Deck 13: Pricing, Promotion, and Distributing Products

Question 1

What are the two basic tools used in price-setting?

A) Profit maximization and market share
B) Advertising and sales promotion
C) Cost-oriented pricing and break-even analysis
D) Cost-oriented pricing and profit maximization
E) Cost-oriented pricing and market share

Answer 1

C

Question 2

A music storeowner would begin to price DVDs by taking into consideration all of the following costs except

A) market share objectives.
B) utilities and insurance.
C) store rent and staff salaries.
D) product displays.
E) cost of buying DVDs from the manufacturer.

Answer 2

A

Question 3

If the cost of one unit of product is $8 and the store sells the product for $15, what is the markup percentage?

A) 46.7 percent
B) 41.3 percent
C) 150.3 percent
D) 214.5 percent
E) 66.3 percent

Answer 3

A

Question 4

Piper & Son makes pickled peppers, sold in upscale supermarkets and specialty food stores. The company has profit-maximizing pricing objectives, so managers constantly monitor the prices of key ingredients such as peppers, vinegar, and garlic. How can setting the price for pickled peppers too high yield profits that are lower than the maximum?

A) The high price will cause the convenience goods to become shopping goods.
B) The high price will hurt the company's reputation, so the product will decline.
C) The high price will generate a large profit per jar, but too few jars will be sold.
D) Customers will insist on paying a lower price, resulting in less income.
E) The high price will cause expenses to rise, reducing profits.

Question 5

If the Piper & Son's fixed cost for making pickled peppers is $200 000, and its variable cost per jar is $1, how many jars would the company have to sell at $3 per jar to break even?

A) 50 000
B) 66 667
C) 100 000
D) 133 333
E) 300 000

Question 6

Costs that change with the quantity of a product that is produced or sold are

A) ongoing costs.
B) variable costs.
C) fixed costs.
D) product costs.
E) selling costs.

Question 7

What information is provided to the manager by performing a break-even analysis?

A) The break-even point identifies the total costs.
B) The break-even point identifies the point where variable costs equal fixed costs.
C) Sales volume above the break-even point makes a profit for the firm.
D) The break-even point identifies the amount of markup.
E) The break-even point identifies the intersection of the demand and supply curves.

Question 8

A highly successful bakery specializes in making cherry tarts. Which of the following costs at the bakery is not variable?

A) Cost of cherries
B) Cost of flour
C) Cost of wax paper liners
D) Cost of the oven
E) Cost of heating the oven

Question 9

What are the two main pricing objectives in corporate pricing?

A) Market share and company image
B) Advertising and sales promotion
C) Company survival in a competitive marketplace and profit maximization
D) Market share and profit maximization
E) Advertising and profit maximization

Question 10

Sally is selling bracelets for $16.00 and the markup is $6.40. What is the markup percentage?

A) 40 percent
B) 12.5 percent
C) 19.6 percent
D) 36.4 percent
E) 54 percent

Question 11

What is the purpose of using break-even analysis when attempting to set prices?

A) To determine the total costs of the product
B) To show the cost, volume, and profit relationships
C) To compare demand and supply
D) To reflect the markup needed to make a profit
E) To show the costs which must be considered in setting prices

Question 12

By stocking a new, highly visible line of shampoos priced lower than local stores, Jack is trying to increase

A) the quality of hair of the youth in the area.
B) the break-even point.
C) yield management.
D) fixed costs so that the variable costs would decrease.
E) his market share of the hair product market.

Question 13

If the cost of one unit of product is $12 and the store sells the product for $22, what is the markup percentage?

A) 32 percent
B) 41 percent
C) 45 percent
D) 21 percent
E) 66 percent

Question 14

How is markup percentage calculated?

A) By dividing the selling price by fixed costs
B) By adding the selling price and the cost of advertising
C) By dividing the selling price by the dollar amount of the markup
D) By dividing the dollar amount of the markup by the selling price
E) By dividing inventory by the selling price

Question 15

The amount added to a product's cost to meet profit targets is usually expressed as a percentage of

A) selling price.
B) selling costs.
C) component costs.
D) total costs.
E) wholesale price.

