Exam 20: Setting the Right Price

In a catalog targeted to people who like to bake,customers can buy a single yeast bread mix designed specifically to be baked in bread machines for $3.95 each or 12 different mixes for $37.50.This is an example of:

An advantage associated with a flexible pricing policy is that it:

Apple iPhone Apple Inc. iPhone went on sale on June 29, 2007. Apple's loyal and enthusiastic customer base is known for rushing to purchase its new products and the iPhone enjoyed a tremendous amount of "buzz" before its introduction. As expected, the iPhone entered the market at what many believed to be a high price ($599). However, within weeks the price was reduced to $399. By the end of 2007 over 8 million iPhones had sold in the U.S. marketplace. By most, if not all measures, the original iPhone was a huge success for Apple and it exclusive U.S. carrier AT&T. On July 11??, 2008, Apple Inc. released the iPhone 3G, which it advertised as twice as fast as the original iPhone for half the cost. However, in order to obtain an iPhone at the new price of $199, buyers had to agree to a two-year service contract with AT&T. This allows iPhone users to receive phone calls and email, and search the web on the same device. A single charge of $59.99 from AT&T included 450 minutes of cellular calls, with free nights and weekend minutes, unlimited data, visual voicemail, 200 text messages, rollover minutes, and unlimited mobile-to-mobile service within the AT&T network. This approach succeeded and over a million iPhone 3Gs were sold during the introductory weekend. -Refer to Apple iPhone.Consumers who agree to the two-year AT&T service contract will be required to pay a cancellation fee if they leave AT&T prior to the end of the two-year period.This fee is a consumer _____.

Odd-even pricing is also called:

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

What type of geographic pricing policy would a marketing manager most appropriately choose for the following products: (1)nationally advertised bubble gum,(2)rebuilt engines for jet airplanes,and (3)bulk amounts of a rare spice harvested from a single mountain in Canada and used in high-priced restaurants.Justify your answers,and specify any assumptions you used to arrive at your answer.

E-Books With the explosive growth of electronic book, or e-book, readers like Amazon's Kindle and Barnes & Noble's Nook and even smart phones like the iPhone and BlackBerry devices, book pricing is becoming a significant concern for book publishers. Digital book sales have grown exponentially from almost non-existent in 2002 to more than $120 million in 2009. While these sales are still small compared to industry sales, they are expected to grow even more in the coming years due to the plethora of e-book readers coming on the market. This creates a dilemma for publishers, though, because the average price of a hardcover book, which is the bread-and-butter of publishers' profits, is $27.00, whereas the price of an e-book is $9.99. To protect profits, some publishers, like Simon & Schuster, are delaying the electronic editions by four months. Other publishers are following suit, claiming consumers will not buy the hardcover at $27.00 if they can purchase it at a much lower price electronically. -Refer to E-Books. If the $27.00 price of a new release came about because two or more publishers agreed on the same price they charge book resellers for the books,they would be participating in which type of illegal pricing activity?

Apple iPhone Apple Inc. iPhone went on sale on June 29, 2007. Apple's loyal and enthusiastic customer base is known for rushing to purchase its new products and the iPhone enjoyed a tremendous amount of "buzz" before its introduction. As expected, the iPhone entered the market at what many believed to be a high price ($599). However, within weeks the price was reduced to $399. By the end of 2007 over 8 million iPhones had sold in the U.S. marketplace. By most, if not all measures, the original iPhone was a huge success for Apple and it exclusive U.S. carrier AT&T. On July 11??, 2008, Apple Inc. released the iPhone 3G, which it advertised as twice as fast as the original iPhone for half the cost. However, in order to obtain an iPhone at the new price of $199, buyers had to agree to a two-year service contract with AT&T. This allows iPhone users to receive phone calls and email, and search the web on the same device. A single charge of $59.99 from AT&T included 450 minutes of cellular calls, with free nights and weekend minutes, unlimited data, visual voicemail, 200 text messages, rollover minutes, and unlimited mobile-to-mobile service within the AT&T network. This approach succeeded and over a million iPhone 3Gs were sold during the introductory weekend. -Refer to Apple iPhone.Samsung recently introduced its Instinct cellular phone,apparently to compete directly with the iPhone.If Samsung checked the price of the iPhone at the Apple Store and AT&T locations and then set the price of the Instinct to match the iPhone's price,it would be using a _____ pricing approach.

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

Two effective pricing tactics,which can be used during a recession,to hold or build market share are:

What are consumer penalties? What two reasons do businesses give for requiring consumers to pay them?

Functional discounts,noncumulative quantity discounts,and promotional allowances are examples of rebates given to the trade customer.

A(n)_____ discount is a deduction from list prices that applies to the buyer's total purchases made during a specific period and intended to encourage customer loyalty.

The Good Earth nursery is selling potting soil at a below-market price to lure customers into the store in hopes that while they are in the store to buy potting soil,they will also buy other gardening items that have a much higher markup.The nursery is using:

It makes the most sense to use price skimming as a pricing policy when supply is greater than demand.

Escalator pricing and price shading are two examples of cost-oriented pricing tactics.

E-Books With the explosive growth of electronic book, or e-book, readers like Amazon's Kindle and Barnes & Noble's Nook and even smart phones like the iPhone and BlackBerry devices, book pricing is becoming a significant concern for book publishers. Digital book sales have grown exponentially from almost non-existent in 2002 to more than $120 million in 2009. While these sales are still small compared to industry sales, they are expected to grow even more in the coming years due to the plethora of e-book readers coming on the market. This creates a dilemma for publishers, though, because the average price of a hardcover book, which is the bread-and-butter of publishers' profits, is $27.00, whereas the price of an e-book is $9.99. To protect profits, some publishers, like Simon & Schuster, are delaying the electronic editions by four months. Other publishers are following suit, claiming consumers will not buy the hardcover at $27.00 if they can purchase it at a much lower price electronically. -Refer to E-Books.It is expected that traditional book clubs,like Doubleday and Book-of-the-Month clubs,will begin offering ebook options to members. Members pay an initial membership fee of $25.00 and $0.99 per ebook purchased. This is an example of:

A national manufacturer of car parts has six warehouses and has a pricing policy of charging freight from the closest warehouse to the customer,regardless of where parts are shipped from.For instance,if the customer is in Vancouver,British Columbia,the closest warehouse to the customer is in Seattle,Washington.If the ordered car part actually comes from the Alabama warehouse,the customer still pays freight from Seattle.The manufacturer uses _____ pricing.

State laws that put a lower limit on wholesale and retail prices are called _____.In states that have these laws,selling below cost is illegal.

How do value-based pricing,unbundling,and bundling help marketers hold onto market share during a recession?