Deck 15: Strategic Pricing Methods

Question 1

Coupons may confuse customers and therefore do little to increase store loyalty.

Answer 1

True

Question 2

Odd prices suggest low quality.

Answer 2

True

Question 3

One of the reasons a manufacturer may decide to sell its products in a bundle is to encourage trial of a new product.

Answer 3

True

Question 4

When Sony released its PlayStation 3 game machines,it charged a high price,attracting the most avid game players.This was a market penetration pricing strategy.

Question 5

Kristina sells sports equipment and wants to get customers into her store.She knows from past experience that sales generate customer traffic,particularly when she puts children's baseball equipment on sale.She may consider a leader pricing strategy.

Question 6

Because market and operating conditions are all very similar,marketers' pricing strategies should be uniform.

Question 7

When a retail store rarely sells deeply discounted or sale products,it is known as "everyday low pricing."

Question 8

Manufacturers like rebates because it provides them with information they can use in developing new products.

Question 9

The Robinson-Patman Act does NOT apply to end consumers,at which point many forms of price discrimination occur.

Question 10

The methods used to develop pricing strategies are cost-based pricing,competitor-based pricing,and value-based pricing.

Question 11

Competitor-based pricing is when a company determines the final price of a good based on the cost.

Question 12

A weakness associated with cost-based pricing methods is that they

A) are too difficult to calculate.
B) infer a cost-price ratio.
C) do not recognize the role that consumers or competitors' prices play in the marketplace.
D) do not allow for predatory pricing.
E) are structurally inflexible and ignore vertical price fixing alternatives.

Question 13

Cheryl wants to quickly establish a dominant market share for her new line of ergonomic pens.To do this,she will likely use a market penetration pricing strategy.

Question 14

Price lining is setting a price floor and a price ceiling for a line of products and then setting price points in between to represent differences in quality.

Question 15

Because market and operating conditions are different in each target market

A) all consumers will react similarly to the firm's pricing strategy.
B) the choice of a pricing strategy is specific to the target market.
C) prices need to be held constant because everything else is changing.
D) only horizontal price fixing should be used.
E) external reference prices will always be the best strategy.

Question 16

Value-based pricing necessitates a great deal of consumer research to be implemented successfully.

Question 17

Proving that a company has engaged in the deceptive bait and switch practice is easy.

Question 18

Compared to other pricing methods,__________ pricing is relatively simple.

A) improvement value
B) value-based
C) cost of ownership
D) reference-based
E) cost-based

Question 19

Slotting allowances are used to get retailers to feature a manufacturer's product in their advertising and promotional efforts.

Question 20

Cost-based pricing assumes costs will not vary much for different levels of production.

Question 21

In determining the price for his company's new small business accounting software,Raymond is assessing how much better the software is as compared to alternative products available in the market.Raymond is using __________ pricing.

A) improvement value
B) odd-even
C) everyday low pricing
D) reference-based
E) cost-based

Question 22

One of the problems associated with an everyday low pricing (EDLP)strategy is that

A) stores may have to offer too many noncumulative wholesale discounts.
B) some consumers may associate EDLP with lower quality goods.
C) the retailer may be accused of price discrimination.
D) too many coupons may be redeemed.
E) it may conflict with price-based cost calculations.

Question 23

Firms using a(n)____________ pricing method set their prices relative to what other firms are charging.

A) improvement value
B) value-based
C) competitor-based
D) reference-based
E) cost-based

Question 24

One of the difficulties associated with value-based pricing is that

A) the way consumers perceive value constantly changes.
B) only the creator of a new product can fully understand its value to consumers.
C) value depends on variable costs and not fixed costs.
D) everyday low pricing has neutralized the impact of price on consumers' purchase decisions.
E) costs are invaluable.

Question 25

In determining the price for his company's new pocket digital camera,Matt determines what consumers consider the regular or original price for similar cameras available in the market.Matt is assessing the influence of __________ on pricing strategy.

