Exam 11: Pricing Products and Services

Three different objectives relate to a firm's profit, which have different implications for pricing strategy. The three profit-oriented objectives include __________, managing current profit, and achieving a target return.

Suppose you want to buy an all-electric Tesla Model S, the world's leading all-electric, zero-emission car that has a 265-mile range and can be recharged in three hours. The Tesla Model S Performance model has a list price of $87,500. However, you want several options (Performance Plus Package, red multi-coat armor paint, Tech package, Sound Studio Package, home charging station, performance wheels, and others) that will cost $17,500. An extended warranty will add an additional $5,000. However, if you put $50,000 down now and finance the balance over the next year, you will receive a dealer rebate of $5,000 off the list price. The dealer will give you a $7,000 trade-in allowance for your 2008 Honda Civic DX four-door sedan. In addition, you will have to pay a state sales tax of $10,000, an auto registration fee of $1,000 to the state, and a $1,000 destination charge to ship and prep the car. But because the Tesla Model S is an alternative energy vehicle, you qualify for a $2,500 state rebate and a $7,500 federal tax credit! Finally, your total finance charge is $7,000. Applying the price equation, what is your final price for the Tesla Model S?

Jason decided to open a small Internet café serving a variety of unusual nonalcoholic beverages from around the world. He set a goal to break-even within the first six months and make a moderate profit thereafter. Within a week of opening, every seat was filled and he had to replenish inventory several times. At his six-month review, he was devastated to find that despite huge sales, he had actually lost money. His math was not wrong, but he had failed to include monthly expenses such as toilet paper, paper towels, and hand soap in his calculations. These costs should have appeared as __________ in his break-even analysis.

Penetration pricing is intended to appeal to which market?

The ratio of perceived benefits to __________ is referred to as value.

Bob Biltmore owns dozens of successful print shops in the Midwest. Biltmore's shops specialize in low-cost black-and-white copies and feature user-friendly machines consumers can easily operate. In recent months, Biltmore has noticed more competition near his stores. In an attempt to eliminate the competition, Biltmore has decided to charge a very low price for his black-and-white copies, a price so low his competitors will be forced to close. After that, Biltmore plans to raise copy prices. He plans to engage in the illegal and unethical practice of

Standard markup pricing is considered to be a __________ approach to pricing.

Rent, executive salaries, and insurance are typical examples of

A target return profit objective implies that a company chooses to

-Suppose you are the owner of a picture frame store. Let's assume that the average price customers are willing to pay for each picture frame is $120. Also, suppose your fixed costs (FC) total $32,000 (real estate taxes, interest on a bank loan, etc.) and unit variable cost (UVC) for a picture frame is $40 (labor, glass, frame, and matting). Figure 11-6 above shows that by selling 200 pictures, your picture frame store will

A reference value involves comparing the costs and benefits of __________.

Four pricing practices are closely scrutinized because of potential unethical or illegal actions. They include: (1) price fixing; (2) price discrimination; (3) predatory pricing; and (4) __________.

Companies often pursue a market share objective when __________.

According to the textbook, Revlon cosmetics uses __________ pricing.

Demand-oriented approaches weigh factors that underlie expected __________ more heavily than such factors as cost, profit, and competition when selecting a price level.

Assume it costs Lady Marion Seafood, Inc. $30 to catch, process, freeze, package, and ship 5-pound packages of Alaskan salmon. The firm adds 60 percent to the cost of its salmon products and charges customers a total of $48 for a postage-paid vacuum-sealed package. What type of pricing does Lady Marion Seafood use to arrive at its final price?

A promotional allowance refers to

The vertical axis of a demand curve graph represents __________.

Carmex uses all of the following approaches to setting the price of its products EXCEPT:

Fixed cost refers to