Exam 20: Setting the Right Price

Cashtown Used Cars aired a radio spot announcing,"Today only,previously owned cars are only $200!" Meghan just wanted some kind of in-town transportation.When she went to Cashtown,the salesperson said,"We have only one $200 car left,and it's not the kind of car I'd want my wife to drive.However,we do have some great deals on newer models." Meghan went home with an $8,000 used car.Cashtown is probably practicing:

Redline Editorial Services sent a $1,000 invoice to a customer for copyediting a booklet.According to the terms of the invoice,the customer would receive a 3 percent discount on the invoice price if the invoice was paid within 15 days.This is an example of a:

States developed unfair trade practice acts to:

Apple iPhone Apple,Inc.'s 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 eight 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 its exclusive U.S.carrier was AT&T. On July 11,2008,Apple,Inc.released the iPhone 3G,which it advertised as being 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 contract would allow iPhone users to receive phone calls,receive e-mail,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 voice mail,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:

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.

Business-to-business salespeople often use _____ to heighten the demand for certain items in a product line.It is a discounting practice that is often done routinely without much forethought.

A firm charging a price identical to or very close to the competition's price is using a _____ strategy.

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:

Kule,Inc.produces three different lines of car racks for transporting large,bulky items. 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?

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:

Often a seller will establish a series of prices for a family of merchandise items.There may be several different models at specific price points but no prices in between.This policy is called:

Price discrimination can sometimes be justified.

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.

Nestlé Purina sells chicken feed and Wheat Chex,but the sale of one of these products has no known impact on demand for the other.In this case,the two products have a(n)_____ relationship.

Reducing the services that come with the basic product is called:

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:

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 Michaels,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 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 Michaels 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.Michaels was trying to get consumers into the store with the Funky Girls Gel Pens promotion in hope that they will purchase other,higher-margin items.This is an example of:

The Comcast Triple Play package includes cable television,Internet,and telephone service for a price significantly lower than the cost of the three services priced separately.This is an example of:

After managers understand both the legal and the marketing consequences of price strategies,they should set a _____ price--the general level at which a company expects to sell a good or service.

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.