Deck 15: Pricing of Services

Question 1

_____-based pricing is used when there are a small number of large service providers.

A) Demand
B) Profit
C) Competition
D) Supply
E) Cost

Answer 1

C

Question 2

Many white-collar workers have heard the story about the busy executive who billed the doctor for keeping him waiting when the patient showed up promptly at his appointment time or has dreamed of doing it themselves.This is an example of the _____ costs of services.

A) Convenience
B) Monetary
C) Psychological
D) Time
E) Search

Answer 2

D

Question 3

In which of the following service industries would you most likely find the service provider using competition-based pricing?

A) Banking industry
B) Hospital industry
C) Legal services
D) Tax accounting business
E) Rental car industry

Answer 3

E

Question 4

In which of the following service industries are you most likely to find the service provider using fee for service pricing?

A) Apartment rental business
B) Management consulting business
C) Cleaning service industry
D) Airline industry
E) Internet service providers

Question 5

_____ costs represent other sources of sacrifice perceived by consumers when buying and using a service.

A) Penalty
B) Forfeit
C) Opportunity
D) Nonmonetary
E) Psychological

Question 6

Which of the following statements describes a problem in cost-based pricing for services?

A) Monetary price must be adjusted to reflect the value of non-monetary costs
B) Heterogeneity of services limits comparability
C) Prices may not reflect customer value
D) Labor is more difficult to price than materials
E) Information on service costs is not available to customers

Question 7

_____-based pricing occurs in services that are standardized across providers.

A) Demand
B) Profit
C) Competition
D) Supply
E) Cost

Question 8

Which of the following is an example of competition-based pricing strategy?

A) Cost-plus pricing
B) Going-rate pricing
C) Fee for service
D) Synchronized pricing
E) Simultaneous pricing

Question 9

Which of the following statements does NOT contain a reason why consumers lack accurate reference prices for services?

A) Individual customer needs vary within the same service provider
B) Collection of price information is overwhelming in services
C) Many service providers are unable or unwilling to estimate price in advance
D) Low degree of variability exists across providers of the same service
E) Prices are not visible

Question 10

All of the following examples are nonmonetary costs EXCEPT:

A) Time costs
B) Search costs
C) Convenience costs
D) Psychological costs
E) Utility costs

Question 11

Accountants,architects,interior decorators,marriage counselors,and lawyers typically use a _____ pricing strategy.

A) Going-rate
B) Perceived value
C) Fee for service
D) Price signaling
E) Cost-plus

Question 12

The basic formula for _____ is Price = Direct costs + Overhead + Profit margin.

A) Contribution margin
B) Return on investment
C) Cost-based pricing
D) ABC costing
E) Net profit

Question 13

After moving to Florida,Kaori opened both a savings and a checking account at Benford Bank.Although Benford had a higher minimum balance requirement for free checking than the other two banks she considered,Kaori chose Benford because it was located closer to her home than the other banks.Kaori would rather expend other costs than _____ costs.

A) Convenience
B) Monetary
C) Psychological
D) Time
E) Search

Question 14

One of the reasons used to explain why customers evaluate goods and services differently is:

A) The greater degree of customer empowerment used to sell services
B) Services and goods influence opportunity costs differently
C) That customers often have limited reference prices for services
D) The increased customer autonomy in the pricing of goods
E) The cost of maintaining inventory

Question 15

Pizza Hut,Uncle Sam's,Domino's,and Papa John's all deliver pizza in Cartersville,Georgia,a town of about 30,000.As a result,one would expect all of the pizza delivery services to use _____-based pricing.

A) Standardized
B) Simultaneous
C) Competition
D) Supply
E) Cost

Question 16

The process for installing Leo's new CD player took almost four hours,which Leo spent sitting in the waiting room of J.J.'s Auto Sound.Leo paid _____ costs for the installation of his new CD player.

A) Convenience
B) Fiscal
C) Physiological
D) Time
E) Search

Question 17

Consumer resistance to using self-checkout lines has resulted from a _____ cost in using a new service.

A) Convenience
B) Monetary
C) Psychological
D) Time
E) Search

Question 18

In _____ pricing,a service firm determines price by calculating component costs of the service and adding a mark-up.

A) Contingency
B) Fee for service
C) Perceived value
D) Cost-plus
E) Going-rate

Question 19

_____ cost refers to the effort invested in identifying and selecting a service from your consideration set.

A) Convenience
B) Monetary
C) Psychological
D) Time
E) Search

Question 20

To calculate what it charges a client,a detective agency charges $200 a day direct costs plus an additional $50 per day to pay for office expenses,licenses,and other fixed costs and fifteen percent of full costs for the profit margin.What type of pricing strategy is being used by the detective agency?

