Deck 14: Arriving at the Final Price

Question 1

Figure 14-2

-Figure 14-2 above represents the four approaches to selecting an appropriate price level. Box C represents which approach?

A) cost-oriented
B) profit-oriented
C) competition-oriented
D) demand-oriented
E) results-oriented

Answer 1

cost-oriented

Question 2

Setting the highest initial price that customers really desiring the product are willing to pay when introducing a new or innovative product is referred to as

A) a skimming strategy.
B) a penetration strategy.
C) a price-lining strategy.
D) an experience-curve pricing strategy.
E) a prestige pricing strategy.

Answer 2

A

Question 3

With the introduction of e-books, distributors could still set their own retail prices, but with a restriction. Distributors could set prices below a publisher's retail list price so long as they

A) matched the commission received from a publisher.
B) exceeded the commission received from a publisher.
C) did not exceed the commission received from a publisher.
D) did not increase prices to the readers.
E) prevented discounts to competitors.

Answer 3

C

Question 4

Demand-oriented approaches weigh factors that underlie expected ________ more heavily than such factors as cost, profit, and competition when selecting a price level.

A) total revenue
B) stakeholder concerns
C) discounting practices
D) product substitutes
E) customer tastes

Question 5

Skimming pricing refers to

A) setting the lowest initial price possible when introducing a new or innovative product in order to "skim" sales from competitors.
B) setting the highest initial price that customers who really desire the product are willing to pay.
C) setting a low initial price on a new product to appeal immediately to the mass market.
D) the practice of replacing promotional allowances with higher manufacturer list prices.
E) setting a high price so that quality- or status-conscious consumers will be attracted to the product and buy it.

Question 6

Skimming pricing is considered to be a ________ approach to pricing.

A) demand-oriented
B) cost-oriented
C) profit-oriented
D) competition-oriented
E) service-oriented

Question 7

Which of the following statements about the price-setting process is most accurate?

A) When selecting a strategy for setting an initial price, it doesn't matter which one you use as long as you stick with it.
B) Sometimes pricing strategies overlap, and a seasoned marketer will consider several strategies when choosing an approximate price level.
C) Demand-oriented pricing approaches rely heavily on comparison with competitors' prices.
D) Skimming pricing is a competition-oriented pricing strategy.
E) Penetration pricing is the best pricing strategy for companies trying to meet the goals of a profit-oriented pricing approach.

Question 8

Figure 14-2

-Figure 14-2 above represents the four approaches to selecting an appropriate price level. Box A represents which approach?

A) cost-oriented
B) profit-oriented
C) competition-oriented
D) demand-oriented
E) results-oriented

Question 9

The first Apple iPhone was introduced in 2007 at an initial price of $600. People waited in line overnight so they could be one of the first to own this unique smartphone. Which pricing strategy did Apple use to help recoup its costs for developing the smartphone?

A) penetration pricing
B) experience-curve pricing
C) customary pricing
D) skimming pricing
E) target pricing

Question 10

There are several factors that predict when a skimming pricing policy is likely to be most effective, including situations in which

A) consumers tend to be price-sensitive.
B) customers interpret the high price as signifying high quality.
C) it will be easier to set measurable sales unit goals.
D) a lower price will significantly reduce unit costs.
E) consumers perceive your product to be similar to other products in the market.

Question 11

Figure 14-2

-Figure 14-2 above represents the four approaches to selecting an appropriate price level. Box B represents which approach?

A) cost-oriented
B) profit-oriented
C) competition-oriented
D) demand-oriented
E) results-oriented

Question 12

The latest in appliance technology allows your refrigerator to send messages to your smartphone and even photos of the interior to remind you of what you need to pick up at the store. Taking advantage of strong consumer demand for technology-enabled products, marketers set prices for these refrigerators at thousands above other models. These marketers are using a ________ pricing strategy.

A) skimming
B) penetration
C) prestige
D) price lining
E) bundle

Question 13

All of these are demand-oriented approaches to selecting an approximate price level except which?

A) odd-even
B) yield management
C) customary
D) bundle
E) prestige

Question 14

Which of these is the step in setting a final price for a product that occurs immediately after determining cost, volume, and profit relationships?

