Deck 12: Pricing Strategies

Question 1

Price is a central marketing strategy element due to its effect on product positioning, market segmentation, demand management, and market share dynamics.

Answer 1

True

Question 2

After a harsh winter in Florida causing the price of fruit to almost double, demand is likely to decline because demand for fresh fruit is inelastic and does respond to price changes.

Answer 2

False

Question 3

If demand for a product increased by 20% when the price was decreased by 5%, the price elasticity is -4 and is elastic.

Answer 3

True

Question 4

If demand for a product decreased by 5% when the price was increased by 10%, the price elasticity is -2 and is elastic.

Question 5

Because business travelers must travel on short notices and cannot normally wait for discounted airfares, the price of airline tickets for business travelers would be inelastic.

Question 6

Deal-prone consumers are more likely to respond to changes in price, especially price discounts, than consumers who are brand loyal.

Question 7

Economic factors such as inflation, recession, and interest rates affect pricing decisions because they affect the cost of producing a product.

Question 8

The three primary success drivers for marketing programs are customer profitability, customer profit potential, and customer retention.

Question 9

Customer profit is calculated as revenue generated by the customer minus the costs for servicing that particular customer.

Question 10

Customer profit potential is an estimate of the individual customer's contribution to a company's bottom line.

Question 11

Customer retention adds value to a company's profit at exponential rates. For example, a 2 percent increase in retention can yield a 6 percent increase in a company's current value.

Question 12

The use of computerized distribution centers and efficient intermodal transportation using containers has cut the cost for intermediaries, thereby allowing manufacturers to earn additional profit on their merchandise.

Question 13

Pricing strategies must take into consideration both the competitive environment and the firm's position relative to the competition.

Question 14

A firm can control prices if its product is in the early stages of the lifecycle and the firm is one of the market leaders.

Question 15

In terms of pricing strategies, firms would have the least control over pricing during the growth stage of the product life cycle.

Question 16

In the maturity stage of the product life cycle, firms can still maintain some control over pricing if their product is well differentiated and has a high degree of brand franchise.

Question 17

Oligopolistic competition characterizes a market that consists of many buyers and sellers and products that vary greatly in the same product category.

Question 18

Pure competition characterizes a market that consists of many buyers and sellers, where no buyer or seller can control price or the market.

Question 19

Price discrimination takes place when manufacturers require retailers to charge a particular price for a product.

Question 20

Resale price maintenance is an agreement among channel members at the same level in the channel to charge the same price to all customers.

Question 21

Price fixing takes place when manufacturers require retailers to charge a particular price for a product.

Question 22

Predatory pricing refers to pricing strategies designed to eliminate small competitors and to deceive consumers.

Question 23

Dumping is selling products below cost to get rid of excess inventory and/or to undermine competition.

Question 24

Unit pricing is pricing that allows consumers to compare prices for different brands and for different package sizes of the various brands.

Question 25

Internal factors, such as the size of the firm, the organizational structure, and the industry focus determine who in the company makes pricing decisions.

Question 26

In a market-oriented company, pricing is based on information shared with the marketing department by other functional areas, such as finance, engineering, research and development, or sales.

Question 27

Different firms within the same industry utilize the same pricing objectives because of similarity in firm size, in-house capabilities, and focus on profit, sales, or government action.

Question 28

In general, consumers responding to skimming pricing strategies are more concerned with quality, uniqueness, and price, rather than image.

Question 29

Product-quality leadership objectives do not necessarily mean that the company is reaping the highest potential profits.

Question 30

Status-quo pricing objectives can only be adopted in the short term, to weather a particular condition or challenge.

Question 31

In cost-based pricing, the firm sets the price by calculating merchandise, service, and overhead costs and then adding an amount needed to cover the profit goal.

Question 32

In using break-even analysis, the break-even point can be calculated in terms of number of units or in terms of sales dollars.

Question 33

Using target pricing to determine the selling price is likely to understate the selling price for firms with high capital investments.

Question 34

Demand-based pricing takes into consideration customers' perceptions of value, rather than the seller's cost, as the fundamental component of the pricing decision.

Question 35

The price ceiling is the maximum amount that consumers are willing to pay for a product.

Question 36

Price leadership tends to be demonstrated by firms that are considered to be the market leaders in a specific industry.

Question 37

In terms of actual use, cost-based pricing is the most frequently used pricing strategy.

Question 38

In terms of price variability and marketing strategy, customary pricing is a strategy whereby a firm sets prices and attempts to maintain them over time.

