Deck 12: Retail Pricing

Question 1

How can a retailer that wants to use an EDLP strategy persuade customers away from high/low strategy competitors?

A) By slowly reducing the number of sales events
B) By using a demand-oriented method for setting retail prices
C) By using price lining
D) By refusing to accept manufacturers' coupons
E) By doing all of these

Answer 1

A

Question 2

When using the ______________ method,the retail price is determined by adding a fixed percentage to the cost of the merchandise.

A) demand-oriented
B) volume-oriented
C) supply-oriented
D) profit-oriented
E) cost-oriented

Answer 2

E

Question 3

What is value?

A) Value describes merchandise that is cheap
B) Value is the relationship between what you have and what you want
C) Value is the relationship between what you get and what you have to pay for it
D) Value is the relationship between desire and need
E) Value is buying at the lowest price and receiving the lowest quality

Answer 3

C

Question 4

The strength of the cost-oriented method of setting retail prices is:

A) it considers the needs of the consumer
B) it is consistent with the marketing concept
C) it determines profit-maximization prices
D) it is designed to achieve target levels of profit
E) it is described by all of these

Question 5

How would improved inventory management through the use of an everyday low pricing (EDLP)strategy benefit retailers?

A) It would increase the number of rain checks
B) It would increase total sales
C) It would require more frequent sales events
D) It would increase the need for more safety stock
E) It would do all of these

Question 6

How can the use of an EDLP strategy increase a retailer's profit margin?

A) Employees do not have to continually make price reductions
B) EDLP increases the large variations in demand caused by frequent sales
C) The stable prices caused by EDLP requires the use of more weekly advertising
D) Employees provide less customer service because of the sale-stimulated numbers of people
E) A more predictable demand increases the likelihood of stockouts

Question 7

Brandon's pet shop had a successful history until the national chains moved into town.Traditionally,he analyzed all products in his store when pricing,for maximum profits.Given his new situation,what would you suggest Brandon do when he prices merchandise,so that he can continue with a successful business?

A) He should use the keystone method of pricing
B) He should continue with his present method of pricing
C) He should use the demand-oriented method of pricing
D) He should consider using the competition- oriented method of pricing
E) He should use the cost-oriented method of pricing

Question 8

What benefit does a retailer experience when using a high/low strategy rather than an EDLP strategy?

A) A high price sends the consumer a message of quality that the EDLP strategy does not communicate
B) EDLP is much more difficult to maintain than high/low pricing strategy
C) High/low pricing strategies create excitement
D) The same merchandise appeals to consumers who want quality and those who wait for bargains
E) All of these are benefits

Question 9

Advantages of an EDLP approach include:

A) Reduced price wars and reduced advertising
B) Increased profits due to price discrimination
C) Improved inventory management due to a "no rain check" policy
D) Reduced rain checks due to increased number of sales events
E) All of these

Question 10

Conrad prices his sportswear using the ______________ method.When the merchandise arrives,he doubles the cost of the merchandise to obtain the original retail selling price.

A) benchmark
B) customer-oriented
C) doubling
D) keystone
E) leavening

Question 11

What is the benefit of having the Internet facilitate the use of an auction pricing mechanism like eBay?

A) Participants no longer have to be in the same place for the auction.
B) Potential buyers are able to see the products up close.
C) Sellers are able to communicate with the bidders.
D) Sellers have more information.
E) Bidders are better able to follow previous bids.

Question 12

Prices are based on what the customer would expect to be paying or be willing to pay in the ______________ method.

A) demand-oriented
B) volume-oriented
C) supply-oriented
D) profit-oriented
E) cost-oriented

Question 13

Which of the following statements is/are true?

A) Under the cost-oriented method, the retail price is determined by adding a fixed percentage to the cost of the merchandise.
B) With the demand-oriented method, prices are based on what customers expect or are willing to pay.
C) The keystone method of setting price involves doubling the cost of the merchandise to obtain the initial retail selling price.
D) All of these statements are true.
E) None of these statements are true.

Question 14

Which of the following is an advantage of the demand-oriented method of pricing?