Question 16

Betty's Breads is trying to calculate its break-even point. Monthly fixed costs are $5255. The cost of making one loaf of bread, considering labour and materials, is $3.50. Betty's sells the bread at $6 per loaf. How many loaves does Betty's need to sell each month in order to break even?

A) 251
B) 626
C) 1502
D) 2102
E) 2200

Question 17

Sara is selling posters at the sale price of $12.00, and the markup percentage is 35 percent. What is the dollar amount of the markup?

A) $7.80
B) $4.20
C) $7.75
D) $3.50
E) None of these

Question 18

What is "markup"?

A) Markup is the point at which the firm covers the fixed and variable costs.
B) Markup is the amount of money left over after all expenses have been deducted from revenues.
C) Markup is an amount equal to demand divided by product cost.
D) Markup is an amount added to the cost of the item to arrive at the selling price.
E) Markup is the point where demand equals supply.

Question 19

Piper & Son sells pickled peppers to stores for $3 per jar, and the stores sell each jar to consumers for $7.50. What is the markup percentage?

A) 40 percent
B) 60 percent
C) 67 percent
D) 150 percent
E) 250 percent

Question 20

Companies often price their products to establish ________, a company's percentage of the total market sales for a specific product type.

A) break-even point
B) sales percentage
C) variable costs
D) fixed costs
E) market share

Question 21

Shiras Watch Depot prices all watches at $150. The variable cost per watch is $70 and the fixed costs are $55 000. What is Shiras's break-even point in units?

A) 687.50
B) 806.25
C) 702.00
D) 300.00
E) 453.75

Question 22

Many e-tailers, such as eBay and Priceline, use ________ pricing.

A) penetration
B) skimming
C) dynamic
D) psychological
E) odd-even

Question 23

Which of the following best represents the formula for the break-even point?

A) Total variable costs divided by (price minus variable costs)
B) Total variable costs divided by (price minus fixed costs)
C) Total fixed costs divided by (price minus variable costs)
D) Total fixed costs divided by (price minus fixed costs)
E) Total revenue divided by (price minus fixed costs)

Question 24

If Louisa's Craft Supply Store uses odd-even psychological pricing, then it would likely price its yarn at

A) $4.50 per ball.
B) $4 per ball.
C) $5 per ball.
D) $4.95 per ball.
E) $6 per ball.

Question 25

Which of the following pricing strategies has stimulation of sales as a higher priority than maximization of profits?

A) Price fixing
B) Penetration pricing
C) Price skimming
D) Price pointing
E) Price lining

Question 26

Which of the following is correct with regard to break-even analysis?

A) Variable costs are really all that is important.
B) Fixed costs are all that really is important.
C) Some costs are unaffected by the number of units of product that are sold.
D) Generally speaking, retailers should charge higher prices so that they will reach the break-even point earlier.
E) Break-even analysis fails to take into account the slope of the demand curve.

Question 27

Which of the following pricing strategies best describes price lining?

A) Setting an initial low price to establish a new product in the market
B) Setting an initial high price to cover new product costs and generate a profit
C) Setting individually negotiated prices for certain categories of products
D) Setting a limited number of prices for certain categories of products
E) Setting individually negotiated prices for all categories of products

Question 28

Julia, owner of Julia's Craft Supply Store would like to take advantage of the fact that customers are not completely rational when making buying decisions and may prefer prices that are not stated in even dollar amounts. Which pricing tactic is she interested in?

A) Discounting
B) Price skimming
C) Psychological pricing
D) Skewed pricing
E) Price lining

Question 29

Which of the following is correct with regard to the issue of fixed versus dynamic pricing?

A) When launching new products, start-up firms generally use dynamic pricing until they get a better understanding of the market.
B) In the digital marketplace, dynamic pricing is the norm.
C) Amazon.com uses fixed pricing as its pricing strategy for its millions of retail items.
D) The reverse auction is one type of fixed pricing.
E) All of these are correct.

Question 30

What results can be expected if Trimar Videos used a price skimming strategy to price its video equipment?

A) Large profits may be earned on each sale.
B) It may generate a lot of consumer interest, but very low profits.
C) It permits the store to gain entrance to a market and then later adjust the price to a more realistic figure.
D) It generates a lot of consumer interest.
E) It will increase Trimar's market share

Question 31

The pricing strategy that is used to create consumer interest and stimulate trial purchases of a new product is

A) penetration pricing.
B) price lining.
C) market pricing.
D) price fixing.
E) price skimming.