A) set list or quoted price
B) select an approximate price level
C) scan competitors for prices of similar products or services
D) estimate demand and revenue
E) identify pricing objectives and constraints

Question 15

The key to setting a final price for a product is finding an approximate price level to use as a reasonable starting point. Which of the following is one of four common approaches to selecting an approximate price level?

A) competition-oriented
B) cause-oriented
C) revenue-oriented
D) stakeholder-oriented
E) distribution-oriented

Question 16

Figure 14-2

-Figure 14-2 above represents the four approaches to selecting an appropriate price level. Box D represents which approach?

A) cost-oriented
B) profit-oriented
C) competition-oriented
D) demand-oriented
E) results-oriented

Question 17

To accommodate the changes in the book selling market, publishers changed their pricing approach so that

A) rebates could be paid to the bookstores.
B) readers would pay more so that distributors would continue to profit.
C) distributors would no longer get a commission on every e-book sold.
D) distributors would get a commission on every e-book sold.
E) eventually e-books would be free to distribute.

Question 18

A skimming pricing policy is likely to be most effective when

A) consumers tend to be price-sensitive.
B) the company's product is easily and quickly duplicated.
C) a lower price will significantly lower fixed costs.
D) consumers perceive this product to be similar to others on the market.
E) the high initial price will not attract competitors.

Question 19

Skimming pricing is a strategy that introduces a new or innovative product by

A) following a price elastic strategy.
B) creating multiple price points.
C) setting a high initial price.
D) setting a low initial price.
E) setting the price at the average of competitors' prices.

Question 20

A manufacturer of a portable digital HD camera is thinking of using a skimming pricing strategy for its new product. Which of the following conditions would argue against using a skimming pricing strategy for the camera?

A) There will be a large potential market, even if the product is sold at a high price.
B) Technological problems still exist for competitors; their products are not equivalent.
C) Increasing the volume sold reduces production costs substantially.
D) Consumers perceive a strong price-quality relationship for this product.
E) Many consumers in the target market are innovators.

Question 21

Prestige pricing refers to

A) charging different prices to different buyers for goods of like grade and quality.
B) setting a low initial price on a new product to appeal immediately to the mass market odd-even pricing.
C) setting a market price for a product or product class based on a subjective feel for the competitors' price or market price.
D) setting a high price so that quality- or status-conscious consumers will be attracted to the product and buy it.
E) setting a price that is dictated by tradition, a standardized channel of distribution, or other competitive factors.

Question 22

A penetration pricing policy is most likely to be effective when which of these is true?

A) Lowering the price has only a minor effect on increasing the sales volume and reducing the unit cost.
B) The high initial price will not attract competitors.
C) A low initial price discourages competitors from entering the market.
D) Customers interpret the high price as signifying high quality.
E) Enough prospective customers are willing to buy immediately at the high initial price to make these sales profitable.

Question 23

Figure 14-3

-The movement from point A to point B in Figure 14-3 above shows

A) skimming demand.
B) penetration demand.
C) that buyers see the product as a bargain and buy more.
D) that buyers become dubious about the quality and prestige and buy less.
E) a downturn in the economy.

Question 24

Figure 14-3

-Figure 14-3 above shows a demand curve depicting which pricing approach?

A) prestige pricing
B) skimming pricing
C) penetration pricing
D) price lining
E) reflexive pricing

Question 25

Talbots sells women's clothes. A long-sleeved scoop neck T-shirt with the Talbots label costs $45. By comparison, you can buy a T-shirt for $5 at a Family Dollar Store, but it won't have the prestigious Talbots label or quality. What kind of demand-oriented approach to pricing does Talbots use?

A) experience-curve pricing
B) skimming pricing
C) demand-backward pricing
D) prestige pricing
E) flexible pricing

Question 26

Which of these statements about penetration pricing is most accurate?

A) Penetration pricing is a profit-oriented approach to pricing.
B) Penetration pricing is a cost-oriented pricing method.
C) Penetration pricing often encourages competitors to enter a market.
D) Penetration pricing is more effective for a price-sensitive market segment.
E) Penetration pricing usually precedes a skimming pricing.

