Exam 17: Setting the Right Price

When a firm introduces a new product at a relatively low price because it hopes to reach the mass market,which type of strategy is it following? (The low price is designed to capture a large share of a substantial market and produce lower production costs. )

What are the three basic strategies for setting a price on a new good or service? Briefly describe each strategy.

What is the basic assumption behind value-based pricing?

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 Michael's,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 individual 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 Michael's 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 Canada Day sale were reduced by 40 percent. -Refer to Art Supplies.Which type of discount is being using to price the Tacky Glue?

Business-to-business salespeople often use a discounting practice that is often done routinely without much forethought.The goal is to heighten the demand for certain items in a product line.Which of the following is being described?

Dell's new line of computers is selling for up to 20 percent lower than similar computers sold by its largest competitors.Since Dell's goal is to maximize its sales,it is probably using which type of strategy?

What can a marketing manager do to make demand for his or her product more inelastic?

Marketing managers can use a wide variety of special pricing tactics to fine-tune prices.Name and define five of the special pricing tactics that are legal.For each tactic,give an example of a specific company,industry,or product that would use the tactic.

Kule,Inc.produces three different lines of car racks for transporting large,bulky items. Bicycle Luggage Sks Sales \ 140,000 \ 100,000 \ 160,000 Less: cost of goods sold 110,000 110,000 140,000 Net proff 30,000 (10,000) 20,000 Total company net annual profit =\ 40,000 Included in the cost of goods sold is $120,000 of annual rent (a fixed cost)that is distributed equally among the three product lines. -Refer to Kule,Inc.What will be the effect on total net profit for the company if the line of bicycle racks is dropped?

One example of price bundling occurs when theatres sell season tickets at a lower price than individual tickets for the same show.

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

Merck & Co. ,the manufacturer of the AIDS drug Crixidan,distributes exclusively to one distributor,Stadtlanders Pharmacy.The pharmacy has been criticized for charging too high a price for the drug and exploiting inelastic demand.Stadtlanders claims the charges are ethical because of high staffing costs and associated discounts with various health plans.This situation describes issues associated with which of the following?

What is a price reduction that shifts the storage function forward to the purchaser and enables manufacturers to maintain steady production year-round?

Hannah's cable system has offered her a deal for basic cable plus six premium channels for less than she is currently paying for basic cable.The cable system is using price lining to increase its overall profits.

If a marketer decides to price goods at odd-numbered dollar amounts to denote bargains,and at even-numbered amounts to denote quality,what is he or she using?

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

Which of the following BEST describes uniform delivered pricing?

A penetration strategy tends to be effective in a price-sensitive market.Thus,one of the purposes of penetration pricing is to do which of the following?

List the three basic pricing methods.Name one advantage and one disadvantage associated with using each method.

Sharyl Kabbes manufactures dairy products on her farm outside Walkerton,Ontario.Her products carry the brand name Mrs.K's Premium.The company sells milk,cheese,and sausage products.The products are sold individually or in sets that include a variety of cheeses and sausage products for a special price.Currently the products are sold only in Ontario.Mrs.K's products were introduced with a high price relative to competition.Kabbes says that her products are premium and therefore justify the high initial price.To get retailers to carry Mrs.K's products,the company offers discounts to buyers who will transport the products from the Kabbes Farm to their warehouses.Kabbes also offers retailers money to run ads for Mrs.K's products. Because Mrs.K's products are perishable,transportation is very important,and some of her customers could not take advantage of the discount offered for picking up the product from the farm.As such,Kabbes has decided to divide the province into several segments and base her freight charges on the location of the buyer within these segments. -Refer to Mrs.K's Premium Cheese.Mrs.K's sells some products in sets that include a variety of cheeses and sausage products for a special price.What is this known as?