Question 32

Psychological pricing involves

A) setting an initial low price to establish a new product in the market.
B) setting prices in uneven dollar amounts.
C) setting a limited number of prices for certain categories of products.
D) setting an initial high price to cover new product costs and generating a profit.
E) taking advantage of the fact that consumers do not always respond rationally to stated prices.

Question 33

What term identifies a company's policy of offering all items in certain categories (e.g., men's suits) at a limited number of prices?

A) Price skimming
B) Boundary pricing
C) Discounting
D) Penetration pricing
E) Price lining

Question 34

What is the best definition of the term fixed costs?

A) Costs that are needed to acquire a fixed market share
B) Costs that are needed to acquire fixed profits
C) Costs that are unaffected by the number of goods sold by the firm
D) Costs that remain the same from year to year
E) Costs that remain the same across all products

Question 35

What pricing strategy has generally been used for HDTV?

A) Penetration pricing
B) Price lining
C) Market pricing
D) Price fixing
E) Price skimming

Question 36

Penetration pricing involves

A) setting prices in uneven dollar amounts.
B) setting an initial low price to establish a new product in the market.
C) taking advantage of the fact that consumers do not always respond rationally to stated prices.
D) setting an initial high price to cover new product costs and generate a profit.
E) setting a limited number of prices for certain categories of products.

Question 37

"Sears Good," "Sears Better," and "Sears Best" are examples of

A) market pricing.
B) price fixing.
C) psychological pricing.
D) price lining.
E) price discounting.

Question 38

Which of the following options best describes an example of price lining?

A) Having the price of each individual song on an online music store be determined by length of song
B) Having the price of each individual song on an online music store be determined by popularity of the band
C) Having the price of each individual song on an online music store be determined by user auction
D) Having the price of each individual song on an online music store be determined by reverse auction
E) Having the price of each individual song on an online music store be determined by which of several categories the song falls into

Question 39

Which of the following is correct with regard to the pricing of existing and new products?

A) Price skimming is generally most effective for consumer goods, but penetration pricing is generally most effective for industrial goods.
B) The penetration pricing option is generally most effective for both consumer and industrial goods.
C) In the car rental business, setting prices below the market generally works best.
D) Penetration pricing is generally superior to a skimming strategy for new products.
E) None of these is correct.

Question 40

Which of the following is correct with regard to the pricing of new products?

A) There are two basic strategies available: follow-the-leader and price leadership.
B) Price skimming is more effective than penetration pricing.
C) Penetration pricing is generally more effective than price skimming.
D) Price skimming involves trying to sell a new product only to customers with the highest income levels.
E) Penetration pricing is designed to stimulate trial purchase.

Question 41

The communications vehicle that is flexible, has rapid coverage, but lasts briefly and cannot target audiences very well is

A) direct mail.
B) newspapers.
C) magazines.
D) radio.
E) television.

Question 42

Mega Computers, a computer manufacturer, has decided to promote its new line of computers by offering its wholesalers and retailers an additional 5 percent off list prices. This strategy is called a ________ strategy.

A) product
B) pull
C) push
D) place
E) position

Question 43

Searchmont Ski Resort was finding that spring was a particularly slow time for chalet rentals. In order to increase the occupancy rate, Searchmont implemented a(n)

A) advertising campaign.
B) seasonal discount.
C) skimming pricing strategy.
D) penetration pricing strategy.
E) trade credit policy.

Question 44

The communications vehicle that is inexpensive, that effectively segments the customers, but is not very long lasting is

A) radio.
B) direct mail.
C) newspaper.
D) television.
E) magazines.

Question 45

A ________ strategy is a promotional strategy designed to encourage wholesalers and retailers to market those products to the consumer.

A) push
B) position
C) product
D) pull
E) place

Question 46

Promotion seeks to accomplish all of the following with potential customers except

A) persuade them to purchase products.
B) persuade them to dislike all other competitors' products.
C) make them aware of products.
D) make them knowledgeable about products.
E) persuade them to like products.

Question 47

What is the ultimate objective of any type of promotion?