Question 27

Prestige pricing is considered to be a ________ approach to pricing.

A) demand-oriented
B) cost-oriented
C) profit-oriented
D) competition-oriented
E) service-oriented

Question 28

The pricing strategy that is almost the exact opposite of skimming pricing is

A) target pricing.
B) penetration pricing.
C) price lining.
D) odd-even pricing.
E) prestige pricing.

Question 29

In response to Duracell's introduction of the Duracell Ultra battery, Energizer introduced an Advanced Formula battery. But unlike Duracell, Energizer priced its batteries at a low initial price, believing that consumers were too price-sensitive to pay more in this category. In this case, Energizer used

A) penetration pricing.
B) prestige pricing.
C) skimming pricing.
D) price lining.
E) cost-plus fixed-fee pricing.

Question 30

When Amazon introduced the latest Kindle Fire tablet at $49.99 and the average price of competitive models was $323, Amazon was using a ________ pricing strategy.

A) skimming
B) price lining
C) BOGO
D) penetration
E) loss-leader

Question 31

In some cases, penetration pricing may follow skimming pricing. The skimming pricing would help ________ and the penetration pricing would help

A) increase market share; attract price-insensitive customers.
B) attract price-sensitive customers; increase market share.
C) recoup initial research and development costs; increase market share.
D) recoup initial research and development costs; improve firm reputation.
E) increase market share; attract price-insensitive customers.

Question 32

Setting a high price so that quality- or status-conscious consumers will be attracted to the product and buy it is referred to as

A) skimming pricing.
B) status pricing.
C) price lining.
D) value pricing.
E) prestige pricing.

Question 33

Penetration pricing refers to

A) charging different prices to different buyers for goods of like grade and quality.
B) setting the highest initial price that customers really desiring the product are willing to pay.
C) setting a low initial price on a new product to appeal immediately to the mass market.
D) setting a market price for a product or product class based on a subjective feel for the competitors' prices or market price.
E) setting prices a few dollars or cents under an even number.

Question 34

Figure 14-3

-The movement from point B to point C in Figure 14-3 above shows

A) skimming demand.
B) penetration demand.
C) that buyers see the product as a bargain and buy more.
D) that buyers become dubious about the quality and prestige and buy less.
E) a downturn in the economy.

Question 35

You can buy a General Electric dishwasher for $399 or you can buy a similar Bosch brand dishwasher for $989. Since Bosch uses its pricing strategy to project a high-quality product image, it is most likely using ________ pricing.

A) bundle
B) standard markup
C) prestige
D) penetration
E) cost plus fixed-fee

Question 36

Wrigley introduced a new flavor of Orbit brand sugar-free chewing gum, mint mojito, and its introductory price was low so that it quickly created loyal customers for the flavor. In this example, Wrigley used

A) skimming pricing.
B) price lining.
C) odd-even pricing.
D) penetration pricing.
E) loss-leader pricing.

Question 37

Penetration pricing is intended to appeal to which market?

A) highly selective, quality-seeking consumers
B) price-insensitive markets
C) specialty product markets
D) the same markets as those targeted with a skimming pricing strategy
E) the mass market

Question 38

Several factors indicate that a penetration pricing policy would be effective when introducing a new product, including situations in which

A) lowering the price has only a minor effect on increasing the sales volume and reducing the unit cost.
B) the high initial price will not attract competitors.
C) customers interpret the high price as signifying high quality.
D) enough prospective customers are willing to buy immediately at the high initial price to make these sales profitable.
E) many segments of the market are price-sensitive.

Question 39

In some cases, penetration pricing may follow ________ pricing after price-insensitive customers have already purchased.

A) experience-curve
B) target ROI
C) odd-even
D) above-market
E) skimming

Question 40

Penetration pricing is considered to be a ________ approach to pricing.

