to get business that they would not have had without it, give a reduced shipping rate. This reduced rate is an example of:

Which of the following statements about the factors that influence demand is true?

Pricing constraints are:

What is the difference between fixed cost and variable cost?

Jane Westerlund owns a picture-framing shop, The Caplow Co. The average price she receives for a picture she frames for a customer is $120. This price must cover her average costs for a typical framed picture of $5 for glass, $2 for matting, and $13 for the frame, and $30 for the labour involved. She must also cover monthly expenses of $1,000 for rent and insurance, $200 for heat and electricity, $500 for advertising, and $3,500 for her salary. Assuming everything else stays the same, if Westerlund wants to increase her monthly salary to $4,000, this would cause the slope of the total cost curve to ________ and the break-even quantity to _________.

Pharmaceutical companies that manufacture drugs for AIDS patients have been asked to provide free drugs to Africa where the disease is of epidemic proportions. So far, most of the companies have continued to charge for the medication. People who believe the pharmaceutical companies should provide free AIDS medication and recognize their obligation to act altruistically want the companies to have a__________ pricing objective.

Consumers will often make comparative value assessments. That is, the consumer will judge one product or service against other alternatives or substitutes. In doing so, a " ________" emerges, which involves comparing the prices and benefits of substitute items.