Deck 11: Pricing Strategies: Additional Considerations

Question 1

A market-skimming pricing strategy should NOT be used for a new product when ________.

A) the product's quality and image support its higher price
B) enough buyers want the products at that price
C) competitors are unable to enter the market
D) competitors can undercut prices easily
E) producing a smaller number of goods is feasible

Answer 1

D

Question 2

Which of the following product mix pricing strategies involves setting prices across an entire product range based on cost differences between the products, customer evaluations of different features, and competitors' prices?

A) by-product pricing
B) product bundle pricing
C) optional product pricing
D) captive product pricing
E) product line pricing

Answer 2

E

Question 3

For market skimming to be successful, the costs of producing a smaller volume cannot be so high that they cancel the advantage of charging more.

Answer 3

True

Question 4

For what types of products might marketers use market-skimming pricing?

Question 5

Why might marketers use market-penetration pricing?

Question 6

Which of the following is true of market-penetration pricing?

A) It should be used when the product's quality and image support a high price.
B) It involves setting a high price for a new product to appeal to the elite in society.
C) It results in drawing in large numbers of buyers quickly, winning a large market share.
D) It is best used in conjunction with a market-skimming pricing strategy.
E) It results in the company making fewer and less profitable sales.

Question 7

Electrowhip, a company that manufacturers blenders and electric whisks, has decided to use a market penetration pricing strategy. Which of the following, if true, proves their decision to be a wise one?

A) Electrowhip's competitors utilize social media for marketing their products.
B) Electrowhip sells products whose image and quality support high prices.
C) Electrowhip operates in a market with many competitors.
D) Electrowhip does not operate in a price sensitive market.
E) Electrowhip's products are intended to appeal to the elite in society.

Question 8

Whizz Corp. wishes to introduce a new hybrid car into mature markets in developed countries with the goal of gaining mass-market share quickly. Which of the following pricing strategies would help the firm meet its goal?

A) market-skimming pricing
B) market-penetration pricing
C) market-segmentation pricing
D) cost-plus pricing
E) captive-product pricing

Question 9

Companies that set a low price for a new product in order to attract a large number of buyers and a large market share are using the ________ strategy.

A) market-skimming pricing
B) market-penetration pricing
C) cost-plus pricing
D) inclusive pricing
E) exclusive pricing

Question 10

Companies set not a single price, but a pricing ________ that covers different items in its line and changes over time as products move through their life cycles.

A) by-product
B) structure
C) loop
D) cycle
E) bundle

Question 11

Companies facing the challenge of setting prices for the first time can choose between two broad strategies: market-penetration pricing and ________ pricing.

A) comparative
B) competitive
C) market-skimming
D) market-segmentation
E) cost-plus

Question 12

Refer to the scenario below to answer the following question(s).
Champion, Inc. is a manufacturer of lunch boxes, school bags, and school stationery. Charles Payton, the CEO of Champion, hopes to sell the products at a low price to penetrate the market quickly.
Which of the following best supports a market-penetration strategy for Champion?

A) Production costs increase as sales volume increases.
B) It is very difficult for competitors to enter the market.
C) The cost of producing a smaller volume is negligible.
D) The quality of the products supports high initial prices.
E) The market for the products is highly price sensitive.

Question 13

When a company sets a high price for a new product with the intention of reducing the price in the future, it is using the ________ pricing strategy.

A) market-skimming
B) cost-plus
C) market-segmentation
D) market-penetration
E) competitive

Question 14

Which of the following is true of price skimming?

A) It is effective in situations in which competitors are able to undercut prices easily.
B) It can be profitably used when the product's quality and image support its price.
C) It involves underpricing products so that companies make larger sales.
D) It is ineffective in situations in which competitors are unable to enter the market easily.
E) It leads to a situation in which the company completes more, though less profitable, sales.

Question 15

Differentiate between market-skimming and market-penetration pricing strategies. Explain the conditions within which they are effective.

Question 16

When The Candy Store sets a low initial price in order to get its "foot in the door" and to quickly attract a large number of buyers, the company is using market-skimming pricing.

Question 17

Midnight Magic, a perfume manufacturing company, plans to release a new fragrance during the holiday season at $99 per bottle. The company intends to bring the price down to $49 within six months of its release to attract buyers who couldn't afford the initial price. Which of the following pricing strategies is Midnight Magic using?

A) market-penetration pricing
B) market-skimming pricing
C) competitive pricing
D) cost-plus pricing
E) product-line pricing

Question 18

Pricing strategies tend to change and evolve as the average product passes through its life cycle.

Question 19

A market-penetration pricing policy should LEAST likely be used for a new product when ________.