A) demand-oriented
B) cost-oriented
C) profit-oriented
D) competition-oriented
E) service-oriented

Question 41

A retailer purchased a gross (144) of silk shells each costing exactly $17. Although the only difference between the shells was color, when they were put on the floor, the primary colors were marked $25, the pastel colors were marked $28, and the black-and-white shells were marked $30. These prices were set most likely because

A) retailers using a price lining strategy will occasionally mark up items based on color, style, and expected consumer demand.
B) fewer people buy black-and-white shells, so the retailer has to charge a higher price to break even.
C) the retailer is using prestige pricing; black-and-white shells are more elegant.
D) the primary colors were priced using a penetration strategy, the pastels were priced using a skimming strategy, and the black-and-white shells were priced using prestige pricing.
E) the retailer is essentially using above-, at-, and below-market pricing for the three groupings.

Question 42

Target pricing is considered to be a ________ approach to pricing.

A) cost-oriented
B) profit-oriented
C) demand-oriented
D) competition-oriented
E) service-oriented

Question 43

Price lining refers to

A) charging different prices to different buyers for goods of like grade and quality.
B) setting a low initial price on a new product to appeal immediately to the mass market.
C) setting a market price for a product or product class based on a subjective feel for the competitors' price or market price as the benchmark.
D) setting prices a few dollars or cents under an even number.
E) setting the price of a line of products at a number of different specific pricing points.

Question 44

The prices for all furniture sold at American Furniture Warehouse end in $9.99, such as $599.99, $899.99, etc. American Furniture Warehouse uses

A) odd-even pricing.
B) dynamic pricing.
C) price lining.
D) bundle pricing.
E) product-line pricing.

Question 45

Which of these pricing techniques is most sensitive to customers' responses to price?

A) cost-plus percentage-of-cost pricing
B) target pricing
C) experience-curve pricing
D) cost-plus fixed-fee pricing
E) standard markup pricing

Question 46

Which of the following statements regarding price lining is most accurate?

A) In order for price lining to be effective, there should be at least five specified price points.
B) Price lining assumes that demand is inelastic at each price point but elastic between price points.
C) Price lining assumes that demand is elastic at each price point but inelastic between price points.
D) Price lining is the preferred pricing strategy for governmental contracts.
E) Price lining is the same as above-, at-, or below-market pricing.

Question 47

The pricing approach that results in the manufacturer deliberately adjusting the composition and features of the product to achieve the desired price for consumers is referred to as

A) cost-benefit pricing.
B) cost-plus percentage-of-cost pricing.
C) target pricing.
D) cost-plus fixed-fee pricing.
E) product feature pricing.

Question 48

A Patek Philippe Sky Moon Tourbillon men's wristwatch is among the most expensive in the world, costing more than $1.5 million. This is an example of a ________ strategy.

A) penetration pricing
B) target pricing
C) bundle-pricing
D) loss-leader pricing
E) prestige pricing

Question 49

When using a price lining strategy, a marketer will

A) set the price of a line of products at a number of different specific pricing points.
B) set the price slightly higher than necessary to protect against losses resulting from adverse environmental forces.
C) adjust the price of a product so it is "in line" with the price of its largest competitor.
D) set a low initial price on a new product to appeal immediately to the mass market.
E) set a market price for a product or product class based on a subjective feel for the competitors' price or market price as the benchmark.

Question 50

Price lining is considered to be a ________ approach to pricing.

A) cost-oriented
B) demand-oriented
C) profit-oriented
D) competition-oriented
E) service-oriented

Question 51

The pricing approach that estimates the price that ultimate consumers would be willing to pay for a product; works backward through markups taken by retailers and wholesalers to determine what price to charge wholesalers is referred to as

A) cost-benefit pricing.
B) cost-plus percentage-of-cost pricing.
C) target pricing.
D) cost-plus fixed-fee pricing.
E) product feature pricing.

Question 52

Setting prices a few dollars or cents under an even number is referred to as

A) odd-even pricing.
B) prestige pricing.
C) price lining.
D) above-, at-, or below-market pricing.
E) every day fair pricing.