Question 39

In terms of price variability and marketing strategy, no-haggle pricing is a strategy that is aimed at consumers who are averse to negotiations but who want, nevertheless, to have some sort of low price guarantee.

Question 40

In terms of price variability and marketing strategy, variable pricing is a strategy of changing prices in response to changes in demand or cost.

Question 41

In terms of price variability and marketing strategy, flexible pricing is a strategy of changing prices in response to changes in demand or cost.

Question 42

Reference pricing is the price that most competitors charge for the product.

Question 43

Reference pricing can be influenced by previous purchase experiences and by advertising.

Question 44

To support prestige pricing, retailers tend to use an even pricing strategy, i.e. ending the price with an odd number, rather than even number pricing.

Question 45

A problem with product line pricing is that markdowns on the higher priced merchandise will blur the distinction between it and the lower product lines.

Question 46

Geographic pricing is defined as pricing that accounts for the geographic location of customers.

Question 47

Geographic pricing takes into consideration the cost of distribution, as well as other considerations, such as taxes, competitors who benefit from government subsidies, and consumer demand.

Question 48

Pricing is a central marketing strategy element due to its effect on all of the following except

A) product positioning
B) market segmentation
C) supply management
D) market share dynamics

Question 49

The only element of the company's marketing mix that produces revenue is _____. The other elements all represent costs.

A) product
B) price
C) promotion
D) place

Question 50

The curve that portrays the number of units bought for a particular price in a given time period is called the

A) demand curve
B) supply curve
C) supply-demand curve
D) price elasticity curve

Question 51

The demand for cigarettes did not substantially decline despite the introduction of a high excise tax because demand for cigarettes is

A) elastic and does respond to price changes
B) inelastic and does respond to price changes
C) elastic and does not respond to price changes
D) inelastic and does not respond to price changes

Question 52

The demand for large vehicles declines when there is a sharp increase in the price of gasoline because demand for large vehicles is

A) elastic and does respond to price changes
B) inelastic and does respond to price changes
C) elastic and does not respond to price changes
D) inelastic and does not respond to price changes

Question 53

The price of a product is increased by 5%. As a result, the demand decreased 20%. The price elasticity is

A) -4 and elastic
B) -4 and inelastic
C) -0.25 and elastic
D) -0.25 and inelastic

Question 54

The price of a product is decreased by 5%. As a result, the demand increased 20%. The price elasticity is

A) -4 and elastic
B) -4 and inelastic
C) -0.25 and elastic
D) -0.25 and inelastic

Question 55

The price of a product is decreased by 10%. As a result, the demand increased 8%. The price elasticity is

A) -1.25 and elastic
B) -1.25 and inelastic
C) -0.8 and elastic
D) -0.8 and inelastic

Question 56

The price of a product is increased by 10%. As a result, the demand decreased 8%. The price elasticity is

A) -1.25 and elastic
B) -1.25 and inelastic
C) -0.8 and elastic
D) -0.8 and inelastic

Question 57

If consumers believe that products are relatively similar and that there are substitutes available, the demand will tend to be

A) elastic
B) inelastic
C) elastic for price increases, but inelastic for price decreases
D) inelastic for price increases, but elastic for price decreases

Question 58

Because business travelers must travel on short notices and cannot normally wait for discounted airfares, the price of airline tickets for business travelers would

A) be inelastic
B) be elastic
C) depend on the time of the year they travel
D) depend on consumer demand

Question 59

Consumers loyal to a particular retailer will pay higher prices for the privilege of shopping at that retail outlet. In terms of price elasticity, these consumers would tend to display price _____ behavior in terms of where they shop.

A) inelastic
B) elastic
C) elastic behavior for price decreases, but inelastic behavior for price increases
D) inelastic behavior for price decreases, but elastic behavior for price increases

Question 60

Because leisure travelers have more flexibility in terms of when they travel, the demand price elasticity for airline tickets for most leisure travelers tends to be

A) inelastic
B) elastic
C) elastic for price decreases, but inelastic for price increases
D) inelastic for price decreases, but elastic for price increases

Question 61

Individual customer profit is calculated as

A) revenues generated by the customer minus costs to keep the customer
B) revenues generated by the customer divided by costs to keep the customer
C) costs to keep the customer minus revenues generated by the customer
D) revenues generated by the customer over his or her lifetime

Question 62

Customer profit potential is an estimate of an individual's contribution to a company's

A) gross margin
B) bottom line
C) revenue
D) target market

Question 63

Customer retention adds value to a company by exponential rates. For example, a 2 percent increase in customer retention will yield _____ percent to current value.