A) the market is highly price sensitive
B) production and distribution costs fall as sales volume increases
C) the product's quality and image support a high price
D) a high price helps keep out the competition
E) there are few or no competitors in the market

Question 20

In a bid to attract more customers in a market that has several competitors, Barrymore's Bakery slashed the prices of all its products by 50 percent. Managers at the firm reasoned that lower prices would draw in even more customers, making up for the reduction in price several times over. Which of the following pricing strategies are they using?

A) market-skimming pricing
B) market-penetration pricing
C) captive-product pricing
D) cash discount pricing
E) by-product pricing

Question 21

Which of the following companies uses captive product pricing?

A) Photo Genie, which sells inexpensive cameras that run only on their own expensive batteries
B) Tune Zone, which launched a range of mp3 player models, each priced according to its features
C) Penguin's Parlor, which offers customers a 20-percent discount on their birthdays
D) Sportsprint, which prices sports equipment according to customer evaluations
E) Burger Den, whose combo meals are priced lower than its individual components sold together

Question 22

In addition to its customary services, On the Spot, a moving company, also sells the boxes and padding that are used when moving household furniture. This is an example of customer-segmented pricing.

Question 23

Which of the following companies uses product line pricing?

A) Photo Genie, which sells inexpensive cameras that run only on their own expensive batteries
B) Mobile Point, which launched a range of cell phone models, each priced according to its features
C) Penguin's Parlor, which offers customers a 20-percent discount on their birthdays and certain holidays
D) Green Thumb, which gives away free watering cans with the purchase of certain potted plants
E) Panizza, whose combo meals are priced lower than the individual components sold together

Question 24

Tone Zone plans to introduce four mp3 player models over the next year. These models range from basic players at $99 per unit, to more sophisticated players at $399 per unit. The more features a model has, the more expensive it is. What pricing strategy is Tone Zone using for its range of mp3 players?

A) product line pricing
B) product bundle pricing
C) captive product pricing
D) by-product pricing
E) optional product pricing

Question 25

Which of the following is true of product bundle pricing?

A) It promotes the sale of products that consumers might not otherwise buy.
B) It is used to set prices across an entire product range based on customer evaluations.
C) It forces customers to buy product parts that are only compatible with the main product.
D) It results in companies making fewer-though more profitable-sales.
E) It involves pricing the main product low and setting high markups on the supplies.

Question 26

Pricing across a product mix is difficult because various products have related demand and costs, and products face different degrees of competition.

Question 27

Which of the following product mix pricing strategies involves pricing products that can only be used with the main product?

A) by-product pricing
B) product bundle pricing
C) captive product pricing
D) product line pricing
E) optional product pricing

Question 28

Refer to the scenario below to answer the following question(s).
Champion, Inc. is a manufacturer of lunch boxes, school bags, and school stationery. Charles Payton, the CEO of Champion, hopes to sell the products at a low price to penetrate the market quickly.
Noticing that themed envelopes aren't selling well, Charles Payton decides to offer customers a special "letter writing" kit. He prices the kit-which comprises letter paper, matching envelopes, and pens-at $5, even though the combined prices of the individual items is $8. Which of the following pricing strategies is he using?

A) optional product pricing
B) product bundle pricing
C) by-product pricing
D) dynamic pricing
E) captive product pricing

Question 29

In product line pricing, price steps should account for differences in customer perceptions of the value of different features.

Question 30

Which of the following is true of product line pricing?

A) The price steps take cost differences between products in the line into account.
B) The pricing strategy cannot be used by companies in developed countries.
C) The price steps do not account for the prices of similar products from competitors.
D) The pricing strategy involves overpricing products so that they appeal to the elite.
E) The customer's perception of the value of different features is considered irrelevant.

Question 31

Which of the following product mix pricing strategies did Polaroid use when it set the general price range of its cameras low and the markup on its film high?

A) product-segmented pricing
B) by-product pricing
C) customer-segmented pricing
D) captive product pricing
E) product bundling pricing

Question 32

Which of the following companies uses product bundle pricing?

A) Photo Genie, which sells inexpensive cameras that run only on their own, expensive, batteries
B) Tune Zone, which launched a range of mp3 player models, each priced according to its features
C) Penguin's Parlor, which offers customers a 20 percent discount on their birthdays
D) Green Thumb, which gives away free watering cans with the purchase of certain potted plants
E) Panizza, whose combo meals are priced lower than its individual components sold together

Question 33

Thinking Cap Corp. prices its various cap designs at different price levels, ranging from $2.05 to $5.95. This is an example of optional product pricing.

Question 34

Which of the following product mix pricing strategies involves pricing multiple products to be sold together?

