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 Consumer Buying Habits.In the past,Procter & Gamble set prices on significant brands such as Pampers so that total revenue was as large as possible relative to total costs.This represents a _____ approach.

Manufacturers can regain some control over the price their products are sold for at the retail level by:

Which of the following statements about price is true?

Price equilibrium is the price at which supply and demand are equal,and there is no inclination for prices to rise or fall.

List the three categories of pricing objectives and then two specific strategies in each category that a marketer could implement to achieve those objectives.

Aviary Industries produces and markets unfinished birdhouses to craft retailers.When graphed,the demand schedule for its birdhouses is a straight line.If one birdhouse costs $20,5,000 unfinished houses are sold.At $25,4,500 birdhouses are sold.How many birdhouses will be sold if the price per house is increased to $30?

List three factors that affect elasticity of demand.Briefly describe how each affects demand.

The ______ is the quantity of products that will be sold in the market at various prices for a specified time period,and _____ is the quantity of a product that will be offered to the market by suppliers at various prices for a specified period.

Regency Inc.makes disposable cap and gown sets for graduations.Each cap and gown set sells for $15.The average variable cost for manufacturing 10 cap and gown sets is $100.Total fixed costs for the year equal $65,000.Calculate the break-even point in units.

If a company's pricing objective is to meet the competition or to maintain existing prices,it is using _____ pricing.

Which of the following statements describes a limitation associated with break-even analysis?

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.Assume a product has a strong brand name,a reasonable price,and good quality.Which of the following strategies should NOT be implemented?

_____ use complex mathematical software to profitably fill unused capacity.

Price is often used as a promotional tool.

When Plantation Manufacturing Company lowered the price of its patio sets from $1,100 to $850,demand doubled from 4 units sold per month to 8 units per month.However,total revenue dropped.This is an example of:

At her local supermarket,Tara saw a pizza pan and a package of mix to make homemade pizza.The items,which were sold together,retailed at $28.50,but were marked down to $19.99.The retailer sold one for $28.50 and six at the $19.99.The retailer's revenue is:

What is the biggest advantage associated with markup pricing?

Yield management systems (YMS)were first used by Internet service providers..

An office supply store can buy an office chair for $30.If the store owner sells the office chair for $45,what is the markup based on the selling price?

Lincoln Florist is a flower shop that has recently moved to a new,larger location.At this new location,it has been unable to attract sufficient customers.Bonita Cho,its owner,does not have the cash to pay the current loan installment due on the building and inventory.Cho has decided to reduce all merchandise prices by at least 50 percent for a weekend sale so she can at least make her loan payment.Her pricing objective can be classified as: