Deck 9: Pricing: Understanding and Capturing Customer Value

Question 1

A company designs what it considers to be a good product,calculates the expenses of making the product,and sets a price that adds a standard markup to the cost of the product.This approach to pricing is called ________ pricing.

A) value-added
B) good-value
C) cost-plus
D) competitor-based
E) break-even

Answer 1

C

Question 2

________ refers to the amount of money charged for a product or service.

A) Payroll
B) Profit
C) Price
D) Cost
E) Salary

Answer 2

C

Question 3

A value-based pricing strategy most likely begins with ________.

A) assessing customer needs
B) designing a stylish product
C) evaluating the product's costs
D) promoting the product's benefits
E) setting a price based on perceived value

Answer 3

A

Question 4

________ pricing is when a firm tries to determine the price at which it will break even or make the profit it is seeking.

A) Competition-based
B) Target return
C) Cost-plus
D) Good-value
E) Value-added

Question 5

Which of the following statements about break-even analysis is most likely true?

A) It determines how customer-perceived value changes with value-added pricing.
B) It is a tool used to calculate fixed costs.
C) It is used to determine the maximum price that can be set on a product.
D) It is a tool marketers use to examine the relationship between supply and demand.
E) It fails to consider customer value and the relationship between price and demand.

Question 6

________ pricing involves setting prices based on the expenses involved in producing,distributing,and selling a product plus a fair rate of return for a company's effort and risk.

A) Competition-based
B) Value-added
C) Cost-based
D) Good-value
E) Demand-based

Question 7

Which of the following sets the upper limit for a product's pricing?

A) profits
B) product costs
C) consumer perceptions of value
D) elements of the product mix
E) competition

Question 8

________ is the only element in the marketing mix that produces revenue.

A) Price
B) Place
C) Promotion
D) Product
E) Profit

Question 9

Rent,electricity,and executive salaries that do not vary with production level are referred to as ________ costs.

A) fixed
B) variable
C) break-even
D) target
E) promotional

Question 10

Which of the following is an external factor that affects pricing decisions?

A) the marketing mix
B) competition
C) top management
D) marketing objectives
E) marketing strategy

Question 11

Which of the following sets the lower limit for a product's pricing?

A) product costs
B) profits
C) competition
D) elements of the product mix
E) consumer perceptions of value

Question 12

________ uses buyers' perceptions of what a product is worth as the key to pricing.

A) Customer value-based pricing
B) Target return pricing
C) Cost-plus pricing
D) Psychological pricing
E) Competition-based pricing

Question 13

Radox,a luxury watch brand,identifies a market segment that is willing to pay premium prices for its watches,and Radox managers select an ideal selling price.Managers then determine the costs to create watches that meet the ideal selling price.The company's pricing approach is referred to as ________.

A) mass production
B) cost-plus pricing
C) target costing
D) value-added pricing
E) target return pricing

Question 14

The Fashion Store,a new startup,sets product prices so that revenues will equal manufacturing and marketing costs.The pricing strategy used by the company is referred to as ________ pricing.

A) good-value
B) value-added
C) cost-plus
D) competition-based
E) target return

Question 15

Providing extra amenities to differentiate and support high-priced products is referred to as ________ pricing.

A) high-low
B) value-added
C) target return
D) everyday low
E) cost-plus

Question 16

________ pricing involves charging a constant low price with few or no temporary price discounts.

A) High-low
B) Target return
C) Cost-plus
D) Everyday low
E) Market-skimming

Question 17

________ costs are also known as overhead.

A) Fixed
B) Variable
C) Target
D) Capital
E) Payroll

Question 18

Costs that change directly with the level of production are referred to as ________ costs.

A) fixed
B) variable
C) target
D) capital
E) payroll

Question 19

________ costs refer to the sum of the fixed and variable costs for any given level of production.

A) Target
B) Marginal
C) Value-based
D) Total
E) Break-even

Question 20

Value-based pricing is the reverse process of ________ pricing.

A) good-value
B) target costing
C) cost-based
D) value-added
E) competition-based

Question 21

In ________,the market consists of many buyers and sellers trading in a uniform commodity,such as wheat,copper,or financial securities.

A) pure competition
B) monopolistic competition
C) oligopolistic competition
D) a pure monopoly
E) a pure monopsony

Question 22

Glow,a gift card store,offers a price reduction to customers who buy Christmas cards the week after Christmas.In this case,the store offers a ________.

A) functional discount
B) seasonal discount
C) promotional allowance
D) trade-in allowance
E) quantity discount

Question 23

Which of the following conditions is most likely essential for implementing a successful market-penetration pricing strategy for a product?

A) The product's quality supports its high price.
B) Alternative products can enter the market easily.
C) The market for the product is highly price sensitive.
D) Prices increase incrementally as sales volume increases.
E) Production costs rise with an increase in marketing efforts.

Question 24

Selling accessory products along with the main product is referred to as ________ pricing.

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

Question 25

A firm uses ________ when it charges a high,premium price for a new product with the intention of reducing the price in the future.

A) market-skimming pricing
B) target costing
C) deceptive pricing
D) market-penetration pricing
E) predatory pricing

Question 26

Setting a price for products that must be used along with a main product is known as ________ pricing.

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

Question 27

The strategy of setting a low initial price to attract a large number of buyers quickly and win a large market share is referred to as ________.

A) market-skimming pricing
B) market-penetration pricing
C) value-added pricing
D) target costing
E) deceptive pricing

Question 28

Under ________,the market consists of many buyers and sellers trading over a range of prices rather than a single market price.

A) pure competition
B) monopolistic competition
C) oligopolistic competition
D) a pure monopoly
E) a pure monopsony

Question 29

Which of the following conditions is most likely essential for implementing a successful market-skimming pricing strategy for a product?

A) The product's quality and image support its high price.
B) Lower-priced alternatives can enter the market easily.
C) Low prices promote more market growth than high prices.
D) The product's price matches its manufacturing costs.
E) A low-price position of the product is maintained.

Question 30

There are more than 20 stores on a street in Sao Paulo that specialize in selling the same quality and brand of wheat products.An individual seller cannot charge more than the going market price without the risk of losing business to the other stores.What type of market does this example represent?

A) pure competition
B) monopolistic competition
C) oligopolistic competition
D) a pure monopoly
E) a black market

Question 31

Netcorp,an Internet service provider,charges its users a fixed rental fee for its basic package,which has a download limit.If a user exceeds this download limit,an additional fee is charged for every download.In this case,the firm's pricing strategy is referred to as ________ pricing.

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

Question 32

When demand hardly changes with a small change in the price of a product,then the demand for the product is best described as ________.

A) elastic
B) flexible
C) inelastic
D) variable
E) cyclical

Question 33

Qriosity Inc.released a new antivirus program at half-price to attract buyers.This is most likely an example of ________.

A) market-skimming pricing
B) market-penetration pricing
C) optional-product pricing
D) by-product pricing
E) allowance pricing

Question 34

The relationship between the price charged for a product and the resulting demand level can be shown in a ________.

A) demand curve
B) supply curve
C) elastic demand slope
D) break-even chart
E) inelastic demand slope

Question 35

Combining several products and offering the collection at a reduced price is referred to as ________ pricing.

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

Question 36

Which of the following is an economic factor that affects the pricing decisions of a company?

A) market-penetration practices
B) top management decisions
C) promotional activities
D) reseller policies
E) interest rates

Question 37

How do firms that use captive-product pricing make up for the low prices of their main products?

A) They reduce the cost of the captive products.
B) They provide the captive products as freebies.
C) They set high markups on the captive products.
D) They increase the price of the main products.
E) They offer the captive products and main products together at a reasonable price.

Question 38

Which group is most likely offered functional discounts by manufacturers?

A) trade-channel members that perform sales tasks
B) consumers who buy products in large quantities
C) buyers who pay their bills before the due date
D) buyers who purchase merchandise out of season
E) retailers that participate in advertising programs

Question 39

NerdHerd Electronics sells three different sizes of televisions at three different prices.In this case,the company's pricing strategy is referred to as ________ pricing.

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

Question 40

Under ________,the market consists of a few large sellers who are highly sensitive to each other's pricing and marketing strategies.

A) pure competition
B) monopolistic competition
C) oligopolistic competition
D) a pure monopoly
E) pure monopsony

Question 41

Wilkinson & Company sells plumbing supplies across the United States.Wilkinson uses Chicago as its central location for determining freight costs regardless of the city from which products are actually shipped.For example,a Dallas customer pays the freight cost from Chicago to Dallas even if the goods are shipped from Dallas.Wilkinson most likely uses ________ pricing.

A) basing-point
B) FOB-origin
C) freight-absorption
D) zone
E) reference

Question 42

Consumers rely less on price to judge the quality of a product when they ________.

A) lack information about the product
B) are unable to research the product
C) have prior experience with the product
D) are unable to judge the quality of the product
E) rely on cues from sellers to differentiate a high or low price

Question 43

Computer Works is a computer accessories manufacturer based in Brazil.All customers in South America pay the same freight charge,$20,when they order products from the company.All customers in North America pay a freight charge of $50.The company's pricing strategy is referred to as ________ pricing.

A) basing-point
B) FOB-origin
C) freight-absorption
D) zone
E) uniform-delivered

Question 44

Penny Bank,a discount store,is highly competitive.When entering a new market,Penny Bank often cuts prices so deeply that it sells below costs,effectively pushing smaller retail stores with less purchasing power out of the market.In this case,Penny Bank is using ________.

A) market skimming
B) psychological pricing
C) predatory pricing
D) deceptive pricing
E) cost-plus pricing

Question 45

When Luxury Motors gives price reductions to its new car dealers to reward them for participating in advertising and sales support programs,the firm is granting ________.