A) Contingency
B) Cost-based
C) Perceived value
D) Fee for service
E) Going-rate

Question 21

A day after US Airways announced its new low fares for the autumn on travel from New York (i.e.,Newark and LaGuardia Airports)to selected cities in the U.S.and Canada,American Airlines matched their fares.American Airlines is using a _____ strategy.

A) Value pricing
B) Price signaling
C) Demand-based pricing
D) Going-rate pricing
E) Price trimming

Question 22

When comparing the value of health clubs,Shaundra believes value comes from having a "women's only" nautilus room and "women's only" aerobic classes.Shaundra defines value as:

A) All that I get for all that I give
B) Whatever I want in a service
C) Low price
D) Reliable service
E) The quality I get for the price I pay

Question 23

In a _____ pricing strategy,new services are introduced at high prices with large promotional expenditures.

A) Penetration
B) Skimming
C) Prestige
D) Contingency
E) Visible

Question 24

Which of the following is NOT a type of differential used by service providers to synchronize demand and supply?

A) Time
B) Quantity
C) Place
D) Utility
E) Incentive

Question 25

A prestige pricing strategy is appropriate when customers define value as:

A) All that I get for all that I give
B) Everything I want in a service
C) Low price
D) Reliable service
E) The quality I get for the price I pay

Question 26

Because most people like to get tattoos and body piercings on the weekends,a tattoo parlor in Portland,Maine,offers a reduced rate Monday to Thursday for all of its services.Prices on Friday and Saturday are 45 percent higher than they are during the rest of the week.The tattoo parlor is using a(n)_____ pricing strategy.

A) Odd
B) Synchro-
C) Discounting
D) Prestige
E) Complementary

Question 27

Salespeople are often on the road three nights every week.They cannot afford to stay in the most luxurious of hotels,but they do appreciate amenities like a good mattress,a firm pillow and a comfortable work area.They want the price they pay to be commensurate with the amenities provided by the hotels.They tend to define value as:

A) All that I get for all that I give
B) Whatever I want in a service
C) Low price
D) Reliable service
E) The quality I get for the price I pay

Question 28

Which of the following is NOT an effective pricing strategy to use when customers define value as "low price"?

A) Odd pricing
B) Synchro-pricing
C) Value pricing
D) Penetration pricing
E) Discounting

Question 29

All of the following are situations in which a penetration pricing strategy would be appropriate EXCEPT:

A) Sales volume of the service is very sensitive to price
B) Economies in unit costs can be achieved by operating at large volumes
C) A service faces threats of strong potential competition very soon after introduction
D) There is no class of buyers willing to pay a higher price to obtain the service
E) The service is a major improvement over past services

Question 30

Which of the following approaches to pricing considers that customers may judge quality on the basis of price?

A) Demand-based pricing
B) Profit-based pricing
C) Competition-based pricing
D) Supply-based pricing
E) Cost-based pricing

Question 31

Derrick saves coupons from 10-minute oil and lubrication services (e.g.,Jiffy Lube,Quick Lube,and Speedi-Lube)and when he needs to have his car's oil changed,he chooses the oil and lubrication service that offers the best deal on a 10-minute oil change.For 10-minute oil and lubrication services,Derrick defines value as:

A) All that I get for all that I give
B) Everything I want in a service
C) Low price
D) Reliable service
E) The quality I get for the price I pay

Question 32

Executive Dry Cleaners charges customers $2.99 to launder a dress shirt rather than $3.00.Executive Dry Cleaners is using a(n)_____ pricing strategy.

A) Odd
B) Synchro-
C) Discounting
D) Prestige
E) Complementary

Question 33

If a family has one child enrolled in Diane's Day Care Center,it costs $75 per week.If a family has two children enrolled at Diane's,it costs $135.Diane's is using a(n)_____ differential.

A) Place
B) Time
C) Quality
D) Incentive
E) Quantity

Question 34

Which of the following statements describes a problem with demand-based pricing for services?

A) Prices may not reflect customer value
B) Costs are difficult to trace
C) Heterogeneity of services limits comparability
D) Monetary price must be adjusted to reflect the value of non-monetary costs
E) Labor is more difficult to price than materials

Question 35

Which of the following statements does NOT describe how consumers typically define value?

A) Value is all that I get for all that I give
B) Value is everything I want in a service
C) Value is low price
D) Value is reliable service
E) Value is the quality I get for the price I pay

Question 36

_____ occurs in markets with a high concentration of sellers.Any price offered by one company will be matched by its competitors in order to avoid giving the low-price seller a distinct advantage.

A) Cost-plus pricing
B) Price signaling
C) Value pricing
D) Price lining
E) Price standardization

Question 37

In talking to a travel agent,T.J.Matthews learned that he would have to pay the same amount of money for a three-day/two night package right outside the gates of Walt Disney World for his family of four as he would for a five-day/four-night stay at a hotel that was about fifty miles away from Walt Disney World.Matthews decided the farther hotel was a much better value.Matthews defined value as:

A) All that I get for all that I give
B) Whatever I want in a service
C) Low price
D) Reliable service
E) The quality I get for the price I pay

Question 38

American Airlines BreakAway fares offer travelers substantial savings on nonstop flights from Newark,New Jersey to Los Angeles from mid-August to mid-October.The round-trip airfare is $299 for customers who depart on Friday and return the following Monday or Tuesday.American Airlines is using a(n)_____ differential.

A) Place
B) Time
C) Quality
D) Incentive
E) Quantity

Question 39

_____ is a form of competition-based pricing that involves charging the most prevalent price on the market for a service.

A) Value pricing
B) Price signaling
C) Fee for service pricing
D) Going-rate pricing
E) Price trimming

Question 40

American Woman Fitness Centers offer first-time customers a 3-month membership for $79,a saving of $20 off the regular 3-month membership price.American Woman Fitness Centers' pricing strategy is aligned with which of the following customer definitions of value?

A) Value is all that I get for all that I give
B) Value is everything I want in a service
C) Value is low price
D) Value is reliable service
E) Value is the quality I get for the price I pay

Question 41

Price framing would be used when the customer defines value as:

A) All that I get for all that I give
B) Superior quality
C) Quality I get for the price I pay
D) Everything I want in a service
E) Low price

Question 42

Kendra teaches swimming lessons at the YWCA pool.She will charge $75 per child for four weeks worth of lessons.Payment is not due until the child can swim the length of the pool.If the child cannot accomplish this task,he or she will be automatically enrolled in the next swimming lesson session until the child can swim the length of the pool.At that time,the parents will be expected to pay the $75.The YWCA is using a _____ pricing strategy.

A) Price framing
B) Complementary pricing
C) Price bundling
D) Results-based
E) Value-based

Question 43

Deana and Rod Li went on a one-week vacation at the Club Med Turkoise village,located in Turks and Caicos,a chain of islands in the Caribbean.Club Med's per person price of $1499 included round-trip air travel from New York,one-week accommodations,all meals,sports,activities and nightly entertainment.Club Med is using a _____ strategy.

A) Market segmentation pacing
B) Price framing
C) Complementary pricing
D) Price bundling
E) Contingency pricing

Question 44

Price signaling is typical in markets with a high concentration of sellers.

Question 45

Demand-based pricing does not consider that customers might be sensitive to nonmonetary prices and may judge quality on the basis of price.

Question 46

The New York Yankees,a major league baseball team,offer half-price tickets for high school and college students every Wednesday home game at Yankee Stadium.The New York Yankees are using a(n)_____ pricing strategy.

A) EDLP
B) Value
C) Penetration
D) Market segmentation
E) Cost-based

Question 47

Search costs are the costs invested to identify and choose from services you desire.

Question 48

Value may be perceived differently because of consumers' idiosyncratic tastes,knowledge about the service,buying power,and ability to pay.

Question 49

Promotional pricing may be less meaningful for services,for which price anchors do not exist,than for goods,for which they do.

Question 50

If you visit a county or state fair,you will pay a basic admission fee plus other fees if you want to enjoy any of the amusement rides.County and state fairs that price this way are using:

A) Synchro-pricing
B) Two-part pricing
C) Mixed bundling
D) Contribution margin pricing
E) Contingency pricing

Question 51

When the customer defines value as low price,the service provider should use prestige pricing.

Question 52

An inn near a ski resort would be using a synchro-pricing strategy if it had lower rates in the summer months than in its busy season.

Question 53

The price for an all-day trip to the Alpine Spa is $235 and includes an hour-long massage,a facial,a manicure and pedicure and a hair styling and make-up application.Any of these services can be purchased individually for the total cost of almost $350.What kind of pricing strategy is Alpine Spa using?

A) Synchro-pricing
B) Complementary pricing
C) Price bundling
D) Results-based pricing
E) Penetration pricing

Question 54

The three types of complementary pricing are:

A) Substitute pricing,price bundling and leader pricing
B) Leader pricing,value pricing and price lining
C) Leader pricing,penetration pricing and captive pricing
D) Two-part pricing,results-based pricing and bundling
E) Two-part pricing,captive pricing and loss leadership pricing

Question 55

The ad for legal services that Marla saw indicated the lawyers would receive no money unless their client did.To Marla,this statement indicated the legal firm offering this service was using:

A) Synchro-pricing
B) Two-part pricing
C) Mixed bundling
D) Contribution margin pricing
E) Contingency pricing

Question 56

Which of the following is NOT an example of an effective pricing strategy to use when the customer defines value as "all that I get for all that I give?"

