Deck 13: Pricing Management

Question 1

If Wrigley set its pricing objective as attaining 38 percent of the chewing gum market, what else would be needed to make this a true pricing objective?

A)Statement of demand elasticities
B)Identification of cost structure
C)Breakeven analysis
D)Identification of a time period for accomplishment
E)Establishment of a subsequent pricing policy

Answer 1

D

Question 2

When a company adjusts price levels so that it can increase sales volume to levels that match the organization's expenses, it is said to employ a ____ objective.

A)market share
B)cash flow
C)return on investment
D)survival
E)profit

Answer 2

D

Question 3

Compare and contrast price skimming and penetration pricing.

Answer 3

Answer not provided.

Question 4

Explain the difference between cost-plus and markup pricing.

Question 5

What are some issues to consider when determining a specific price?

Question 6

Explain the ethical implications of professional pricing.

Question 7

What is bundle pricing? Give three examples, each one from a different industry.

Question 8

Explain differential pricing and then describe the four major types.

Question 9

How might a marketer find information about a competitor's prices? Why is this information important?

Question 10

Identify and describe six types of psychological pricing.

Question 11

Describe the six steps of the process that marketers can use to establish prices.

Question 12

How are pricing objectives similar to a corporation's overall goals? How are they different?

Question 13

Marketers must take steps to make sure that the pricing objectives they set are consistent with the organization's ____ objectives and ____ objectives.

A)advertising; marketing
B)overall; marketing
C)marketing; promotional
D)overall; promotional
E)overall; revenue

Question 14

Identify and describe the four types of product-line pricing.

Question 15

Under what conditions would a marketer most likely use a price leader strategy?

Question 16

When establishing prices, a marketer's first step is to

A)determine demand.
B)develop pricing objectives.
C)select a pricing policy.
D)evaluate competitors' prices.
E)determine a pricing method.

Question 17

Which of the following is a requirement for setting pricing objectives?

A)The objectives should be short-term oriented.
B)There should be only one pricing objective.
C)An evaluation of competitors' prices should be made.
D)The cost structure should be identified.
E)The objectives should be explicitly stated.

Question 18

What are some of the objectives a firm might hope to achieve when setting prices?

Question 19

Describe, compare, and contrast the three major bases for setting prices.

Question 20

How can a marketer use product quality as a pricing objective to influence purchasing decisions?

Question 21

Maintaining a certain market share, meeting competitors' prices, maintaining a favorable image, and achieving price stability are all associated with a ____ pricing objective.

A)product quality
B)market share
C)survival
D)profit
E)status quo

Question 22

When consumers are making do with less expensive products and shopping more selectively, manufacturers and retailers must focus on the ____ of their products.

A)price
B)quality
C)availability
D)value
E)image

Question 23

A marketer is most likely to set prices according to a cash-flow objective when a

A)trial-and-error approach to the market is acceptable.
B)certain market share must be maintained.
C)quick return on investment is desired.
D)higher price is acceptable to the firm.
E)product is expected to have a long life cycle.

Question 24

Marketers improve their ability to establish prices appropriately when

A)there is nonprice competition.
B)they know prices charged for competing brands.
C)their products are of better quality than the competition's.
D)the main objective is image building.
E)using psychological pricing.

Question 25

A market share objective

A)is not recommended when sales for the total industry are declining.
B)is not especially useful when sales for the total industry are increasing.
C)is not especially useful when sales for the total industry are flat.
D)is useful primarily in an industry where total sales are increasing.
E)can be used effectively whether total industry sales are rising or falling.

Question 26

If an organization sets prices to recover research and development expenses and establish a premium quality image for its product, it would be using a ____ pricing objective.

A)survival
B)return on investment
C)market share
D)product quality
E)cash flow

Question 27

Which type of pricing objective can reduce a firm's risk by helping to stabilize demand for its products?

A)Status quo
B)Market share
C)Survival
D)Cash flow
E)Return on investment

Question 28

Most pricing objectives based on ____ are achieved by trial and error because not all cost and revenue data are available when prices are set.

A)market share
B)cash flow
C)return on investment
D)survival
E)profit

Question 29

Westin Inc. has an objective of achieving a 25 percent return from its overall sales. This is an example of a ____ pricing objective.

A)market share
B)cash flow
C)return on investment
D)profit
E)status quo

Question 30

A firm establishes which of the following pricing objectives to maintain or increase its product's sales in relation to total industry sales?

A)Cash flow
B)Sales potential
C)Product quality
D)Market share
E)Status quo

Question 31

Gambrell Designs thinks its new product, the Automatic Dog Walker, will have a short product life cycle; therefore, its marketing department sets its primary pricing objective as

A)market share.
B)cash flow.
C)profit.
D)product quality.
E)status quo.

Question 32

For customers, value is a function of the product's

A)quality attributes.
B)price.
C)price and durability.
D)quality and functional attributes.
E)quality relative to the quality of competing brands.

Question 33

If Nabisco had established a pricing objective of selling one out of every three crackers consumed in the world, it would have established an objective based on

A)cash flow.
B)market share.
C)survival.
D)return on investment.
E)dollar sales volume.

Question 34

What type of pricing objective would an organization use if it were in a favorable position and desired nothing more?

A)Return on investment
B)Cash flow
C)Profit
D)Status quo
E)Survival

Question 35

Running a big sale in order to generate enough cash flow to pay creditors is typical in a situation in which a firm's primary pricing objective is

A)status quo.
B)profit.
C)survival.
D)market share.
E)recovery.

Question 36

Research indicates that both market share and ____ are good indicators of profitability.

A)low pricing
B)product quality
C)limited competition
D)sales growth
E)ROI pricing

Question 37

Which of the following pricing objectives sets prices to recover cash as quickly as possible?

A)Market share
B)Profit
C)Cash flow
D)Return on investment
E)Product quality

Question 38

The pricing of Clinique makeup considerably higher than brands such as Cover Girl, Revlon, and Maybelline is used to communicate ____, which is the company's primary pricing objective.

A)market share
B)product quality
C)status quo
D)profitability
E)cash flow

Question 39

Maintaining or increasing market share

A)can be achieved even if industry sales are flat or decreasing.
B)is an infrequently used pricing objective in most industries.
C)depends upon the overall growth of the total industry.
D)is a profit-related objective based on price.
E)is directly tied to leading an industry in product quality.

Question 40

Which pricing objective de-emphasizes price and can lead to a climate of nonprice competition in an industry?

A)Status quo
B)Return on investment
C)Market share
D)Survival
E)Cash flow

Question 41

For custom-made equipment or commercial construction projects, which pricing method is most likely used?

A)Prestige
B)Premium
C)Differential
D)Return-on-investment
E)Cost-plus

Question 42

When a seller's costs are usually determined during or after a product is made and then a specified percentage or dollar amount is added to the cost to establish a price, an organization is using ____ pricing.

A)markup
B)demand-based
C)differential
D)cost-plus
E)expensed-based

Question 43

J.C. Penney's pays $16.50 for a six-ounce bottle of cologne and sells it for $25.95. Its markup as a percentage of cost is approximately ____ percent for this product.

A)64
B)36
C)18
D)57
E)45

Question 44

Steinway produces concert grand pianos, often using the custom materials and designs desired by a specific customer. The average price of these pianos runs about $50,000 depending on the exact piano. What type of pricing does Steinway most likely use for these pianos?

A)Markup
B)Competition-based
C)Cost-plus
D)Demand-based
E)Secondary-market

Question 45

Amtrak prices its tickets so that it is less expensive to travel on weekends than during the week when there is heavy business travel. This illustrates ____ pricing.

A)cost-plus
B)demand-based
C)competitive
D)secondary markup
E)seasonal

Question 46

The three primary bases for developing prices are

A)profit, demand, and competition.
B)supply, demand, and marketing objectives.
C)demand, competition, and cost.
D)markup, cost, and cost-plus.
E)negotiation, periodicity, and randomness.

