Exam 20: Setting the Right Price

Rag fibers for paper and cotton seeds for cottonseed oil are two by-products of the cotton textile industry.Because these products are produced together,they are complementary products.

When Microsoft introduced its Zune MP3 player,many people thought it would capture the MP3 player market by pricing its product so low that a smaller competitor,like the Apple iPod,would be unable to compete.If Microsoft had used this approach it have been would be guilty of _____.

Pharmacies are a new addition to Sam's Clubs.They could exert a greater influence on the marketplace for prescription drugs than their newness indicates.Sam's has a stated philosophy of marking up merchandise a maximum of 14 percent.When that philosophy is applied to prescription drugs,especially generics,warehouse club prices can be dramatically lower than those of conventional drugstores,supermarkets,or discount store pharmacies.Sam's is using a _____ strategy to convince consumers to use its pharmacies rather than its competitors.

Functional discounts are typically calculated as the wholesale price times the accumulated margin percentages.

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 with the scrapbook starter kit?

What are consumer penalties? What two reasons do businesses give for requiring consumers to pay them?

When the salesperson from Affiliated Food Inc. ,a grocery distributor,calls on a grocery store,she is authorized to offer a 15 percent discount from the list price in recognition of activities (such as unpacking items and stocking shelves)that retailers perform for the distributor.This 15 percent discount is a:

Alissa Dunn is the owner and operator of Dunn's Best Jams,which she sells at craft festivals.She only makes and sells three types of jams-pecan pie jam,chocolate pie jam,and lemon tart jam.The costs of leasing her professional kitchen for manufacturing,travel to craft shows,insurance,and so on are allocated on an equal basis to the three types of jam sold.In other words these costs are:

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.HSBC Group is the world's largest banking group.It is considering switching from BlackBerry handsets to iPhone 3Gs.This would mean ordering 200,000 iPhones,so HSBC would probably receive special pricing incentives,including a _____.

AMC Theaters offers customers a package that includes two movie tickets,two small drinks and one small popcorn all priced together at $29.99.this pricing technique is called:

There are two limousine services that drive customers from communities in North Georgia to the Atlanta airport.Whenever one reduces its fare,its competitor reduces its fares by the same amount.This is an example of status quo pricing.

All of the following are tactics for fine-tuning the base price EXCEPT:

Acme Lawnmowers sells its mowers to retailers at different prices,depending on whether they are independent stores or members of a national chain.It uses _____.

In a catalog targeted to people who like to bake,customers can buy a single yeast bread mix designed specifically to be baked in bread machines for $3.95 each or 12 different mixes for $37.50.This is an example of:

A 16-ounce bottle of Prairie Herb vinegar sells for $4.95,and a 16-ounce bottle of Heinz vinegar costs $1.05.Prairie Herb vinegar is new to the market,perceived to be of higher quality,and provides a unique flavor to foods even though it is used in the same way as Heinz vinegar.Prairie Herb vinegar is most likely using a _____ policy.

Which of the following prohibits any firm from selling to two or more different buyers,within a reasonably short time,commodities (not services)of like grade and quality at different prices where the result would be to substantially lessen competition?

Claxton Bakery recently began selling its fruitcakes online.If Claxton wants a simple pricing system that allows for different shipping charges depending on geographic segment or region,the company should use _____ pricing.

Manufacturers know the approximate price level they can expect when establishing a product price.This approximate price is called the base price.

Best Buy charges customers a 15 percent restocking fee on some returned items.A restocking fee is for putting a returned item back into inventory.This is an example of a:

State laws that put a lower limit on wholesale and retail prices are called _____.In states that have these laws,selling below cost is illegal.