A) Image enhancement
B) Creative selling
C) To increase sales
D) To advertise
E) To increase consumer knowledge of the product

Question 48

During the ________ phase of the consumer buying process, marketers emphasize ________.

A) buyers evaluate products after purchase; sales promotion
B) buyers seek information; sales promotion
C) consumers recognize the need to make a purchase; personal selling
D) buyers compare competing products; advertising and public relations
E) buyers purchase products; sales promotion

Question 49

When is discounting used to set prices?

A) When attempting to stimulate sales
B) When odd-even psychological pricing is not successful
C) When conducting a break-even analysis
D) When a price-skimming strategy is used
E) When profit margins are too low

Question 50

Which promotional strategy appeals directly to the consumer who demands the product from retailers, who, in turn, demand the product from wholesalers?

A) Product positioning
B) Layered promotion
C) Pull strategy
D) Contests
E) Push strategy

Question 51

After television, what is the next most important medium in terms of advertising dollars spent?

A) Mobile
B) Online
C) Magazines
D) Radio
E) Newspaper

Question 52

Mega Computer, a computer manufacturer, is using direct mail to send 10 percent off coupons to its list of potential customers. This strategy is called a ________ strategy.

A) pull
B) product
C) position
D) push
E) place

Question 53

This communications vehicle is highly segmented, allows for excellent visual communication, and is long-lived, but requires a long lead-time.

A) Online
B) Television
C) Magazines
D) Newspaper
E) Outdoor

Question 54

The communications vehicle that appeals to many consumer senses, can be targeted to a specific audience, and reaches more people than any other medium is

A) magazines.
B) radio.
C) television.
D) newspaper.
E) direct mail.

Question 55

In terms of advertising revenues, which medium is the most important?

A) Newspapers
B) Television
C) Radio
D) Internet
E) Magazines

Question 56

When Burger King tells you about a new restaurant that it is opening near you, it is attempting to fulfill which promotional objective?

A) Remind you about the product
B) Communicate information
C) Positioning products
D) Controlling sales volume
E) Eliminate competition

Question 57

Odd-even pricing involves

A) setting a limited number of prices for certain categories of products.
B) setting an initial high price to cover new product costs and generating a profit.
C) taking advantage of the fact that consumers do not always respond rationally to stated prices.
D) setting prices in uneven dollar amounts.
E) setting an initial low price to establish a new product in the market.

Question 58

What is meant by the term "product placement?"

A) Making sure that products are prominently visible on store shelves
B) Using brand-name products as part of the storyline of TV shows
C) Choosing the channel of distribution with the lowest overall cost
D) Placing free sample of products in consumers' mailboxes so they can actually try the product
E) Providing free product samples to influential consumers

Question 59

Why would a business firm want to use controlling sales volume as a promotional objective?

A) A company will aggressively push its products through wholesalers and retailers who persuade customers to buy it.
B) The production and distribution systems will run more smoothly when the firm achieves a more stable sales volume during the year.
C) The company is trying to appeal to a specific segment of the market.
D) Consumers are more likely to purchase a product when they have been informed about it.
E) The company wants to be able to communicate information to consumers when it is more economical to do so.

Question 60

During the ________ phase of the consumer buying process, marketers emphasize ________.

A) buyers evaluate products after purchase; personal selling
B) buyers seek information; sales promotion
C) consumers recognize the need to make a purchase; advertising and publicity
D) buyers compare competing products; advertising and public relations
E) buyers purchase products; advertising

Question 61

Coupons, point-of-purchase displays, free samples, and trade shows are examples of

A) advertising.
B) sales promotions.
C) publicity.
D) personal selling.
E) pricing.

Question 62

Which of the following is correct with regard to the various media?

A) About twice as much is spent on advertising in magazines than is spent on newspapers.
B) Newspapers generally allow advertisers to target their audiences well.
C) Radio stations are generally not highly segmented into listening categories.
D) Billboard messages are relatively expensive.
E) People tend to use radio as "background" while they are doing other things.

Question 63

A firm that wanted to conduct a short-term activity in order to boost consumer buying would use which of the following strategies?

A) Sales promotions
B) Special offers
C) Trade shows
D) Point-of-sale displays
E) Missionary selling

Question 64

Which of the following is correct with regard to the various media?