A) improvement value
B) odd-even prices
C) everyday low pricing
D) reference prices
E) cost of ownership

Question 26

An everyday low pricing strategy stresses the continuity of retail prices

A) at a level above regular retail prices and below deep-discount prices.
B) based on horizontal price fixing.
C) bundled with cost-based,cash discounts.
D) at a level somewhere between the regular price and the deep-discount sale prices competitors may offer.
E) at a price skimming level.

Question 27

Value-based pricing methods include approaches to setting prices that focus on the overall value of the product offering

A) when the product is produced.
B) as recognized by competitors.
C) as perceived by the consumer.
D) in order to minimize bundling charges.
E) relative to production costs.

Question 28

Each generation of cell phones has provided greater clarity,range,and multi-functionality.Marketers of cell phones can use these upgrades in __________ pricing.

A) everyday low pricing
B) odd-even
C) improvement value
D) reference-based
E) cost-based

Question 29

A reference price is

A) the actual price.
B) the price against which buyers compare the actual selling price.
C) the manufacturer's cost.
D) a cumulative quantity discount price.
E) the external horizontal fixed price.

Question 30

Dan is especially price sensitive.He has been known to line up on "Black Friday" (the day after Thanksgiving)at 4 a.m.in order to be among the first to buy sale items.Dan would likely respond to a __________ pricing strategy.

A) high / low
B) premium
C) slotting allowance
D) horizontal flattening
E) vertical triangulation

Question 31

Everyday low pricing (EDLP)provides value to consumers by

A) continually offering items on sale.
B) minimizing the number of options a consumer can evaluate.
C) noncumulative quantity discounts.
D) reducing their search costs.
E) creative use of referencing pricing.

Question 32

Ben owns a lawn care business.From experience,Ben has found that John Deere equipment lasts almost twice as long as competitors' machines.For John Deere,Ben's perception about its products makes __________ pricing possible.

A) improvement value
B) odd-even
C) everyday low pricing
D) reference-based
E) cost of ownership

Question 33

In determining the price for his company's new personal computer photography printer,Raymond is assessing the total cost of owning his printer as compared to alternative products available in the market.Raymond is using __________ pricing.

A) improvement value
B) odd-even
C) everyday low pricing
D) reference-based
E) cost of ownership

Question 34

When Sony introduced its new PlayStation 3 game system,buyers who could not get them the first day bid up the price of the systems on eBay and other auction sites.As Sony provided more PlayStation 3 units to the market and early demand was satisfied,prices dropped because

A) the way consumers perceived their value changed.
B) Sony fully understood its value to consumers.
C) variable costs became constant and fixed costs increased.
D) everyday low pricing neutralized the impact of price on consumers' purchase decisions.
E) Sony discontinued using the improvement value method of pricing.

Question 35

Cost-based pricing assumes costs

A) vary with the level of prices.
B) are used to estimate value.
C) will not vary much for different levels of production.
D) are calculated based on historical consumer perceptions of what things should cost.
E) will continue to decrease as production increases.

Question 36

One of the difficulties associated with value-based pricing is that

A) costs are impossible to compute.
B) only the creator of a new product can fully understand its value to consumers.
C) value depends on variable costs and not fixed costs.
D) everyday low pricing has neutralized the impact of price on consumers' purchase decisions.
E) it necessitates a great deal of consumer research to be implemented successfully.

Question 37

It is important to Joanne to get value for her money,but she does not want to spend time comparison shopping.Joanne will likely respond to __________ pricing but not __________ pricing.

A) high / low; everyday low
B) premium; everyday low
C) discount; vertical
D) horizontal; flattening
E) everyday low; high / low

Question 38

Yvonne estimates the average cost of her floral arrangements is $14 regardless of whether she is doing 5 or 20 arrangements that day.She adds a standard markup to the $14 estimate to determine her price.Yvonne is using a(n)__________ pricing method.

A) improvement value
B) value-based
C) everyday low pricing
D) reference-based
E) cost-based

Question 39

When Greenbelt Construction Company began building houses in a large subdivision with many other builders,they priced their homes slightly higher than their competitors and promoted the added quality features in their homes.Greenbelt was using a(n)__________ pricing strategy.

