Exam 16: Pricing Objectives and Policies

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." Bella Computers' pricing objective is best described as:

The cash discount terms "2/10, net 30" mean that:

A catalog merchant divides the country into regions. Every buyer in a particular region pays the same average shipping charge. The shipping charges differ from region to region, depending on how far the region is from the catalog merchant's main warehouse facility. The catalog merchant is using:

In the "Borden case," the U.S. Supreme Court ruled that a well-known label alone makes a product different from a physically similar product with an unknown label.

"Value pricing" means setting a fair price level for a marketing mix that gives the target market superior customer value.

A main purpose of "unfair trade practice acts" is to:

Pricing a product sold in a foreign market lower than the cost of producing it is called dumping.

A firm has just received an invoice for $1,000 with the following terms: 3/10, net 30. In this case, the firm:

A target return pricing objective has administrative advantages in a large company where there are many divisions to compare.

A discount that is offered to encourage buyers to stock earlier than present demand requires is:

Careful handling of "trade-ins"-to avoid reducing the list price-is especially important for sellers of:

Prices are called "administered" when:

A target return figure of zero implies:

Which of the following is NOT a "Something of Value" which might be offered to FINAL CONSUMERS in the "price equation"?

A(n) _____ involves making small payments for a product over time-usually with interest payments built in.

Which of the following statements about a flexible-price policy is True?

"Unfair trade practice acts":

A skimming policy does not involve price reduction over time.

Quantity discounts encourage customers to buy in larger amounts.

A producer offers a retailer free merchandise to stock a new item. The retailer is receiving a