A) product line pricing
B) product bundle pricing
C) optional product pricing
D) by-product pricing
E) captive product pricing

Question 35

Cellpoint uses two-part pricing for its long-distance call charges. Because this is a service, the price is broken into a fixed fee plus a(n) ________ usage rate.

A) fixed
B) variable
C) standard
D) market
E) optional

Question 36

Multiprint, a printer manufacturing firm, sells ink cartridges for each of its specific models. Only Multiprint cartridges are compatible with Multiprint printers, and no two models share the same specifications. What type of pricing does Multiprint use?

A) product line pricing
B) captive product pricing
C) optional product pricing
D) by-product pricing
E) product bundle pricing

Question 37

Which of the following product mix pricing strategies involves pricing additional or accessory products sold along with the main product?

A) inclusive product pricing
B) exclusive product pricing
C) by-product pricing
D) product bundle pricing
E) optional-product pricing

Question 38

Using ________ pricing, companies are able to turn their trash into cash, allowing them to make the price of their main product more competitive.

A) product bundle
B) optional product
C) captive product
D) by-product
E) product line

Question 39

In the case of services, captive product pricing is called ________ pricing.

A) by-product
B) optional product
C) two-part
D) bundle
E) segmented

Question 40

Which of the following is true of optional-product pricing?

A) It involves capitalizing on low value by-products.
B) It involves pricing products that can be added to the base product.
C) It is used to price a company's main product.
D) It involves setting geographically-specific prices.
E) It is used to price products that must be used with the company's main product.

Question 41

Leicestershire Renovations has a history of problems with customers who do not pay their bills on time. Leicestershire Renovations wants to improve its cash situation, reduce bad debts, and reduce credit-collection costs. Which of the following forms of pricing would most likely help the firm achieve its goal?

A) by-product pricing
B) zone pricing
C) cash discounts
D) product bundling
E) quantity discounts

Question 42

Explain product line pricing.

Question 43

Give two examples of product bundle pricing.

Question 44

Which of the following is a price adjustment strategy?

A) product bundle pricing
B) by-product pricing
C) product line pricing
D) optional product pricing
E) discount and allowance pricing

Question 45

The discount offered by Glamor Gifts to customers who bought Valentine-themed merchandise the week following Valentine's Day is an example of a ________.

A) functional discount
B) seasonal discount
C) trade discount
D) cash discount
E) time-based discount

Question 46

Solar Tanning Salon prices tanning sessions at $25 per visit. It also offers seasonal passes for $175 that allow the customer to visit the salon multiple times in a year. This is an example of a(n) ________.

A) sample
B) promotional allowance
C) product bundle
D) discount
E) product line

Question 47

What should the price steps of product line pricing take into account?

Question 48

Some industries commonly use two-part pricing, breaking the price down into a fixed fee and a fixed usage rate.

Question 49

Which of the following price adjustment strategies offers a price reduction to buyers who pay their bills promptly?

A) cash discount
B) season discount
C) quantity discount
D) trade discount
E) functional discount

Question 50

When a manufacturer seeks a market for by-products and accepts a price that covers more than the cost of storing and delivering those by-products, the manufacturer is able to reduce the main product's price to make it more competitive.

Question 51

Which of the following price adjustment strategies involves reducing prices to reward customer responses such as volume purchases, paying early, or participating in sales-support programs?

A) product bundle pricing
B) captive product pricing
C) product line pricing
D) dynamic pricing
E) discount and allowance pricing

Question 52

Give two examples of products for which marketers might use optional-product pricing.

Question 53

Give two examples of products for which captive product pricing might be used.

Question 54

A(n) ________ refers to promotional money paid by manufacturers to retailers in return for an agreement to feature the manufacturer's products in some way.

A) allowance
B) sample
C) discount
D) tax credit
E) tax exemption

Question 55

Give two examples of by-product pricing.

Question 56

A seller offers a ________ to trade-channel members who perform certain functions, such as selling, storing, and record keeping.

A) functional discount
B) storage allowance
C) cash discount
D) promotional allowance
E) quantity discount

Question 57

A(n) ________ is a straight reduction in price on purchases during a stated period of time or of larger quantities.

A) allowance
B) free sample
C) discount
D) tax credit
E) quota

Question 58

A quantity discount is a price reduction for buyers who ________.

A) buy merchandise out of season
B) buy merchandise in bulk
C) pay their bills on time
D) buy discontinued products
E) return old items while buying new ones

Question 59

Sensenig Propeller manufactures replica antique wooden airplane propellers. In the process of production, the company generates a great deal of scrap hardwood. How can using by-product pricing benefit the company?

Question 60

When using product bundle pricing, sellers combine several of their products and offer the bundle at an increased price for increased profit.

Question 61

Trade-in allowances are most commonly used in the ________ industry.

