Exam 39: Setting the Right Price

List in order the four steps used to set the right price for a product.

Kule,Inc.produces three different lines of car racks for transporting large,bulky items. Total company net annual profit = $40,000 Included in the cost of goods sold is $12,000 of annual rent (a fixed cost)that is distributed equally among the three product lines.As a consultant to Kule,will you recommend that it drop the luggage rack line?

The term FOB is an acronym for:

Many businesses find recessions to be an excellent time to build market share through the use of price shading.

Apple iPhone Apple, Inc.'s iPhone first 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 eight 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 its then-exclusive U.S. carrier AT&T. On July 11, 2008, Apple, Inc. released the iPhone 3G, which it advertised as being 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 approach succeeded, and over a million iPhone 3Gs were sold during the introductory weekend. In 2011, the iPhone 4S-the fifth generation iPhone-led cellular phone sales with more than 25 million units sold. Several Android-based phones manufactured by Samsung were not far behind, however. -Refer to Apple iPhone.When Apple introduced the iPhone at a high price,it was probably using a _____ strategy to maximize profits.

Rebates involve a cash refund for the purchase of a product during a specific period.

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.

Art Supplies It's September and Sophia wants to buy some arts and crafts supplies for an after-school program she is developing for her daughter's elementary school. In her Sunday newspaper was a flyer from Michaels, an arts and crafts retailer. As she looked through the newspaper insert, she noticed that if she purchased three or more bottles of Alene's Tacky Glue, the regular price of $1.50 each was reduced to $1.15 each. She also saw that the store priced its plastic storage boxes at $1.99, $3.99, and $5.99. She thought they would be useful for storing each child's projects. On the front page of the flyer was an ad for Funky Girls Gel Pens, something she knew her daughter would love to use. The price at Michael's was $6.99 lower than the price she had found at the other stores that carried the pens. She thought that some of the older girls might like to start a scrapbook and was pleased to find that Michaels had a scrapbook starter kit, which includes scissors, book, pages, and stickers for only $15. The items could be purchased separately for $19.99. The flyer also announced that all flag-related items leftover from its Fourth of July sale were reduced by 40 percent. -Refer to Art Supplies.Which of the following merchandise is offered in the flyer with a seasonal discount?

Loss-leader pricing is a price tactic that tries to get consumers into a store through false or misleading price advertising.

For sports marketers,an inelastic demand curve means that they have greater flexibility in making pricing decisions.What can a sports marketer do to make demand for his or her product more inelastic?

Art Supplies It's September and Sophia wants to buy some arts and crafts supplies for an after-school program she is developing for her daughter's elementary school. In her Sunday newspaper was a flyer from Michaels, an arts and crafts retailer. As she looked through the newspaper insert, she noticed that if she purchased three or more bottles of Alene's Tacky Glue, the regular price of $1.50 each was reduced to $1.15 each. She also saw that the store priced its plastic storage boxes at $1.99, $3.99, and $5.99. She thought they would be useful for storing each child's projects. On the front page of the flyer was an ad for Funky Girls Gel Pens, something she knew her daughter would love to use. The price at Michael's was $6.99 lower than the price she had found at the other stores that carried the pens. She thought that some of the older girls might like to start a scrapbook and was pleased to find that Michaels had a scrapbook starter kit, which includes scissors, book, pages, and stickers for only $15. The items could be purchased separately for $19.99. The flyer also announced that all flag-related items leftover from its Fourth of July sale were reduced by 40 percent. -Refer to Art Supplies.What pricing practice was used with the scrapbook starter kit?

Art Supplies It's September and Sophia wants to buy some arts and crafts supplies for an after-school program she is developing for her daughter's elementary school. In her Sunday newspaper was a flyer from Michaels, an arts and crafts retailer. As she looked through the newspaper insert, she noticed that if she purchased three or more bottles of Alene's Tacky Glue, the regular price of $1.50 each was reduced to $1.15 each. She also saw that the store priced its plastic storage boxes at $1.99, $3.99, and $5.99. She thought they would be useful for storing each child's projects. On the front page of the flyer was an ad for Funky Girls Gel Pens, something she knew her daughter would love to use. The price at Michael's was $6.99 lower than the price she had found at the other stores that carried the pens. She thought that some of the older girls might like to start a scrapbook and was pleased to find that Michaels had a scrapbook starter kit, which includes scissors, book, pages, and stickers for only $15. The items could be purchased separately for $19.99. The flyer also announced that all flag-related items leftover from its Fourth of July sale were reduced by 40 percent. -Refer to Art Supplies.What pricing practice was used to price the plastic storage boxes?

After estimating how much market share and profit can be earned at each possible price point,managers should establish price goals and determine corresponding costs for each price.

A catalog retailer offers three styles of khaki pants at three price levels.The special pricing tactic used by the catalog retailer is best described as variable psychological pricing.

Geographically dispersed sellers often result in significant freight costs.Name and describe the five types of geographic pricing tactics that can be selected by a marketing manager to moderate the impact of freight costs on its more dispersed customers.For each tactic defined,specify the circumstances that would prompt the selection of that geographic pricing tactic.

Describe which pricing method (skimming,penetration,or status quo)would be most appropriate for each of the following products: (1)a new kind of automatic vacuum cleaner; (2)brightly colored wooden blocks to be used as a child's toy; (3)a new,low-cost,no-calorie fat substitute; (4)a home computer; and (5)a designer perfume.Briefly justify your answers.

Flexible pricing enables a seller to close a sale with price-conscious consumers.

Uniform delivered pricing:

States developed unfair trade practice acts to:

A shortage of blood for transfusions for injured animals has resulted in the introduction of a synthesized product called Oxyglobin,which can be used effectively as a blood replacement.The manufacturer of the product has put a high price on the product in order to recoup its research and development costs.The manufacturer of Oxyglobin is using a _____ policy.