Question 47

Competitors' prices, along with the marketing variables they emphasize, are determining factors in

A)the instability of prices in a particular industry.
B)using markup pricing for consumer goods.
C)how much marketing research a firm needs to collect.
D)using differential pricing to demonstrate quality differences.
E)how important price will be to customers.

Question 48

The federal government often uses ____ pricing when it grants defense contracts.

A)markup
B)differential
C)breakeven
D)cost-plus
E)competition-based

Question 49

Marketers at organizations engaged in nonprice competition

A)are more concerned about knowing competitors' prices than are marketers in organizations that are engaged in price competition.
B)are not concerned about the prices of competing brands.
C)need competitive price information to make sure that their products are priced at approximately the same level as the prices of competing brands.
D)rely on customers to help them gather information regarding the prices of competing brands.
E)experience high levels of price instability.

Question 50

If General Motors determines that it wants to sell 200,000 Chevrolet Acadias and sets the price at $29,500 because it knows that at that price it will reach that goal, the firm would be using a ____ pricing method.

A)cost-plus
B)competition-based
C)psychological
D)comparison
E)demand-based

Question 51

Which of the following statements about markup pricing is correct?

A)The use of similar markups reduces price competition.
B)Markup pricing is inconvenient to use.
C)Markup pricing results in a high price when demand is high and a low price when demand is low.
D)Markup pricing is a demand-based pricing method.
E)Using markups makes pricing a time-consuming, difficult process.

Question 52

Markup is measured either as a percentage of ____ or a percentage of ____.

A)selling price; cost
B)cost; profit
C)revenue; contribution margin
D)resources used; cost
E)demand; competition

Question 53

If a product is priced based on how many or how few people want it at a particular time and place, ____ pricing is being used.

A)markup
B)demand-based
C)competitive
D)peak
E)differential

Question 54

When determining markup as a percentage of cost, divide the markup amount by

A)price.
B)cost.
C)quantity.
D)revenue.
E)100.

Question 55

During July and August, Lakewood Links Golf Course, located in South Carolina, offers weekday rates of $13 for a round of golf with a cart. During the rest of the year, the weekday rates are between $25 and $35. This is an example of the use of

A)differential pricing.
B)incentives.
C)competition-based pricing.
D)demand-based pricing.
E)random discounting.

Question 56

A cost-based pricing method commonly used in retail is called

A)value pricing.
B)cost-plus pricing.
C)cost discounting.
D)differential pricing.
E)markup pricing.

Question 57

Some grocery stores collect data on competitive prices

A)by calling their competitors.
B)on a quarterly basis.
C)through stores' purchase data.
D)from their resellers.
E)by using full-time comparison shoppers.

Question 58

Competition-based pricing is

A)used when costs and revenues are secondary to competitors' prices.
B)not useful as a method of increasing market share.
C)not useful if the competing products are homogeneous.
D)not able to increase sales.
E)used when competing products are heterogeneous.

Question 59

When products in an industry are relatively homogeneous and price is a key purchase consideration,

A)competition-based pricing becomes more important.
B)demand-based pricing dominates pricing decisions.
C)firms tend to use secondary-market pricing.
D)cost-based methods like markup pricing are dominant.
E)customary pricing is often used.

Question 60

A retailer of Real Dry deodorant prices it at $2.00; it costs the retailer $1.40. What is the approximate markup as a percentage of selling price?

A)3 percent
B)14.3 percent
C)30 percent
D)70 percent
E)20 percent

Question 61

Maria recently put her house on the market at an asking price of $260,000. She realizes, however, that in order to sell the house, she may have to use

A)secondary-market pricing.
B)reference pricing.
C)negotiated pricing.
D)price lining.
E)professional pricing.

Question 62

The management at Allied Electronics is having difficulty in raising the introductory price on system components to cover the increased costs of producing the sensing devices for home security systems. Apparently, Allied used a(n) ____ strategy in pricing these components.

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

Question 63

If Nabisco wants to quickly gain a large market share with its new line of reduced-fat snack crackers, it should use

A)penetration pricing.
B)random discounting.
C)captive pricing.
D)price skimming.
E)everyday low prices.