A) real estate
B) automobile
C) dairy products
D) financial services
E) health care

Question 62

In return for participating in Honda advertising and sales support programs, Honda dealerships are rewarded with payments or price reductions, which are known as ________.

A) seasonal discounts
B) functional allowances
C) cash discounts
D) promotional allowances
E) trade-in allowances

Question 63

________ allowances are payments or price reductions that reward dealers for participating in advertising and sales support programs.

A) Promotional
B) Trade-in
C) Segmented
D) Functional
E) Dynamic

Question 64

La Belle released a cut glass bottle of perfume at $299 per item, even though its major competitor prices its signature scent at $99 per item. La Belle reasons that customers in search of luxury goods will prefer its product because they are likelier to believe that high price indicates superior quality. What price adjustment strategy is evident in its reasoning?

A) seasonal pricing
B) time-based pricing
C) captive product pricing
D) psychological pricing
E) location-based pricing

Question 65

________ are formed by noting current prices, remembering past prices, or assessing the buying situation.

A) Product line prices
B) Seasonal prices
C) Reference prices
D) Time-based prices
E) Product bundle prices

Question 66

Segmented pricing is only effective when ________.

A) the segments show similar degrees of demand
B) the cost of segmenting does not exceed the revenue obtained from the price difference
C) the segmented prices do not reflect real differences in customers' perceived value
D) the customers of different socio-economic classes are treated according to their rank
E) companies make their services and products accessible exclusively to wealthy patrons

Question 67

Under ________ pricing, different versions of the product are priced differently but not according to differences in their costs.

A) product form
B) optional product
C) captive product
D) by-product
E) seasonal

Question 68

Shoe Trends, a company that manufactures formal shoes for men and women, offers to give its customers $10 for an old pair of shoes when they buy a new pair. In essence, they're reducing the price of the new shoes by $10. What is this type of price adjustment called?

A) functional discount
B) captive product pricing
C) seasonal discount
D) trade-in allowance
E) by-product pricing

Question 69

Consumers are less likely to use price to judge the quality of a product when they ________.

A) have never tried the product before
B) have little knowledge of the brand
C) have experience with the product
D) are shopping for luxury items
E) cannot physically examine the product

Question 70

By definition, ________ pricing is used when a firm sells a product or service at two or more prices, even though the difference in price is not based on differences in cost.

A) segmented
B) variable
C) flexible
D) cost-plus
E) reference

Question 71

When theaters vary seat prices due to audience preferences for seats in coveted rows, they use ________ pricing.

A) customer-segment
B) location-based
C) time-based
D) product line
E) captive product

Question 72

The New Age Gallery has three admission prices for students, adults, and seniors, even though all three groups are entitled to the same services. This form of pricing is called ________ pricing.

A) psychological
B) product form
C) customer-segment
D) captive product
E) by-product

Question 73

________ allowances are price reductions given for turning in an old item when buying a new one.

A) Promotional
B) Trade-in
C) Depreciation
D) Segmented
E) Functional

Question 74

Which of the following is a price adjustment strategy that considers how a customer's perception of a product is influenced by its price?

A) captive product pricing
B) psychological pricing
C) by-product pricing
D) promotional pricing
E) international pricing

Question 75

What type of pricing is being used when a company temporarily prices its product below the list price or even below cost to create buying excitement and urgency?

A) segmented pricing
B) international pricing
C) reference pricing
D) promotional pricing
E) basing-point pricing

Question 76

Which term refers to prices that buyers carry in their minds and check with when they look at a given product?

A) product line prices
B) reference prices
C) location-based prices
D) product form prices
E) time-based prices

Question 77

A supermarket places its store brand of blackberry jam priced at $5 per jar in the fruit preserves aisle, alongside the jam jars of a better known brand-whose products are priced at $8 apiece. Store managers reason that customers are more likely to choose the store brand instead of the better-known brand when they realize the price difference. What price adjustment strategy is evident in the supermarket's reasoning?

A) by-product pricing
B) product bundle pricing
C) captive product pricing
D) psychological pricing
E) seasonal pricing

Question 78

Hearth & Home, a store which sells household products, has announced a one-week sale on its new carpet line. This is an example of ________.

A) promotional pricing
B) seasonal pricing
C) by-product pricing
D) product bundle pricing
E) time-based pricing

Question 79

When a firm varies its price by the season, it is using ________ pricing.

A) product form
B) customer-segment
C) location-based
D) time-based
E) value-added

Question 80

Sparkling Valley, a luxury resort, prices cottages facing the lake higher than cottages that do not, even though the cottages and services offered are identical in every other aspect. This form of pricing is called ________ pricing.

A) location-based
B) time-based
C) by-product
D) seasonal
E) captive product