A) it keeps the retailer in line with competitors' prices
B) it allows retailers to determine which price will provide the greatest profit
C) it opens the doors to the profit maximization process
D) it is hard to implement
E) it is the perfect method when there are many SKUs to price

Question 15

Which of the following best describes competition-oriented method of pricing?

A) Prices are double the cost of the merchandise
B) Prices are based upon adding a fixed percentage to the price of the product
C) Prices are based upon what the merchandise is worth
D) Prices are based on competitor's prices
E) Prices are based upon manufacturer's suggestions

Question 16

After years of struggling,Gigi's beach shop was a raging success.Tourism has been flourishing and Gigi's has been busy.Many days,it's all she can do to keep her head above the crowds.What type of pricing method should she utilize during this busy time?

A) Competition-oriented method
B) Demand-oriented method
C) Profit-oriented method
D) Cost-oriented method
E) A combination of competition-, demand-, and cost-oriented methods

Question 17

Which of the following is not a benefit typically ascribed to an everyday low pricing (EDLP)strategy?

A) IReduced advertising
B) Improved customer loyalty
C) Improved inventory management
D) Increased number of price wars
E) Reduced stockouts

Question 18

Examples of second-degree price discrimination include:

A) the retailer charging more if a wealthy customer wants to buy something
B) early-bird specials at a restaurant offering lower-priced meals before 6 pm
C) the retailer charging less if a price-sensitive customer comes in
D) automobile and antiques dealers haggling with customers
E) None of these are examples of second-degree price discrimination

Question 19

A retail store that offered its customers continuous stable prices,as opposed to the lowest prices available in the market is using a(n)_____________ strategy.

A) low price guarantee
B) penetration pricing
C) EDLP
D) price skimming
E) high/low pricing

Question 20

As a means of creating a differential advantage,some retailers have responded to their customers' needs by creating formats that emphasize low prices.Which of the following would fall into these formats?

A) Hudson's Bay, Sears, and Winners
B) Old Navy, Gap, and Banana Republic
C) Sportchek, La Senza, and Canadian Tire
D) Target, Walmart, and Costco
E) Radio Shack, Moores, and Tip Top Tailors

Question 21

What can a retailer do to ensure consistency between their market strategy and their price position?

A) They can collect and analyze price data from their competitors to determine if the store is maintaining their desired market position compared to their competition
B) They can consistently offer lower prices and allow the consumer to determine market share
C) They can purchase more of the merchandise to relay the lower prices onto the consumer
D) They can price for margins and create a better shopping experience
E) None of these

Question 22

The Bow Shop caters to the archery enthusiasts.It has estimated net sales of $45,300.The maintained markup used by the store is 60 percent of net sales.Reductions are estimated to be 12 percent of net sales.Calculate the store's initial markup.

A) 32.66 percent
B) 52 percent
C) 60 percent
D) 64.29 percent
E) 72 percent

Question 23

The merchandise cost for a Zenith kitchen clock is $65,and the retailer wants to use an initial markup of 67.25 percent.Calculate the initial retail price.

A) $247.21
B) $153.75
C) $57.79
D) $170.00
E) $198.47

Question 24

Give it to Me Baby is a store that features memorabilia from the 1980s.On estimated net sales of $92,500 next year,the owner of Give it to Me Baby has a gross cost of goods sold of $48,000.Their maintained markup percentage should be:

A) 42.0 percent
B) 48.11 percent
C) 53.6 percent
D) 92.71 percent
E) 21.52 percent

Question 25

The owner of a tobacco shop has estimated net sales of $75,100 for next year,with her gross cost of goods sold equalling 35 percent of net sales.Her maintained markup percentage should be:

A) 11.85 percent
B) 65 percent
C) 150 percent
D) 75 percent
E) Cannot be determined from the information given

Question 26

Left Wing is a small retailer which sells items for left-handed people.Since the store is located in a kiosk near one of the entrances to the subway system,it is often the target of shoplifters.It also experiences some merchandise damage in excess of what a store located in a more traditional setting would experience.These types of losses are called:

A) loss margins
B) amortized losses
C) reductions
D) markdowns
E) net losses

Question 27

Pablo owns a chain of toy stores in key markets across the country.He wanted to price the newest toy robots so that he could secure the most profit from its sale.He knew from the past that a sophisticated method was to conduct a pricing experiment.What is the downside to running an experiment?