A) improvement value
B) value-based
C) everyday low pricing
D) reference-based
E) competitor-based

Question 40

In a __________ pricing strategy,marketers rely on the promotion of sales,during which prices are temporarily reduced to encourage purchases.

A) high / low
B) premium
C) discount
D) horizontal flattening
E) vertical triangulation

Question 41

Pricing __________ products is especially challenging because little or nothing is known about consumers' perceptions of value.

A) cost-based
B) seasonal
C) large-quantity
D) new-to-the-world
E) zone pricing

Question 42

Mario is the first retailer in town to sell games for Sony's new PlayStation 3 machine.Mario wants to quickly capture as much of the market for the new games as possible.Mario will likely use a __________ pricing strategy.

A) market penetration
B) bundling
C) price fixing
D) reference
E) skimming

Question 43

With a price skimming strategy,a marketer will NOT benefit from

A) increased consumer value associated with price increases.
B) the ability to use seasonal discounts.
C) the opportunity to offer advertising allowances.
D) economies of scale associated with a larger volume of production.
E) market substitution price elasticity.

Question 44

The major objectives associated with a market penetration pricing strategy are to

A) capture the high end of the market demand curve and lower introduction costs.
B) quickly build sales and market share.
C) minimize customer dissatisfaction and maximize reference price value.
D) provide an incentive to purchase a less desirable product in order to obtain a more desirable product.
E) match competitors' prices and communicate high quality.

Question 45

When Burroughs-Wellcome introduced the first anti-AIDS drugs,they initially set the price at $10,000 for a year's supply.Burroughs-Wellcome was probably pursuing a __________ pricing strategy.

A) skimming
B) introductory
C) slotting allowance
D) market penetration
E) cost-based

Question 46

Marketers use a price skimming strategy for any or all of the following reasons EXCEPT

A) to recoup high research and development costs.
B) to signal high quality.
C) to limit demand.
D) to gain market share quickly.
E) to test consumers' price sensitivity.

Question 47

The __________ occurs when unit cost drops as the quantity sold increases.

A) slotting allowance benefit
B) price fixing return
C) improvement value effect
D) experience curve effect
E) cumulative bundling benefit

Question 48

When HP first introduced their inkjet printers,consumers could only buy refill cartridges from HP.HP made significant profits from the sale of replacement cartridges.In this situation,HP logically used a __________ pricing strategy for their printers.

A) market penetration
B) loss leader
C) price fixing
D) reference
E) skimming

Question 49

When the first hybrid automobiles became available on the market,manufacturers had only minimal production capacity.They used a price skimming strategy primarily to

A) recoup high research and development costs.
B) signal high quality.
C) limit demand.
D) penetrate a market.
E) test consumers' price sensitivity.

Question 50

Developing pricing strategies for __________ is one of the most challenging tasks a manager can undertake.

A) cost-based pricing
B) seasonal rebate items
C) new products
D) zone pricing products
E) quantity discounts

Question 51

With a __________ pricing strategy,marketers set a low initial price for the introduction of a new product or service.

A) market penetration
B) bundling
C) price fixing
D) reference
E) skimming

Question 52

When Apple Computer Company introduced the iPhone-a combination phone,MP3 player,and Internet access device-in 2007,it was priced at $499,considerably higher than either the iPod or competing cell phones.Apple was probably pursuing a __________ pricing strategy.

A) market penetration
B) slotting allowance
C) price fixing
D) reference price
E) skimming

Question 53

One reason marketers of new,innovative products often start out with a price skimming strategy rather than a market penetration strategy is that

A) few consumers understand a penetration strategy.
B) a price skimming strategy lowers the value for consumers.
C) few marketers understand pricing.
D) it is easier to lower prices than to raise them.
E) price skimming is legal while price penetration is not.

Question 54

For a price skimming strategy to be successful,

A) price need to be reduced on a slow,uniform basis.
B) horizontal zone pricing needs to be employed.
C) marketers need to somehow get consumers to redeem coupons.
D) the price should be odd,not even.
E) it must be difficult for competitors to enter the market.