Question 53

Target pricing refers to

A) a method of selecting specific prices wholesalers and retailers are willing to pay based upon the elasticity of each given item.
B) a method of charging different prices to maximize revenue for a set amount of capacity at any given time.
C) the practice of simultaneously increasing product and service benefits while maintaining or decreasing price.
D) a method of estimating the price that ultimate consumers would be willing to pay for a product, then working backward through markups taken by retailers and wholesalers to determine what price to charge wholesalers.
E) a method of estimating the price that ultimate consumers would be willing to pay for a product, then determining how much wholesalers wish to charge its customers, deliberately adjusting the composition and features of the product to achieve the price to consumers.

Question 54

Odd-even pricing is considered to be a ________ approach to pricing.

A) cost-oriented
B) profit-oriented
C) demand-oriented
D) competition-oriented
E) service-oriented

Question 55

When the Swiss watchmaker TAG Heuer quadruped the average price of its watches, its sales volume jumped sevenfold. The likely cause of this volume increase is that

A) the watch market is highly conservative.
B) economies of scale in production would be substantial.
C) retailers are not willing to carry new brands of watches in this category.
D) once the initial price is set, it is nearly impossible to lower the price without alienating early buyers.
E) the watch category frequently uses prestige pricing, wherein lower prices may result in lower sales.

Question 56

If demand for a class of products is elastic at a number of price points but is inelastic between these price points, which pricing approach should be chosen?

A) product-line pricing
B) skimming pricing
C) penetration pricing
D) price lining
E) odd-even pricing

Question 57

Odd-even pricing refers to

A) setting prices one way for product lines and another way for individual brands.
B) setting prices of luxury items at even price points and setting the price of necessities at odd price points.
C) setting prices a few dollars or cents under an odd number.
D) adding a fixed percentage to the cost of all items in a specific product class.
E) setting prices a few dollars or cents under an even number.

Question 58

Figure 14-4

-Figure 14-4 above illustrates which type of pricing approach?

A) skimming
B) penetration
C) cost-plus
D) price lining
E) prestige

Question 59

Which of these statements regarding odd-even pricing is most accurate?

A) Odd-even pricing is designed to give the consumer a better set of pricing alternatives.
B) Odd-even pricing can be used in conjunction with a skimming pricing strategy, but should not be used with a penetration pricing strategy.
C) Odd-even pricing does not work if the product is health care-related.
D) Overuse of odd-ending prices tends to mute its effect on demand.
E) Odd-ending prices are best used with large ticket items; it loses its effectiveness with moderate- to low-ticket items.

Question 60

Setting the price of a line of products at a number of different specific price points is referred to as

A) odd-even pricing.
B) bundle pricing.
C) cost-plus pricing.
D) price lining.
E) prestige pricing.

Question 61

When Dell sells various laptops, it also pre-installs Microsoft Office and other software that customers order at a discount before a laptop is shipped. This is an example of

A) price lining.
B) product-line pricing.
C) bundle pricing.
D) customary pricing.
E) prestige pricing.

Question 62

Which of these is a cost-oriented pricing method?

A) loss-leader pricing
B) standard markup pricing
C) at-, above-, or below-market pricing
D) price lining
E) penetration pricing

Question 63

A ________ approach often results in changing prices based on time, day, week, or season.

A) skimming pricing
B) bundle pricing
C) yield management pricing
D) target return on investment pricing
E) standard markup pricing

Question 64

Delta Air Lines offers vacation packages that include airfare, car rental, and lodging. Delta Air is using ________ pricing strategy.

A) a penetration
B) a prestige
C) a bundle
D) an odd-even
E) a standard markup

Question 65

Marketing two or more products in a single package price is referred to as

A) package pricing.
B) loss-leader pricing.
C) bundle pricing.
D) tie-in pricing.
E) multi-product pricing.

Question 66

Yield management pricing is a typical tactic for services trying to manage

A) perceived risk.
B) capacity.
C) cognitive dissonance.
D) inelasticity of demand.
E) new product strategy development.

Question 67

While ________ often changes price based upon color or style, ________ often changes prices based on time, day, week, or season.

A) prestige pricing; skimming pricing
B) yield management pricing; bundle pricing
C) price lining; yield management pricing
D) target pricing; target return on investment pricing
E) bundle pricing; standard markup pricing

Question 68

With a cost-oriented pricing strategy, a price setter stresses the ________ side of the pricing problem, and the price is set by looking at

A) demand; revenue.
B) production and marketing; profit.
C) demand; target sales.
D) cost; production and marketing expenses.
E) cost; consumer tastes.