A) Price framing
B) Price skimming
C) Complementary pricing
D) Results-based pricing
E) Price bundling

Question 57

One of the problems associated with cost-based pricing is the heterogeneity of services,which limits comparability.

Question 58

Cost-plus pricing is more likely to be used by lawyers than by the construction industry.

Question 59

Price visibility does not influence reference prices when selecting a stockbroker.

Question 60

What two pricing strategies are most commonly used when the customer defines value as quality for the price paid?

A) Market segmentation pricing and value pricing
B) Psychological pricing and value pricing
C) Penetration pricing and value pricing
D) Discounting and value pricing
E) Market segmentation pricing and price skimming

Question 61

The most commonly known form of results-based pricing is a practice called mixed bundling.

Question 62

What are the two types of market segmentation commonly used by service providers?

Question 63

List three groups of service providers that typically use results-based pricing.

Question 64

You can get a haircut in one of the rural counties that surround Atlanta for $15.You will pay around $45 for the same haircut if you buy it in one of the five counties that make up the Atlanta area.Which type of competition-based pricing does this best exemplify?

Question 65

Prestige pricing is a special form of cost-plus pricing by service marketers who offer some sort of status service like providing cold storage for a mink coat or maintenance for a Rolls Royce.

Question 66

Describe the three strategies associated with the complementary pricing of a service.

Question 67

Loss leadership is the term typically used when providers place a familiar service on special to draw the customer to the store and then reveal other levels of service available at higher prices.

Question 68

Celeste has a 4-year old daughter and often employs one of the many teenagers in her neighborhood who regularly baby-sit.When one of the teens raised her price to $5.75 per hour,all of the other babysitters followed suite.Not surprisingly,when another teen tried to increase his babysitting hours by lowering his rate to $5.25,all of the other teens made the same reduction in their rates.What kind of a competition-based strategy does this example depict?

Question 69

College activities boards (CABs)have the responsibility for hiring the entertainment that appears on college campuses.They have limited budgets and when dealing with them,talent agencies have to remember they often define value as low prices.Describe how a talent agency might use this information in pricing to those on CABs that actually have the authority to hire the musicians they represent.Give specific examples with each.

Question 70

What kind of a pricing strategy is a crafts show using when it charges a lower entry fee for teenagers and senior citizens?

Question 71

Tyra has done volunteer fundraising for years.She has recently decided it would be a good career move for her to become a full-time,paid fundraiser.She likes the idea of working with a variety of different organizations and then moving on to some new problem to tackle.She is trying to keep her operation simple.From what Tyra has told you so far,you understand that she plans on using cost-plus pricing.What problems do you foresee if she uses this pricing technique? What type of a pricing strategy might be more appropriate and simpler?

Question 72

What kind of pricing strategy explains why a traveler is willing to pay $400 to fly first class when he or she could get to the same destination by paying $125?

Question 73

Discuss the reasons why customer knowledge of service prices may differ from customer knowledge of goods prices.

Question 74

In mixed-leader pricing,the price of a catered reception may be less if the bride buys her wedding cake from the same caterer and pays full price for the cake.

Question 75

Since customers naturally look for price anchors,as well as familiar services,against which to judge focal services,price framing is an appropriate strategy to use for pricing many types of services.

Question 76

What type of pricing strategy will most likely be used by marriage counselors,bridal consultants,public accountants,and tax attorneys?

Question 77

What is the basic formula for cost-based pricing?

Question 78

In order to find the best veterinarian service for her prized German Shepherd,Vonda interviewed several different veterinarians and did extensive research before she found one she thought provided value.What kind of a nonmonetary cost did Vonda expend as she interviewed different vets?

Question 79

University presidents often have access to funding to pay to have widely recognized people such as Malcolm Gladwell,Maya Angelou or Bill Clinton come to their campuses as speakers.When negotiating with speakers' bureaus for the services of these individuals,college presidents are primarily concerned with the "get" component of a service and monetary price is not of primary concern.What types of pricing strategies should the speakers' bureau use if they wish to appeal to the value as defined by the university presidents?

Question 80

A resort that has identified young upper-middle class parents as a market segment charges $1,750 for a four-day,three-night package for a mother,father and two children.The package includes golf fees and tennis court fees for the parents and a five-hour a day adult-supervised camp for the children.The ordinary four-day,three-night package for four costs $1,200.A single day at the camp for any child between the ages of 3 and 11 is $60.What kind of market segmentation pricing strategy is the resort using?