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

Question 46

Metro Museum has different admission prices for students,adults,and seniors.All three groups are entitled to the same services.This form of pricing is called ________ pricing.

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

Question 47

Chef Brown's Health Food Store sells nutritional,energy-producing foods.Product prices are adjusted frequently to meet the needs of individual customers and situations.For example,long-time customers receive discounts.This strategy is most likely an example of ________ pricing.

A) zone
B) competition-based
C) dynamic
D) basing-point
E) penetration

Question 48

Pricing a product based on consumers' reference prices is referred to as ________ pricing.

A) geographical
B) psychological
C) allowance
D) by-product
E) captive-product

Question 49

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

A) segmented pricing
B) psychological pricing
C) geographical pricing
D) promotional pricing
E) dynamic pricing

Question 50

________ prices are carried in buyers' minds and used when looking at a given product.

A) Captive-product
B) Reference
C) Promotional
D) Geographical
E) Dynamic

Question 51

________ pricing refers to selling below cost with the intention of punishing a competitor or gaining higher long-run profits by putting competitors out of business.

A) Oligopolistic
B) Captive
C) Dynamic
D) Zone
E) Predatory

Question 52

Which of the following pricing strategies is the opposite of FOB-origin pricing?

A) basing-point pricing
B) dynamic pricing
C) uniform-delivered pricing
D) freight-absorption pricing
E) zone pricing

Question 53

Which of the following pricing strategies charges the same price plus freight to all customers,regardless of their location?

A) basing-point pricing
B) freight-absorption pricing
C) FOB-origin pricing
D) zone pricing
E) uniform-delivered pricing

Question 54

The Sherman Act,Clayton Act,and Robinson-Patman Act are all federal laws that were initially adopted to curb the formation of ________.

A) monopolies
B) oligopolies
C) competitive markets
D) international markets
E) limited partnerships

Question 55

When a firm varies the price of a product by the season,month,day,or even hour,without changing product features,it is using ________ pricing.

A) product form
B) market-penetration
C) market-skimming
D) time-based
E) value-added

Question 56

When a manufacturer offers a ________,a customer buys a product from a manufacturer's dealer within a specified time period,and the manufacturer sends the customer a check.

A) cash rebate
B) quantity discount
C) promotional allowance
D) flash sale
E) functional discount

Question 57

________ pricing occurs when a seller states prices or price savings that mislead consumers or are not actually available to consumers.

A) Predatory
B) Psychological
C) Deceptive
D) Cost-plus
E) Allowance

Question 58

Vac "N" Sew,a consumer electronics outlet,offers a price reduction of $100 when customers bring in a used vacuum cleaner and exchange it for a new vacuum cleaner or sewing machine.This is an example of a ________.

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

Question 59

Which of the following would most likely trigger a price increase?

A) cost inflation
B) reduced demand
C) cheaper alternatives
D) reduced expenses
E) overproduction

Question 60

Busch Stadium in St.Louis charges different prices for seats in different areas of the ball park,even though each seat costs the same for the owners of the stadium.What is this form of pricing called?

A) location-based pricing
B) market-skimming pricing
C) product-form pricing
D) time-based pricing
E) market-penetration pricing

Question 61

Andy Candy Stores prices its candy displays at ten different price levels,ranging from $2.00 per pound to $4.95 per pound.This is an illustration of price steps.

Question 62

Under oligopolistic competition,the market consists of only a few large sellers.

Question 63

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

Question 64

Everyday low pricing is a cost-based pricing strategy.

Question 65

The demand curve shows the number of units the market will buy in a given time period at similar prices.

Question 66

In small companies,prices are typically set by the sales or marketing departments.

Question 67

Pricing strategies usually remain the same as a product passes through its life cycle.

Question 68

Used too frequently,promotional pricing can have a negative effect of decreasing a brand's value in the eyes of customers.

Question 69

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 70

Market skimming makes sense when a product's quality and image support its higher price,and enough buyers want the product at that price.

Question 71

A break-even chart shows the total cost and total revenue expected at various sales volume levels of a product.

Question 72

Cost-based pricing relies on consumers' perceptions of value to drive pricing.

Question 73

When using product line pricing,a firm sets one price for all products in the line based on average manufacturing costs.

Question 74

When World Movers,a house mover,sells boxes and pads that must be used in moving a household's furniture,the company is practicing dynamic pricing.

Question 75

Target costing starts with an ideal selling price based on customer value considerations and then aims at costs that will ensure that the price is met.

Question 76

The simplest pricing method is break-even pricing,which involves adding a standard markup to the cost of a product.

Question 77

If demand is elastic rather than inelastic,sellers typically consider increasing their prices.

Question 78

Target return pricing is a variation of break-even pricing.

Question 79

If demand hardly changes with a small change in price,the demand is said to be elastic.

Question 80

A small percentage improvement in price can generate a large percentage increase in profitability.