Question 55

Charging a relatively high price for new and innovative products to those consumers most willing and able to pay the high price is called price

A) penetration.
B) bundling.
C) fixing.
D) referencing.
E) skimming.

Question 56

The manufacturers of the early electric cars are charging relatively high prices to consumers who are willing to pay the price.They need to use a price skimming strategy because of

A) the relatively high emissions produced by electric cars.
B) the potential benefits of price bundling.
C) the high costs associated with producing a small volume of cars.
D) the slotting allowances needed to gain greater distribution.
E) a vertical price fixing arrangement among vendors supplying the needed components.

Question 57

Odd prices often suggest __________ to consumers.

A) low quality
B) superior quality
C) uniqueness
D) expired merchandise
E) foreign-made goods

Question 58

Price skimming focuses on selling products to __________ and __________ in the consumer adoption process model.

A) innovators and early adopters
B) early adopters and early majority
C) early majority and late majority
D) late majority and laggards
E) laggards and innovators

Question 59

For marketers using a price skimming strategy,once the initial demand is met for new and innovative products,they will likely

A) leave the market.
B) discontinue the product and create a new one.
C) offer deep discounts in order to create a loss leader pricing strategy.
D) lower the price to capture the next most price sensitive market segment.
E) use zone pricing to maximize differences.

Question 60

For a price skimming strategy to work,the product or service must

A) be bundled with products or services already available on the market.
B) be similar to what consumers are already comfortable with.
C) have wide market appeal.
D) have low production costs.
E) offer consumers some new benefit currently unavailable.

Question 61

Cosmetic retailers often have one price for each item but another price for three or four similar items with the same brand,all attractively packaged together.These retailers are using

A) price lining.
B) slotting allowances.
C) cumulative quantity discounts.
D) loss leaders.
E) price bundling.

Question 62

Chris works for a hardware store.His boss directs him to make a list of manufacturers whose brand names were included in the store's recent newspaper ads and to put copies of the ads with the invoices from each manufacturer.Chris's boss is documenting a(n)

A) advertising allowance.
B) slotting allowance.
C) quantity discount.
D) loss leader pricing deduction.
E) seasonal discount.

Question 63

The primary reasons manufacturers offer seasonal discounts to retailers are to more easily plan production schedules and to

A) lessen inventories of finished goods.
B) reduce advertising allowances.
C) increase price skimming.
D) control vertical pricing.
E) alter consumers' perceived reference price.

Question 64

When a marketer establishes a price floor and a price ceiling for an entire line of similar products and then sets price points in between for differences in quality among the products,he or she is using a __________ pricing approach.

A) market penetration
B) zone
C) price lining
D) loss leader
E) noncumulative quantity discount

Question 65

Jill knows her wholesaler will give an additional 20 percent off if she orders more than 100 new swimsuits at a time for her store.The wholesaler is using a __________ pricing tactic.

A) uniformed delivered pricing subsidy
B) seasonal slotting allowance
C) cumulative quantity discount
D) horizontal fixed wholesale price discount
E) noncumulative quantity discount

Question 66

If a market penetration pricing strategy results in lower per-unit cost,competitors will be discouraged from entering the market because

A) selective consumer demand will increase gross profit margins.
B) a high / low cost-based pricing strategy will not work.
C) they would likely need to quickly produce a large volume in order to compete.
D) profits would increase too rapidly.
E) they will only be able to advertise in the same media as the firm using the market penetration strategy.

Question 67

Production of the DeLorean car,made famous in the film Back to the Future,never got above 25,000 units during its lifetime.Automobile industry analysts estimate that production of this car needed to reach around 300,000 units to achieve the __________,a decrease in unit cost as product volume increases.