Question 69

Charging different prices to maximize revenue for a set amount of capacity at any given time is referred to as

A) demand-backward pricing.
B) target pricing.
C) skimming pricing.
D) yield management pricing.
E) penetration pricing.

Question 70

A box of Cascade dishwasher detergent shrink-wrapped with a bottle of Jet Dry is sold for $1.50 less than the regular price of the products sold separately. This is an example of ________ pricing.

A) penetration
B) prestige
C) bundle
D) odd-even
E) standard markup

Question 71

Which one of these statements regarding bundle pricing is most accurate?

A) Bundle pricing is intended to benefit the consumer, not the seller.
B) Bundle pricing is really "bundle packaging" since the price charged is for two or more of the same products that are shrink-wrapped together.
C) Bundle pricing is often associated with a skimming strategy.
D) Bundle pricing often provides a lower total cost to buyers and lower marketing costs to sellers.
E) Bundle pricing is based on the idea that consumers value the individual items more than they value the group contained in the package.

Question 72

Which of these is a demand-oriented approach to pricing?

A) customary pricing
B) target profit pricing
C) standard markup pricing
D) bundle pricing
E) service-oriented pricing

Question 73

Yield management is considered to be a ________ approach to pricing.

A) demand-oriented
B) cost-oriented
C) profit-oriented
D) competition-oriented
E) service-oriented

Question 74

The Swedish manufacturer of Asko dishwashers concluded that consumers would be willing to pay approximately $989 for a dishwasher that was quieter than any other dishwasher on the market. Based on this price, Asko determined the margins that would have to be given to wholesalers and retailers to arrive at the $989 retail price. Asko used

A) prestige pricing.
B) price lining.
C) cost-plus pricing.
D) target pricing.
E) customary pricing.

Question 75

One problem in the interstate trucking industry is the number of trucks that return empty after making a delivery. There is a website where independent interstate truckers can look for loads to carry on their return trips, known as backhauls. Because the trucks would normally return empty, truckers who use this website to generate business they would not have had otherwise receive a reduced shipping rate. This reduced rate for a backhaul is an example of

A) penetration pricing.
B) target pricing.
C) cost-plus pricing.
D) odd-even pricing.
E) yield management pricing.

Question 76

Bundle pricing is considered to be a ________ pricing practice.

A) demand-oriented
B) cost-oriented
C) profit-oriented
D) competition-oriented
E) product line-oriented

Question 77

If you were to buy one peach tree and one apple tree from the Stark Bros. fruit trees and landscaping catalog in two separate orders, you would pay a total of $109.99. However, if you order the peach and apple tree together in the same order, you pay only $89.99 each. When purchasing the two trees together, what pricing strategy does Stark Bros. employ?

A) product-line pricing
B) prestige pricing
C) price lining
D) discount pricing
E) bundle pricing

Question 78

Bundle pricing refers to

A) an extra amount of "free goods" awarded sellers in the channel of distribution for promoting a product.
B) marketing two or more products in a single package price.
C) using BOGOs-requiring customers to "buy one to get one free" as a strategy to increase sales and profits.
D) setting the price of a line of products at two specific pricing points.
E) the practice of charging two or more prices depending upon the outlet carrying the product.

Question 79

Yield management pricing refers to

A) controlling the production of products based upon seasonal demand.
B) deliberately selling a product below its customary price, not to increase sales, but to attract customers' attention in hopes that they will buy other products as well.
C) charging the same prices during different times of the day or days of the week to reflect variations in supply for the service.
D) offering significant price discounts to wholesalers that agree to purchase products in advance for a period of a year or more at a time.
E) charging different prices to maximize revenue for a set amount of capacity at any given time.

Question 80

Airlines, hotels, and car rental firms all engage in ________ by varying prices based on time, day, week, or season to match supply and demand.

A) skimming pricing
B) yield management pricing
C) bundle pricing
D) target pricing
E) prestige pricing