A) Advertising spending on radio is larger than any other medium.
B) Magazines provide a low level of consumer selectivity.
C) Radio advertisements are fairly inexpensive.
D) Magazine advertising is not very good at conveying to consumers the value of a product.
E) Outdoor advertising is the most important form of advertising based on spending by companies.

Question 65

Sally selected ________ advertising because it is relatively inexpensive, faces little competition for customers' attention, and is subject to high repeat exposure.

A) outdoor
B) magazine
C) television
D) online
E) radio

Question 66

Which of the following makes it easier for customers to find a product and eliminate competitors' products from consideration?

A) POS displays
B) Coupons
C) Trade shows
D) Contests
E) Premiums

Question 67

The most expensive promotional tool on a cost per contact basis is

A) personal selling.
B) direct mail.
C) television.
D) radio.
E) magazines.

Question 68

Due to the high cost of personal selling, many companies are turning to

A) radio advertising.
B) telemarketing.
C) coupons.
D) contests.
E) magazine advertising.

Question 69

The promotional tool in which a salesperson communicates one-on-one with potential customers is

A) direct mail.
B) personal selling.
C) television.
D) radio.
E) magazines.

Question 70

Which of the following represents a reason for a firm's use of personal selling promotions?

A) It is the only form of selling that works.
B) It provides a personal link between the seller and the buyer.
C) The salesforce has the capability of contacting the greatest number of potential customers.
D) Personal selling provides the lowest promotional costs per contact.
E) Sales promotions must be convenient and accessible when the purchase decision is made.

Question 71

Which of the following is a type of sales promotion?

A) Publicity
B) Contests and sweepstakes
C) Advertising
D) Personal selling
E) Public relations

Question 72

Dove is introducing a new deodorant. In order to entice customers to purchase the deodorant, a free bar of soap is attached to the package. Which type of sales promotion is Dove using?

A) Point-of-sale display
B) Premium
C) Contest
D) Trade show
E) Coupons

Question 73

Adrianna developed a new perfume. She wanted to market the perfume via a communication vehicle that appeals to many consumer senses, targets a specific audience, and reaches as many people as possible. Adrianna would select ________ advertising.

A) television
B) magazine
C) radio
D) direct mail
E) newspaper

Question 74

A gas station offering a free car wash with a fill-up is an example of

A) sales promotion.
B) advertising.
C) publicity.
D) premiums.
E) public relations.

Question 75

Which advertising medium can present only limited information and sellers have little control over who sees their advertisements?

A) Television
B) Radio
C) Online
D) Magazines
E) Outdoor

Question 76

The Cream Soap Company has launched a new campaign geared at increasing the sales volume of its new Fresh Smelling line of soap products. The $1.6 million campaign will cover the costs of providing samples of their soap products to be delivered with the Toronto Star newspaper to 500 000 homes in Toronto. This marketing technique is known as

A) personal selling.
B) public relations.
C) advertising.
D) publicity.
E) sales promotion.

Question 77

Jack wants to sell his new marketing ideas from any location and yet be as global as possible. Which advertising medium should Jack use?

A) Word of mouth
B) Radio
C) Outdoor
D) E-commerce
E) Television

Question 78

What is an advantage to the firm when using trade shows as a type of sales promotion?

A) They are effective since the buyer comes to the seller.
B) Coupons may be used to encourage customers to try new products.
C) The displays serve to attract customer attention as they walk through a store.
D) Free samples may be used to allow customers to try a product for a few days without any risk.
E) Contests may increase sales by stimulating buyers' interest in a product.

Question 79

Brian works at the local grocery store. His supervisor asked him to use point-of-sale displays. Brian needs to

A) set up a product display so it is located in an area to encourage consumers to buy the products.
B) set up a display where consumers can pick out one item free when they purchase a specified product.
C) pass out coupons to customers purchasing the targeted products as they are checking out.
D) set up a table and give out free samples.
E) interview customers as they are considering a purchase of the targeted products.

Question 80

Samantha wanted to use a flexible communication vehicle which would give her rapid coverage. She should select ________ advertising.

A) television
B) newspaper
C) magazine
D) radio
E) online