Exam 17: Pricing Concepts

SCENARIOS Continental Lite In the mid-1990s,Continental Airlines chose to compete head-on with Southwest Airlines by launching Continental Lite,an alternative low-fare commercial airline passenger operation.Top executives at Continental had expected its no-frills operation to break even within a year of its inception,but the airline fell short of the goal.A source close to the company explained it by saying,"Its costs were too high,and its revenues were too low." Some observers criticized Continental's marketing efforts.When the no-frills service was first launched,it lacked a distinct name or identity,missing its chance to make a splash.Then Continental tried to sell three "brands" at once--Lite,a new premium service,and its more traditional long-haul domestic flights.As one rival expressed it,"You cannot be all things to all people." -Refer to Specialty Cakes.Which of the following is the BEST example of a variable cost for Cecilia Villaveces Cakes?

Hal Macini owner of Evergreen Landscaping is more interested in earning customer goodwill than striving for maximum profit.He determines his prices by maintaining the company's profitability at a level that gives him a good living but will never make him a rich man.Macini is basing his pricing policy on:

SCENARIOS Continental Lite In the mid-1990s,Continental Airlines chose to compete head-on with Southwest Airlines by launching Continental Lite,an alternative low-fare commercial airline passenger operation.Top executives at Continental had expected its no-frills operation to break even within a year of its inception,but the airline fell short of the goal.A source close to the company explained it by saying,"Its costs were too high,and its revenues were too low." Some observers criticized Continental's marketing efforts.When the no-frills service was first launched,it lacked a distinct name or identity,missing its chance to make a splash.Then Continental tried to sell three "brands" at once--Lite,a new premium service,and its more traditional long-haul domestic flights.As one rival expressed it,"You cannot be all things to all people." -Refer to Consumer Buying Habits.Changing consumer buying habits will force premium brand marketers to lower their prices to protect their positions (maintain the same revenue).This suggests that demand for premium products is:

_____ is defined as the quantity of a product that will be sold at various prices for a specified period.

Ceylon Express sells bottled pasteurized tea to retailers.It has the following revenues and costs: What is the annual break-even point in unit for the company?

When Richard opened The Kite Hut,he charged $7 for kites and could not keep up with the demand.The Kite Hut has raised the price to $10,and now Richard is still selling all the kites he carries,but he is not forced to reorder on a daily basis.The $10 price is probably a(n):

The Fenton Company produces memorial bricks,which veterans' organizations,Chambers of Commerce,and other service organizations sell as fund raisers.The company has a target return on investment of 13 percent.This means that the Fenton Company has a(n)_____ pricing objective.

Kables Optic builds quality binoculars,which has innovative components (such as water-resistance)and superior durability.Kables Optic has managed to keep its price lower than its competitors.However,Kables's sales have been disappointing.For a fast and simple remedy,Kables should:

Profit maximization is the most common pricing objective used by firms.

How does price interact with the other three Ps of the marketing mix?

Chulo Ibsen makes and sells hand-forged wrought iron fireplace screens for $125 each.He has determined that his fixed costs are $8,000,and his variable costs per firescreen are $45.What is his fixed cost contribution per screen?

SCENARIOS Continental Lite In the mid-1990s,Continental Airlines chose to compete head-on with Southwest Airlines by launching Continental Lite,an alternative low-fare commercial airline passenger operation.Top executives at Continental had expected its no-frills operation to break even within a year of its inception,but the airline fell short of the goal.A source close to the company explained it by saying,"Its costs were too high,and its revenues were too low." Some observers criticized Continental's marketing efforts.When the no-frills service was first launched,it lacked a distinct name or identity,missing its chance to make a splash.Then Continental tried to sell three "brands" at once--Lite,a new premium service,and its more traditional long-haul domestic flights.As one rival expressed it,"You cannot be all things to all people." -Refer to Specialty Cakes.Although many factors determine the prices charged by Cecilia Villaveces Cakes,the two primary determinants are:

During the off-season,Parrish Farms,a bed-and-breakfast inn,offers a 25 percent reduction on its weekend rates to entice customers to make last-minute reservations at its Web site.This is an example of pricing strategy used as a:

Firms that price their products solely on the basis of costs are adhering to the marketing concept.

SCENARIOS Continental Lite In the mid-1990s,Continental Airlines chose to compete head-on with Southwest Airlines by launching Continental Lite,an alternative low-fare commercial airline passenger operation.Top executives at Continental had expected its no-frills operation to break even within a year of its inception,but the airline fell short of the goal.A source close to the company explained it by saying,"Its costs were too high,and its revenues were too low." Some observers criticized Continental's marketing efforts.When the no-frills service was first launched,it lacked a distinct name or identity,missing its chance to make a splash.Then Continental tried to sell three "brands" at once--Lite,a new premium service,and its more traditional long-haul domestic flights.As one rival expressed it,"You cannot be all things to all people." -Refer to Specialty Cakes.There are many occasions for which people may need to buy a cake,but most people do not have the time or interest to learn about cakes and their bakers.These people who do not know about the quality of the Cecilia Villaveces Cakes might choose them because they:

Deb Ross wants to open a store to sell quilting supplies.She cannot decide whether to base her store's pricing objectives on market share,dollar sales,or unit sales.Regardless of which she chooses,her firm's pricing objective can be categorized as:

Distribution strategies become a less important factor during the growth stage of a product's life cycle.

Monthly output at Vincent Sheds and Outbuildings changed from 15 to 16 outdoor storage buildings,and the total costs changed from $27,000 to $28,500.What was the marginal cost for the company?

Parrish Farms produces homemade cheese.Last year,it managed to exceed its target ROI for the current fiscal year.The following results were found on its financial statements: What was the actual return on investment (ROI)for Parrish Farms?

Name two advantages and two disadvantages associated with the use of break-even analysis.