Exam 20: Setting the Right Price

The first step in setting the right price for a new product is to estimate demand,costs,and profits.

The practice of charging a very low price for a product with the intent of driving competitors out of business or out of a market is called:

For over 100 years,resale price maintenance has been illegal under the:

A base price may be lowered through the use of a discount.Discounts take a variety of forms and have several different objectives.Name and define three types of discounts (do not include allowances or rebates).State the main objective of the each type of discount you identify.

Kule,Inc.produces three different lines of car racks for transporting large,bulky items. Sales \ 140,000 \ 100,000 \ 160,000 Less: cost of goods sold 110,000 110,000 140,000 Gross margin 30,000 (10,000) 20,000 Total company net annual profit = $40,000 Included in the cost of goods sold is $12,000 of annual rent (a fixed cost)that is distributed equally among the three product lines.As a consultant to Kule,will you recommend that it drop the luggage rack line?

Art Supplies It's September and Sophia wants to buy some arts and crafts supplies for an after-school program she is developing for her daughter's elementary school.In her Sunday newspaper was a flyer from Michael's,an arts and crafts retailer.As she looked through the newspaper insert,she noticed that if she purchased three or more bottles of Alene's Tacky Glue,the regular price of $1.50 each was reduced to $1.15 each.She also saw that the store priced its plastic storage boxes at $1.99,$3.99,and $5.99.She thought they would be useful for storing each individual child's projects.On the front page of the flyer was an ad for Funky Girls Gel Pens,something she knew her daughter would love to use.The price at Michael's was $6.99 lower than the price she had found at the other stores that carried the pens.She thought that some of the older girls might like to start a scrapbook and was pleased to find that Michael's had a scrapbook starter kit,which includes scissors,book,pages,and stickers for only $15.The items could be purchased separately for $19.99.The flyer also announced that all flag-related items leftover from its Fourth of July sale were reduced by 40 percent. -Refer to Art Supplies.What pricing practice was used to price the plastic storage boxes?

During a recent worldwide recession when wine usage was declining,Nickel & Nickel launched a new brand of wine,which it sold at $125 a bottle.The wine is allowed to age three times as long as lower-priced wines,and the grapes used in the wine's production are hand-picked.Wine lovers appreciate how both production techniques improve wine quality.Nickel & Nickel used _____ to build market share.

Apple's "Back to School" program offered students who purchased an iMac computer and an iPod Touch MP3 player a $250 refund.The $250 check was essentially a:

A national manufacturer of car parts has six warehouses and has a pricing policy of charging freight from the closest warehouse to the customer,regardless of where parts are shipped from.For instance,if the customer is in Vancouver,British Columbia,the closest warehouse to the customer is in Seattle,Washington.If the ordered car part actually comes from the Alabama warehouse,the customer still pays freight from Seattle.The manufacturer uses _____ pricing.

Every week,Keller's Grocery runs a weekly ad in the newspaper touting its sale prices on a number of products.For example,this week the store is selling cherries for $1.50/pound and boneless chicken breasts for 99 cents/pound.Keller's sells these products at a below-market price to lure customers into the store in hopes that while they are in the store to buy chicken and cherries,they will also buy other grocery items that have a much higher markup.The store is using:

More and more businesses are adopting consumer penalties-extra fees paid by consumers for violating the terms of a purchase agreement.

Odd-even pricing is also called:

What type of geographic pricing policy would a marketing manager most appropriately choose for the following products: (1)nationally advertised bubble gum, (2)rebuilt engines for jet airplanes,and (3)bulk amounts of a rare spice harvested from a single mountain in Canada and used in high-priced restaurants.Justify your answers,and specify any assumptions you used to arrive at your answer.

All of the following are potential disadvantages of a flexible pricing policy EXCEPT:

Which of the following is a pricing policy whereby a firm charges a high introductory price,often coupled with heavy promotion?

Apple iPhone Apple Inc.iPhone went on sale on June 29,2007.Apple's loyal and enthusiastic customer base is known for rushing to purchase its new products and the iPhone enjoyed a tremendous amount of "buzz" before its introduction.As expected,the iPhone entered the market at what many believed to be a high price ($599).However,within weeks the price was reduced to $399.By the end of 2007 over 8 million iPhones had sold in the U.S.marketplace.By most,if not all measures,the original iPhone was a huge success for Apple and it exclusive U.S.carrier AT&T. On July 11,2008,Apple Inc.released the iPhone 3G,which it advertised as twice as fast as the original iPhone for half the cost.However,in order to obtain an iPhone at the new price of $199,buyers had to agree to a two-year service contract with AT&T.This allows iPhone users to receive phone calls and email,and search the web on the same device.A single charge of $59.99 from AT&T included 450 minutes of cellular calls,with free nights and weekend minutes,unlimited data,visual voicemail,200 text messages,rollover minutes,and unlimited mobile-to-mobile service within the AT&T network.This approach succeeded and over a million iPhone 3Gs were sold during the introductory weekend. -Refer to Apple iPhone.Apple and AT&T have several options available for competing with Samsung and its Instinct phone.If Apple and AT&T choose to compete by pricing their product at a low price to drive Samsung out of the market,this would be considered _____.

An awning manufacturer that is allowed to deduct 3 percent from its total bill if it pays by a specific date is receiving a promotional discount.

The Used Car Mall lets salespeople charge different customers different prices for essentially the same automobile depending on how good the customer is at negotiating price.It uses:

Once he compiles information on pricing objectives,market demand,quantity supplied,and the price elasticity of demand,the owner/operator of a home cleaning service will be ready to determine the optimal price for a new service offering.

Hunter's Alley is a chain of stores targeted to people who are proud of their NRA membership.It has agreed to set up a special display of Swartklip ammunition near its rifle and shotgun aisles and also to run an advertisement in newspapers in communities where its stores are located.Swartklip has agreed to supply the display material free and to pay for half the cost of the advertisement.This is an example of a: