Exam 20: Setting the Right Price

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.Which of the following merchandise is offered in the flyer with a seasonal discount?

Some pricing decisions are subject to government regulation.Name and define three pricing practices that are illegal.

Delayed-quotation pricing:

An Alabama-based catalog retailer sells fireplace equipment such as screens and andirons.Its customers in New England are charged one shipping rate,and customers west of the Rocky Mountains are charged a different rate.Customers in the midwestern states are charged yet another rate.What kind of geographic pricing is the catalog retailer using?

Which pricing method (skimming,penetration,or status quo)would be most appropriate for each of the following products: (1)a new kind of automatic vacuum cleaner; (2)brightly colored wooden blocks to be used as a child's toy; (3)a new,low-cost,no-calorie fat substitute; (4)a home computer;and (5)a designer perfume.Briefly justify your answers.

Last year,a single infield box ticket for an Atlanta Braves baseball game cost $40,but fans who bought a season pass for the same seat got a reduced price.This $40 price was a _____ price.

Price discrimination can sometimes be justified.

A discount off the base price to customers who pay immediately,or within a specified time period,is called a:

A penetration strategy tends to be effective in a price-sensitive market.Thus,one of the purposes of penetration pricing is to:

_____ occurs when a firm is customer-driven and seeks to understand the attributes customers want in the goods and services they buy and the value of those attributes to customers.Thus,the price of the product is set at a level that seems to the customer to be a good price compared with the prices of other options.

With _____,the seller pays the actual freight charges and bills every purchase with an identical,flat freight charge.

The term FOB is an acronym for:

If a manufacturer designates a shipping point from which to calculate all freight charges and charges customers the freight costs from that point (even if the goods were shipped from another location),the manufacturer is using _____ pricing.

A situation in which a manufacturer,and its distributors agree that the retailers will sell the manufacturer's products at a certain price,at or above the price floor,is called:

Escalator pricing and price shading are two examples of cost-oriented pricing tactics.

Sears and John Deere run major sales on their lines of riding lawn mowers every fall.This is an example of a seasonal discount.

Geographically dispersed sellers often result in significant freight costs.Name and describe the five types of geographic pricing tactics that can be selected by a marketing manager to moderate the impact of freight costs on its more dispersed customers.For each tactic defined,specify the circumstances that would prompt the selection of that geographic pricing tactic.

Price lining presents certain drawbacks to sellers,especially if:

The basic assumption with price skimming is that the firm is customer driven,seeking to understand the attributes customers want in goods and services they buy and the value of that bundle of attributes to customers.

Discuss the two reasons why managers sometimes price their products too low,thereby reducing company profits.