A) 3
B) 6
C) 10
D) 15

Question 64

The use of computerized distribution centers, intermodal transportation containers, and efficient inventory management systems reflect _____ influences on price.

A) competitive
B) intermediaries
C) economic
D) consumer

Question 65

The use of efficient inventory management systems, just-in-time delivery methods, quick-response inventory systems, and electronic data interchange reflect _____ influences on price.

A) competitive
B) intermediaries
C) economic
D) consumer

Question 66

In terms of competitive forces, pricing strategies must take into consideration

A) the competitive environment
B) a firm's position relative to the competition
C) both a and b
D) neither a nor b

Question 67

Firms can have control over the prices of their product if their product is in

A) the early stages of the PLC and they are one of the market leaders
B) the latter stages of the PLC and they are one of the market leaders
C) the early stages of the PLC and they are one of the product followers
D) the latter stages of the PLC and they are one of the product followers

Question 68

In the maturity stage of the product life cycle, the only way firms can have some control over prices is if their product

A) is the market leader
B) is the low-priced leader
C) new to the market
D) is well differentiated

Question 69

Pure competition characterizes a market that consists of

A) only one seller
B) a few sellers who dominate the market
C) many buyers and sellers and products that vary greatly in the same product category
D) many buyers and sellers, where no buyer or seller can control price or the market

Question 70

Monopolistic competition characterizes a market that consists of

A) only one seller
B) a few sellers who dominate the market
C) many buyers and sellers and products that vary greatly in the same product category
D) many buyers and sellers, where no buyer or seller can control price or the market

Question 71

Oligopolistic competition characterizes a market that consists of

A) only one seller
B) a few sellers who dominate the market
C) many buyers and sellers and products that vary greatly in the same product category
D) many buyers and sellers, where no buyer or seller can control price or the market

Question 72

Pure monopoly characterizes a market that consists of

A) only one seller
B) a few sellers who dominate the market
C) many buyers and sellers and products that vary greatly in the same product category
D) many buyers and sellers, where no buyer or seller can control price or the market

Question 73

In _____, if one company lowers prices, then typically, all of the other companies will also have to lower prices.

A) a pure monopoly market
B) a monopolistic competition market
C) oligopolistic competition and pure competition markets
D) all of the above

Question 74

Price discrimination is

A) a strategy used by sellers who state prices or price savings that may mislead consumers or that are not available to consumers
B) charging different prices to different buyers for the same merchandise
C) when manufacturers require retailers to charge a particular price for a product
D) an agreement among channel members at the same level in the channel to charge the same price to all customers

Question 75

Resale price maintenance is

A) a strategy used by sellers who state prices or price savings that may mislead consumers or that are not available to consumers
B) charging different prices to different buyers for the same merchandise
C) when manufacturers require retailers to charge a particular price for a product
D) an agreement among channel members at the same level in the channel to charge the same price to all customers

Question 76

Price fixing is

A) a strategy used by sellers who state prices or price savings that may mislead consumers or that are not available to consumers
B) charging different prices to different buyers for the same merchandise
C) when manufacturers require retailers to charge a particular price for a product
D) an agreement among channel members at the same level in the channel to charge the same price to all customers

Question 77

Deceptive pricing is

A) a strategy used by sellers who state prices or price savings that may mislead consumers or that are not available to consumers
B) charging different prices to different buyers for the same merchandise
C) when manufacturers require retailers to charge a particular price for a product
D) an agreement among channel members at the same level in the channel to charge the same price to all customers

Question 78

Predatory pricing is

A) pricing that allows consumers to compare among prices for different brands and for different package sizes of the various brands
B) pricing strategies used to eliminate small competitors and to deceive consumers
C) selling products below cost to get rid of excess inventory and/or to undermine competition
D) strategies to confuse consumers so that they do not quite understand the price that they ultimately have to pay

Question 79

Dumping is

A) pricing that allows consumers to compare among prices for different brands and for different package sizes of the various brands
B) pricing strategies used to eliminate small competitors and to deceive consumers
C) selling products below cost to get rid of excess inventory and/or to undermine competition
D) strategies to confuse consumers so that they do not quite understand the price that they ultimately have to pay

Question 80

Price confusion is

A) pricing that allows consumers to compare among prices for different brands and for different package sizes of the various brands
B) pricing strategies used to eliminate small competitors and to deceive consumers
C) selling products below cost to get rid of excess inventory and/or to undermine competition
D) strategies to confuse consumers so that they do not quite understand the price that they ultimately have to pay