Exam 10: Pricing: Understanding and Capturing Customer Value

Refer to the scenario below to answer the following question(s). Alden Manufacturing produces small kitchen appliances-blenders, hand mixers, and electric skillets-under the brand name First Generation. Alden attempts to target newlyweds and first-time home buyers with this brand. Considering that most young households have limited financial resources, Alden attempts to engage in target costing. "In doing this," says Milt Alden, the co-founder of Alden Electronics, "we have better control over keeping price right in line with customers." Alden manufactures a three-speed blender, its top seller, along with a five-speed blender. The hand mixers are manufactured in two variants-a small handheld mixer with two rotating beaters and another that comes with an optional stand and an attached mixing bowl. Alden's temperature-controlled skillets are manufactured in a single style with three color options. "Our product offerings are narrower," Milt Alden added, "but our line workers know each product like the back of their hands. This allows us to produce superior products while holding our prices low. -Which of these is NOT a way in which pricing can accomplish company objectives?

Cost-based pricing is often product driven.

John assured his venture capitalists an earning of 25-percent return on equity when he began his IT startup. In order to achieve this result, he will most likely use which of the following pricing approaches?

Customer perceptions of the product's value set the floor for prices.

The learning curve is representative of the ________.

Which of the following is a cost-based approach to pricing?

Briefly describe how economic conditions impact a firm's pricing strategies.

What is competition-based pricing?

Effective ________ pricing involves understanding how much value consumers place on the benefits they receive from the product and setting a price that captures that value.

Target return pricing is a variation of which of the following cost-oriented pricing approaches?

In industries in which pricing is a key factor, ________ often set the best prices or help others in setting them.

Variable costs change directly with the level of production.

If demand changes greatly with price, the demand is inelastic.

A downward-sloping experience curve is indicative of a company's rapidly increasing production costs.

In Viña del Mar, Chile, a large number of shops specialize in selling the same quality of seafood products along the beach frequented by tourists. No individual shop dares charge more than the going price without fearing loss of business to other shops. This exemplifies ________.

The more elastic the demand, the more it pays for the seller to raise the price.

Dips in the economy and the instant price comparisons made possible by the Internet have contributed to ________.

Why is price considered one of the most flexible elements of the marketing mix?

The movie industry in a country is controlled by six large studios that receive 90 percent of the annual revenues from movies. This is an example of a(n) ________.

The total production costs at Kellner Machine Works are $87,000 out of which $45,000 represent fixed costs. Which of the following is representative of the variable costs incurred by the company?