Exam 18: Setting the Right Price

SCENARIOS 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 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 Fourth of July sale were reduced by 40 percent. -Refer to American Girl Catalog.When a customer buys the matching nightgown set for the doll and her owner,American Girl priced the items using:

One disadvantage of using a penetration pricing policy is that the high unit profit margins will attract potential competitors into production of similar products.

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:

Kasha has decided to keep her new power boat in a "drystack" storage facility rather than in the water at a marina.The storage facility charges her a fee of $500 per year,plus $25 each time she calls ahead and asks the facility to put her boat in the water for the day or weekend.The facility is a using a pricing tactic known as:

A catalog retailer offer three styles of khaki pants at three price levels.Customers can buy khaki pants for $26.00,$32.00,or $38.00 and at no other prices but these.The special pricing tactic used by the catalog retailer is best described as variable psychological pricing.

The Association of Specialty Surgical Practice has published a minimum fee schedule for services and distributed this schedule throughout the medical profession.Specialty Surgical is encouraging:

SCENARIOS 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 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 Fourth of July sale were reduced by 40 percent. -Refer to Mrs.K's Premium Wisconsin cheese.Dividing the state of Wisconsin into segments and pricing products based on the freight charges to different segments represents the use of _____ pricing.

Landover Arms,Inc.currently markets its rifles designed for competitive shooting in the New England Market.It would like to expand into the Midwest market,but the competition there is intense.Which geographic pricing tactic should the firearms manufacturer use?

Ahmad Jing operates a wedding consultant service.He will often provide essentially the same service to different customers at distinctly different prices depending on how he likes the customer and how much he thinks the customer needs his services.Jing uses:

Super-Sav supermarket employees regularly shop at other local supermarkets in order to make certain that Super-Sav is charging prices comparable to the other supermarkets.What type of pricing strategy is Super-Sav using?

When a buyer pays a lower price for buying in multiple units or above a specified dollar amount,the buyer is receiving a:

Price discrimination can sometimes be justified.

When the economy is characterized by high inflation,special pricing tactics are often necessary.One popular cost-oriented tactic is culling low profit margin products from the product line.Why might this tactic backfire? What two other cost-oriented tactics can be used to guard against inflation? Describe these tactics.

______ tries to get customers into the store with misleading advertising and then uses high-pressure selling to persuade the consumer to buy something else more expensive.

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.This 15 percent discount is called a:

Quantity discounts are most often used to:

When Microsoft introduced its Windows NT network operating system,it gave buyers free Web-server software.At the same time,Netscape was trying to sell similar Web-server software for $4,999.Once Microsoft got a lion's share of the market,and Netscape's market share declined substantially,Microsoft began charging above-market price for its Web-server software.Many people thought Microsoft was guilty of:

A penetration pricing strategy tends to be most effective:

Business-to-business salespeople often use _____ to heighten the demand for certain items in a product line.It is a discounting practice that is often done routinely without much forethought.

Chicago Metallic Company,a manufacturer of baking pans,requires its buyers to pay for the cost of transportation from the manufacturing site to their place of businesses.Chicago Metallic uses FOB origin pricing.