Exam 19: Pricing Concepts

Factors affecting pricing decisions can include demand, distribution, and the way in which the product is promoted.

A firm that competes on a price basis is unable to change prices frequently.

Comparison of various prices and various breakeven points will tell the marketer exactly what price to charge.

Noncumulative discounts are one-time reductions in prices based on the number of units purchased, the dollar value of the order, or the product mix purchased.

Brady Juraco is the owner of a company that manufactures metal doors that are utilized by retail outlets in shopping malls or higher crime areas where the retailer wants to provide additional security to prevent break-ins. Brady is developing a new model that provides greater metal strength, is lighter, and is more attractive when in a closed position. He's interested in determining the breakeven point in order to establish minimum goals for the first month of production. Brady estimates that his fixed costs to produce the new model will be $60,000. He plans to sell the doors to retailers at a list price of $249. Variable costs are estimated to be $95. How many units will his business need to sell in order to reach the breakeven point?

Suppose that the watchband department of Timex sells completed watchbands to the finished watch department. The finished watch department is charged the price it would have to pay an outside watchband manufacturer less a discount to reflect low sales and transportation costs. This method of pricing is called ____ pricing.

Identify and describe the major factors that affect pricing decisions.

To determine the breakeven point in units, divide the fixed costs by

What are the terms of F.O.b. pricing?

Monopolies are the most likely type of firm to engage in price wars.

Changes in buyers' attitudes, other components of the marketing mix, and uncontrollable environmental factors can influence demand.

To avoid the appearance of price fixing, marketers must develop independent pricing policies and set prices in ways that do not even hint at collusion.

Knowing the number of units necessary to break even is important in setting the price.

Carmen Sanchez is a sales representative for Sherwin Williams and her territory includes approximately 120-mile radius of her "home" retail store. Her customers are painting contractors and facility managers of office complexes, apartment buildings, hospitals, and other businesses that might have commercial painting needs. Carmen uses her company vehicle and spends about five hours each day in her car visiting her customers and prospecting for new business. Since her territory is so large, Carmen puts about 200 miles on her car each day, which consumes a lot of gasoline. She tries to be economical when choosing gas stations, but it doesn't really matter how much the gas costs, she pays the price. In this case, demand for gasoline is _________.

Brittany Williams is a division 3 collegiate volleyball player and wears a lot of athletic apparel such as shorts, yoga pants, tights, and tops. She loves having the latest styles and colors but likes to save money too. Brittany has discovered that she can purchase the top quality brands such as Nike, Under Armour, and Adidas at Dunham's Sports. The store is not as large as Dick's Sporting Goods, but Brittany believes the selection, price point, and level of quality is very competitive. She enjoys purchasing name-brand items at 25% to 30% savings compared to Dick's Sporting Goods. Which of the following best describes Brittany and her selection of Dunham's Sports as her preferred store for sports apparel?

While giving trade discounts is a relatively standard practice, discounts tend to vary between industries.

The Loft is an upscale lounge that caters to young professionals who enjoy drinks after work in a casual and comfortable setting. The Loft has a specialty cocktail menu with items that its owner and head bartender, Stefan Young, created. All cocktails on the specialty menu are $15 each and include a variety of alcohol or liquors and are "hand-crafted" with ingredients such as egg whites, orange blossom water, lemon juice, lime juice, and simple syrup. Stefan has priced his cocktails so that he earns a 70% profit margin on each sale. Thus, the total costs to prepare each specialty cocktail are 30% of the retail price. Last month, Stefan sold 1,250 specialty cocktails. How much profit did Stefan's Loft business earn on the sale of specialty cocktails?

Both the Federal Trade Commission Act and the Wheeler-Lea Act prohibit

What a price means or what it communicates to customers is called

If Colgate-Palmolive wants to maximize profit on its toothpaste, it should operate at the point where