A) slotting allowance benefit
B) price fixing return
C) improvement value effect
D) experience curve effect
E) cumulative bundling benefit

Question 68

Christina owns and operates a shop that sells home furnishings.One of her vendors has just offered her a greatly reduced price for some traditional Christmas decorations,even though it is really too early to be thinking about holiday merchandise.One of the main pricing issues Christina will have to address as she considers the offer is

A) whether the cost reduction will be low enough to cover the additional inventory costs she will have to incur.
B) whether she can get an even lower price by waiting.
C) whether the company is going out of business.
D) whether this offer is legal.
E) whether she should open a Christmas shop instead of her home furnishing store.

Question 69

When Toyota introduced its Scion line of cars,the lowest priced model was listed for $15,000 while the highest priced model was listed for $21,000,with two or three other list prices in between.Toyota used a __________ pricing approach.

A) market penetration
B) zone
C) price lining
D) loss leader
E) noncumulative quantity discount

Question 70

Generally,a __________ represents either a short-term response to a competitive threat or a broadly accepted method of calculating a final price for the customer that is short-term in nature.

A) pricing strategy
B) reference price
C) high / low strategy
D) loss leader price
E) pricing tactic

Question 71

Clark Manufactured Housing Company charges $500 for deliveries within 50 miles and $800 for deliveries 51 to 100 miles away from their factory.The company is using a ____________ pricing tactic.

A) uniformed delivered
B) zone
C) cumulative
D) horizontal
E) noncumulative

Question 72

The saying "leaving money on the table" is associated with

A) the use of odd pricing to force consumers to use their coins in making purchases.
B) loss leader pricing.
C) a predatory pricing strategy that results in excessive seasonal discounts.
D) using a market penetration strategy when there is an opportunity for price skimming.
E) vertical price fixing in markets where horizontal price fixing would be more appropriate.

Question 73

Which of the following is NOT a common business-to-business pricing tactic?

A) seasonal discounts
B) slotting allowances
C) quantity discounts
D) loss leader pricing
E) advertising allowances

Question 74

Marlie designs and manufactures specialty furniture.She has a number of unique products but can only produce in limited quantities.Marlie will probably NOT use a market penetration strategy because

A) there are few barriers to competitive entry in the market.
B) she could not meet a rapid rise in demand.
C) a low price would indicate low quality.
D) she would have to determine zone pricing discounts.
E) the experience curve effect would drop unit costs too rapidly.

Question 75

The advantage of zone pricing to the seller is the shipping charges typically

A) are not marked down during the off season.
B) complement the advertising allowances.
C) reflect more closely the cost of delivery.
D) result in a cumulative quantity discount.
E) are the same for all shipments,making it easy to calculate total price.

Question 76

Manufacturers use cash discounts primarily because they benefit from

A) uniformed delivered pricing.
B) seasonal slotting allowances.
C) price skimming.
D) the time value of money.
E) high / low pricing.

Question 77

A pricing tactic is

A) a long-term and broad-based approach to pricing.
B) an integrative pricing approach based on the 5 Cs.
C) an approach that can be used only with consumers.
D) a short-term approach that often is a response to a competitive threat.
E) an approach that can only be used in a business-to-business setting.

Question 78

Yurgen is opening a financial consulting service for high-income retirees in his area.This target market is used to paying for quality and associates high quality with high prices.Yurgen should probably NOT use a market penetration pricing strategy because

A) he might be missing out on customers who would pay more for his products.
B) there are moderate barriers to competitive entry in the market.
C) a low price might signal low quality.
D) he would have to determine zone pricing discounts.
E) the experience curve effect would drop unit costs too rapidly.

Question 79

A pricing strategy is

A) a long-term approach to setting prices in a companywide integrated effort.
B) the use of one-time seasonal discounts to reduce inventory.
C) the use of slotting allowances to gain access to distribution channels.
D) a short-term approach to setting prices.
E) associated with competitive threats in the marketplace.

Question 80

A noncumulative B2B quantity discount is

A) used to encourage consumers to purchase larger quantities each time they buy.
B) based only on the amount purchased in a single order.
C) considered illegal under the Robinson-Patman Act.
D) used primarily to attract new retail customers.
E) only offered to one-time purchasers.