Exam 16: Pricing Objectives and Policies

Price fixing is illegal under all circumstances in the United States.

Managers satisfied with their current market share and profits sometimes adopt what can be termed as "don't-rock-the-pricing-boat objectives." These are also referred to as

Many nonprofit organizations try to set a price level that will earn a target return figure of zero.

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." What is Digital Imaging's pricing objective?

Most firms operate in monopolistic competition, where products and whole marketing mixes are not exactly the same.

Introductory price dealing involves setting high initial prices on a product when it is introduced-to see how much consumers are willing to pay.

Some customers encourage the use of ______________ by paying more attention to supposed price discounts than to the actual prices (and values).

Penetration pricing may be wise if the firm expects strong competition very soon after introduction.

A sales-oriented pricing objective seeks some level of unit sales, dollar sales, or share of market-without referring to profit.

"Push money" is most likely to be offered to:

A wholesaler has been offering his customers payment terms of 3/10, net 60. He wants to tighten his terms because interest rates have gone up. He could change his terms to:

If a manufacturer in China offers a product in the U.S. market at a lower price than in China, this may be a violation of a(n):

Offering a NONCUMULATIVE quantity discount seeks to:

Price fixing is not illegal unless it hurts a competitor.

Freight-absorption pricing basically amounts to cutting list price on sales to distant customers.

The target return figure is zero for an organization that sets a price level that will just recover costs.

Pricing objectives should be explicitly stated because:

The following terms appeared on an invoice dated May 20 which was sent by a manufacturer to a retail store: 2/10, net 30. The amount of the invoice was $2,000. Assuming the retailer paid the invoice on May 30 (10 days after the products were delivered), how much should he have paid?

Most firms avoid administered prices because they may be illegal under the Robinson-Patman Act.

The majority of U.S. firms use a one-price policy.