Question 64

A sale that advertised prices "up to 65 percent off" the original price uses

A)tensile pricing.
B)random discounting.
C)periodic discounting.
D)bait pricing.
E)psychological pricing.

Question 65

A price-skimming strategy assumes that

A)the initial demand is highly elastic.
B)the product is efficient.
C)it will be difficult to recoup development costs.
D)all consumers have homogeneous tastes.
E)the initial demand is highly inelastic.

Question 66

Price skimming and penetration pricing are both strategies used for

A)product-line pricing.
B)business products only.
C)psychological pricing.
D)new-product pricing.
E)promotional pricing.

Question 67

A penetration pricing strategy is particularly appropriate when demand is

A)increasing.
B)highly elastic.
C)highly inelastic.
D)decreasing.
E)inefficient.

Question 68

Which of the following would be used in setting the price of a new product if considerable competition is expected?

A)Psychological pricing
B)Penetration pricing
C)Odd-even pricing
D)Price skimming
E)Prestige pricing

Question 69

When businesses charge the highest possible price that customers who really want the new product will pay, they are using

A)premium pricing.
B)prestige lining.
C)captive pricing.
D)price skimming.
E)penetration pricing.

Question 70

If PepsiCo sets its twelve-pack price at $3.99 to match the price charged by Coca-Cola, Pepsi is using which of the following pricing methods?

A)Demand-based
B)Cost-based
C)Reference pricing
D)Competition-based
E)Price leader

Question 71

Executives in Japan decided to price Lexus luxury cars in the United States at $55,000 while pricing them at $66,000 in their own country. This is an example of

A)secondary-market pricing.
B)price skimming.
C)bait pricing.
D)prestige pricing.
E)random discounting.

Question 72

A manager at JC Penney discovers that Sears has reduced the price of its children's Levi's from $31.99 to $24.99, according to an advertisement in the Sunday newspaper. She immediately phones her store and instructs the salesperson on duty to put a sign up next to their children's Levi's that reads, "SALE: $24.99." This is an example of what pricing strategy?

A)Secondary-market pricing
B)Bait-pricing
C)Reference pricing
D)Random discounting
E)Comparison discounting

Question 73

Sony management decided to use skimming as a pricing strategy for its newest line of high-definition television (HDTV) sets. It should be aware that this strategy does not

A)generate capital to cover research and development costs.
B)discourage competitors from entering the market.
C)provide flexibility in the introductory base price.
D)protect the firm from covering costs if prices are set too low.
E)reduce the stress that may be placed on the firm's production capabilities.

Question 74

When Sharp first introduced its line of graphing calculators, it set the price quite high; it has lowered the price as competitors have entered the market. The pricing strategy initially used by Sharp is called

A)customary pricing.
B)odd-even pricing.
C)penetration pricing.
D)price skimming.
E)prestige pricing.

Question 75

A problem associated with ____ is that consumers can predict when prices will be lowered and delay purchases until that time.

A)random discounting
B)penetration pricing
C)reference pricing
D)everyday low pricing
E)periodic discounting

Question 76

The "White Sale" that many department stores have every year a few weeks after Christmas is an example of

A)secondary pricing.
B)off-peak pricing.
C)periodic discounting.
D)random discounting.
E)captive pricing.

Question 77

If General Mills looks at Kellogg's cereal prices as the primary method of determining its own prices, General Mills is using

A)price fixing.
B)price discrimination.
C)demand-based pricing.
D)market share pricing.
E)competition-based pricing.

Question 78

The fact that senior citizens are charged a lower price at movie theaters than younger adults is an example of ____ pricing.

A)price-line
B)promotional
C)professional
D)differential
E)psychological

Question 79

If Norelco introduced a new electric razor that sonically removes hair and priced it first at $175 and then at $150 before reducing the price to $100, the firm's initial pricing strategy is known as

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

Question 80

If a business decides to reduce its prices once in a while on an unsystematic basis, it is using

A)price reduction planning.
B)random discounting.
C)bait pricing.
D)periodic discounting.
E)penetration pricing.