Exam 17: Setting the Right Price

The marketing manager of icruise.com (a website targeted to consumers who want a luxury vacation)finds that the firm can gain market share and become the industry leader if it slashes prices by 50 percent during December.However,the vice-president of finance is committed to reporting a 25 percent return on investment at all times.What does this conflict illustrate?

If the world's largest manufacturer of door knobs and deadbolt locks set wholesale prices below its cost,with the intention of driving its competitors out of business,the manufacturer would be engaged in predatory pricing.

It makes the most sense to use price skimming as a pricing policy when demand is relatively elastic in the upper ranges of the demand curve.

The Canadian Girl catalogue began as a concept to introduce girls who lived in the past to today's girls.Each historically accurate doll is carefully crafted and dressed and has books to describe her life.For example,Kristen is an 1854 pioneer girl who is growing up in Manitoba.Her story begins with her long sea voyage from Iceland.The basic doll dressed in a calico dress and striped apron and the hardcover story of how she got to Manitoba costs $90.Six more hardback books of Kristen's life are available for $80.Kristen's nightgown costs $20,and a matching one for the doll owner is an additional $40.Buy both together and the price is only $50.A hand-painted wooden bed and trunk for Kristen are available for $220.Shipping costs vary with the price of the merchandise ordered and are not connected to weight or distance. -Refer to Canadian Girl Catalogue.Look at the prices of items found in the Canadian Girl catalogue.Which fine-tuning pricing tactic does Canadian Girl use?

Often a seller will establish a series of prices for a family of merchandise items.There may be several different models at specific price points but no prices in between.What is this policy called?

All pricing objectives have tradeoffs that managers must weigh.

Gary Thrower is a chimney sweep.He gives large discounts to homeowners who use his services in June and July.This is an example of a seasonal discount.

A manufacturer of lighting fixtures has six warehouses and a pricing policy of charging freight from the closest warehouse to the customer,regardless of where parts are shipped.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 Toronto warehouse,the customer still pays freight from Seattle.Which type of pricing is the manufacturer using?

What activities occur once the marketing manager has established pricing goals? Why are these activities important?

When the salesperson from R.W.Hunt & Sons,a distributor of rifles and other items needed for hunting or target practice,calls on retail sporting goods stores,she is authorized to offer the retailers a 15 percent discount from the list price in recognition of activities retailers perform for the distributor.These activities include unpacking,floor display setup,and a repair service.What is this 15 percent discount called?

Landover Carpentry,Inc.currently markets its garden benches in the Ontario market.It would like to expand into the Western Canada market,but the competition there is intense.Which geographic pricing tactic should the Landover use?

A company that is allowed to deduct 3 percent from its total bill if it pays by a specific date is receiving a cash discount.

For which of the following situations would a price-skimming strategy be most appropriate?

Geographically dispersed sellers often result in significant freight costs.Define four 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.

What are extra fees paid by consumers for violating the terms of purchase agreements?

Distinguish between a cumulative and a noncumulative discount.

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

Supposed a firm is customer-driven and seeks to understand the attributes customers want in the goods and services they buy and the value customers contribute to those attributes.The firm sets the price of the product at a level that seems to the customer to be a good price compared with the prices of other options.What is this pricing?

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.Which type of policy is the manufacturer of Oxyglobin using?

The market for turkey products is large.If a major producer of turkeys were to introduce a boneless fresh turkey wrapped around savory dressing,most of the large market for this new product would be aware of its existence.The market is price sensitive,and there is some potential competition.What would be the appropriate strategy?