Exam 16: Pricing Objectives and Policies

A producer in Philadelphia uses "zone pricing." It's selling widgets for $150/ton in the Eastern Zone-which includes Richmond and Baltimore. The actual freight cost from its plant to Baltimore is $70/ton and from its plant to Richmond is $80/ton. In this situation:

An "all the traffic will bear" pricing objective is a ______________ objective.

A sales-oriented objective may seek all of the following except

Some top managers seek only enough profits to convince stockholders that they are "doing a good job." The pricing objective of such managers is:

A firm would likely pursue penetration pricing when

In states which have unfair trade practice acts, wholesalers and retailers are usually required to mark up merchandise a certain minimum percentage above cost.

Use this information for question that refer to the Pricing 1 case. (WPI) case. As a project for her marketing class, Emily Washington is researching how five local businesses price their products. The following are brief sketches of what she has learned about each company. At Bella Computers, Emily has discovered that the company earned a 6 percent return on investment this year and wants to increase it to 9 percent next year. To its retailer customers, Bella Computers gives cash discount terms of 2/10, net 30. It also gives retailers a 3% reduction on the invoice amount for advertising Bella products locally. Bella gives retailers' salespeople 2% of the sale price for each Bella Computer they sell. At Ross Pharmaceuticals, she learned that the company has invested heavily in developing a new product that recently received a patent. Because cash is tight, the company wants to achieve a rapid return on its investment. The new patented product is badly needed in the market, so a very inelastic demand curve is expected. Digital Imaging makes photographic prints for wedding photographers. It is very concerned about competitor reactions to its pricing, so it has selected prices that will not draw the attention of the competition and not start a price war. Digital Imaging offers customers an 8% discount if their purchases exceed $20,000 a year. Jack's One Hour Cleaners recently opened for business. The company invested a lot of money in new equipment, and feels that it has to quickly get "at least 10% market share to stay in the game." This need obviously influences the company's pricing decisions. Jack's also plans to offer customers 20% discounts on any order over $20. National Printing Equipment (NPE) produces equipment that helps to print newspapers and magazines. The company sells directly to printers and through wholesalers. Its salespeople negotiate prices with individual customers and often have to match competitors' prices. NPE has a new product, the Gutenberg NP201, with some competitive advantages now, but competitors are expected to follow quickly with similar products. The new product is being introduced into a market with elastic demand. Regarding freight charges for its equipment, NPE's invoice reads, "Seller pays the cost of loading equipment onto a common carrier. At the point of loading, title to such products passes to the buyer, who assumes responsibility for damage in transit, except as covered by the transportation agency." Ross Pharmaceuticals' pricing objective is:

Cash discount terms of 2/10, net 60 on an invoice would-in effect-amount to borrowing at an annual interest rate of about ________ percent if the buyer did not pay the invoice for 60 days.

The Bijou Classic Movie House changes ticket prices as demand for a movie increases or decreases. Prices can change every hour as ticket sales go up or down for particular shows. Bijou Classic Movie House appears to be using:

The Robinson-Patman Act:

A British firm selling in the U.S. prices its product at $100. The initial exchange rate is 0.80 pounds per dollar. If the new exchange rate is 0.75 pounds per dollar, the revenue for the British firm from a single sale would drop by

Seeking a profit maximization pricing objective:

If a producer's marketing manager doesn't know the shape of the demand curve for a new product, the initial price level policy should probably be a(an) ______________ policy.

Which of the following may be the only sensible pricing policy in oligopoly situations?

A flexible-price policy is MOST LIKELY to be set by a retailer selling:

A lease requires a consumer to pay a monthly fee over a specified time period.

Trying to get the "cream" of a market (i.e., the top of a demand curve) at a high price before aiming at the more price-sensitive customers is consistent with a(an):

Noncumulative quantity discounts

Introductory price dealing means setting a low "penetration" price early in the product life cycle to discourage competitors from entering the market.

Value pricing involves developing a "bare bones" marketing mix and a cheap price.