Exam 19: Setting the Right Price

For which of the following situations would a price-skimming strategy be most appropriate?

After managers understand both the legal and the marketing consequences of price strategies,they should set the general level at which a company expects to sell a good or service.What is this type of price called?

The American Girl catalogue began as a concept to introduce girls who lived in the past to today's girls.Each historically accurate doll is carefully crafted and dressed and has books to describe her life.For example,Kristen is an 1854 pioneer girl who is growing up in Minnesota.Her story begins with her long sea voyage from Sweden.The basic doll dressed in a calico dress and striped apron and the hardcover story of how she got to Minnesota cost $90.Six more hardback books of Kristen's life are available for $80.Kristen's nightgown costs $20,and a matching one for the doll owner is an additional $40.Buy both together and the price is only $50.A hand-painted wooden bed and trunk for Kristen are available for $220.Shipping costs vary with the price of the merchandise ordered and are not connected to weight or distance. -Refer to American Girl Catalogue.Why does American Girl use even-numbered pricing?

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 Saturday 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 left over from its Canada Day sale were reduced by 40 percent. -Refer to Art Supplies.Which of the following merchandise is offered in the flyer with a seasonal discount?

For sports marketers,an inelastic demand curve means they have greater flexibility in making pricing decisions.What can a sports marketer do to make demand for his or her product more inelastic?

Merck & Co. ,the manufacturer of the AIDS drug Crixidan,distributes exclusively to one distributor,Stadtlanders Pharmacy.The pharmacy has been criticized for charging too high a price for the drug and exploiting inelastic demand.Stadtlanders claims the charges are ethical because of high staffing costs and associated discounts with various health plans.This situation describes issues associated with which of the following?

Tickets to the combined amusement park and water slide were $49 for the day.Then the company gave customers the option to purchase tickets for either the amusement park or the water slide for $18.To help keep costs in line,the park management also began charging its customers a small parking fee.Initially,the cost of parking was figured into the $49 price.What is the amusement park using?

Landover Arms,Inc.currently markets its rifles designed for competitive shooting in the Ontario market.It would like to expand into the western market,but the competition there is intense.Which geographic pricing tactic should the firearms manufacturer use?

Hudson Melendez owns a company that installs in-ground swimming pools.He gives large discounts to homeowners who have pools built in October or November.This is an example of a seasonal discount.

What is value-based pricing? What is the basic assumption marketers must make about their markets before implementing a value-based pricing strategy?

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.

Which of the following pricing methods can be used to build market share during a recession?

Imagine you have developed a device that can be used to tell whether uncooked meat has been irradiated.Several smaller retail chains have agreed to carry your product,but a large discount retailer has asked you to sell the device to it for a substantially lower price.What is the large discount retailer asking you to carry out?

Name five of the special pricing tactics.Give one advantage and one disadvantage associated with using each of the tactics you have named.

The American Girl catalogue began as a concept to introduce girls who lived in the past to today's girls.Each historically accurate doll is carefully crafted and dressed and has books to describe her life.For example,Kristen is an 1854 pioneer girl who is growing up in Minnesota.Her story begins with her long sea voyage from Sweden.The basic doll dressed in a calico dress and striped apron and the hardcover story of how she got to Minnesota cost $90.Six more hardback books of Kristen's life are available for $80.Kristen's nightgown costs $20,and a matching one for the doll owner is an additional $40.Buy both together and the price is only $50.A hand-painted wooden bed and trunk for Kristen are available for $220.Shipping costs vary with the price of the merchandise ordered and are not connected to weight or distance. -Refer to American Girl Catalogue.What kind of geographic pricing does American Girl use?

Charlene's cable system has offered her a deal for basic cable plus six premium channels for less than she is currently paying for basic cable.The cable system is using price lining to increase its overall profits.

The owner of a neighbourhood hardware store has decided to sell a set of three padlocks for $5.He hopes the below-cost price for the locks will attract current and new customers who will also buy regularly priced items.The owner is encouraging store patronage through which of the following?

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

The marketing manager of icruise.com (a travel website targeted to consumers who want a luxury vacation)finds that the firm can gain market share and become the industry leader if it slashes prices by 50 percent during December.However,the vice-president of finance is committed to reporting a 25 percent return on investment at all times.What does this conflict illustrate?

A retail store implements a single-pricing tactic as a way to remove price comparisons from the buyer's decision-making process.