Exam 17: Pricing Concepts

At the end of February,the Hearts and Flowers store reduced the price on all of its Valentine's Day's candy by 50 percent in order to liquidate this inventory.What type of pricing strategy is being used in this example?

How do consumers use the price-quality relationship to evaluate goods? How can marketers take advantage of this consumer response?

The pricing policy used by Middleton Industries,manufacturer of Renaissance charms for bracelets and necklaces,is to set prices so the its retail prices are as high as the market will tolerate.Additionally,Middleton strives to keep its costs at an industry low by using silver and gold overlays over charms made of cheap base metal.This is an example of a _____ policy

As products enter the growth stage of the product life cycle,prices generally begin to fluctuate wildly.

In the mature and highly competitive furniture industry,you would expect furniture manufacturers to engage in:

Queeg Industries sells all types of artists' paint brushes.When the owner of Queeg learned that Patterson Art,one of its biggest competitors in the Northeast region,had lowered its prices on all synthetic brushes by 5 percent,he did the same.This is an example of _____ pricing.

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 Continental Lite.Continental Lite's pricing objectives were based on gaining as much market share as possible from Southwest Airlines.This suggests that Continental Lite had _____ pricing objectives.

Adequate distribution for a new product is often obtained by reducing the size of the profit margin for its resellers.

Break-even analysis determines what sales volume must be reached for a product before the company's total revenue equals total costs.

Price is defined as the perceived value of a good or service that is exchanged for a certain dollar amount.

Markup pricing,adding an amount to cost to cover expenses and profit,is one of the most common pricing methods used by intermediaries to establish a selling price.

The point at which there is no inclination for the price to rise or fall is called price:

Tom likes to drink scotch whiskey.He was familiar with the Johnny Walker Black Label brand,which he purchased for around $30.When he found a bottle of Johnny Walker Black Label priced at more than $200,he was positive that it would be a much finer whiskey.For Tom,_____ indicated quality.

Kroger supermarkets will place well-known brands on the shelves at high prices while offering its own Kroger brand at lower prices.This practice is an example of:

If demand for athletic shoes is elastic,consumers will not change their purchasing habits greatly when the price of athletic shoes changes.

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 Continental Lite.The statement that Continental Lite had problems because "Its costs were too high,and its revenues were too low," suggests that the airline had no _____ left over after paying for airline activities.

An organization is using _____ when it sets its prices so that total revenue is as large as possible relative to total costs.

The daily demand for bottled water is 35 bottles when the price is set at $1.However,if the price is raised to $5,the demand is only 5 bottles.The bottled water producer is willing to supply 40 bottles if the price is set at $5 per bottle,but will only supply 10 bottles if the price is set at $2.Draw the supply and demand curves for the water bottles on the graph below.Label each curve and each axis.At what level does equilibrium occur? What are the areas of surplus and shortage?

As a short-term pricing objective,_____ can be effectively used on a temporary basis to sell off excessive inventory.

When a seller determines the selling price by adding to cost an amount for profit and expenses not previously accounted for,the seller is using _____ pricing.