A) It takes up employees' time while they are collecting the surveys.
B) The store will lose profits in stores where the robots are priced either too high or too low.
C) It will anger customers who travel long distances to go to more than one store.
D) The vendor won't like having the robots sell for different prices.
E) The additional advertising expense is exorbitant.

Question 28

A salesperson presented The Wonderland Book store,a store that carries Lewis Carroll memorabilia,an opportunity to stock limited edition Alice in Wonderland dolls at a cost of $125 each.The manager had to calculate the initial markup as a percentage of cost.Since the initial markup as a percentage of retail is 48.15 percent,what would the initial markup on the doll as a percentage of cost be?

A) 48.15 percent
B) 60.19 percent
C) 92.86 percent
D) 148.15 percent
E) 192.86 percent

Question 29

With the advent of _________,in-store price experiments are much less costly and time consuming.

A) telemarketing
B) focus groups
C) point-of-purchase displays
D) direct marketing
E) point-of-sale terminals

Question 30

The demand-oriented method for setting retail prices is not designed:

A) to be consistent with the marketing concept
B) to be easy to implement
C) to consider the wants and needs of the target market
D) to achieve target levels of profits
E) to be used to determine profit-maximization prices

Question 31

A pricing experiment:

A) is a method of determining the most profitable price for a product
B) cannot be performed if the retailer uses POS terminals
C) is a less accurate method of determining buyer response to price changes than a consumer panel
D) is useful for obtaining data for a cost-oriented pricing strategy
E) is described by all of these

Question 32

What are included in "reductions"?

A) The cost of alterations
B) The cost of goods sold
C) Shoplifting costs
D) Taxes
E) All of these

Question 33

What is the maintained markup percentage on ceiling fans if gross cost of goods sold is $80,000 and net sales equal $137,250?

A) 45.67 percent
B) 41.71 percent
C) 183 percent
D) 21.89 percent
E) Cannot be determined from the information given

Question 34

Which of the following is a way to determine the most profitable price for a product?

A) Examine a competing firm to determine the price
B) Conduct focus groups
C) Enter low into the market and increase price through the product's life cycle
D) Conduct a pricing experiment
E) Price merchandise based upon manufacturer's suggestions

Question 35

Sam was worried about not making his maintained markup when he was pricing the new line of swimwear for his beach store.What should Sam do to assure a profitable season?

A) He should open earlier in the season and close later to attract extra business
B) He should set his initial prices higher to accommodate for markdowns later in the season
C) He should buy and price merchandise using information about competitors' vendors and manufacturers
D) He should only set prices on swimwear based upon reference prices
E) All of these

Question 36

The problem with discounters using demand-oriented pricing is:

A) the lack of time available for the pricing process
B) the number of buyers who are involved in the pricing process
C) the number of sales expected by the customers
D) the number of SKUs that require pricing
E) none of these

Question 37

The competition-oriented method of setting retail prices is useful because it:

A) provides an outside check on the marketplace
B) considers consumers' wants and needs
C) does not consider individual pricing strategies for each SKU
D) is designed to achieve a target level of profits
E) is quick and simple to use

Question 38

Because of markdowns,discounts to employees and customers,and merchandise reductions,the:

A) maintained markup is always less than the gross margin
B) initial markup is always higher than the maintained margin
C) sell-through analysis is necessary to determine the appropriateness of a location site
D) value of average inventory at cost is less than its value at retail
E) initial markup is always lower than maintained markup

Question 39

The retail price of a set of four leather-bound J.K.Rowling novels is $75 and the initial markup is 51 percent.Calculate the merchandise cost.

A) $33.75
B) $25.71
C) $28.50
D) $36.75
E) $42.85

Question 40

Retailers set prices high enough so that:

A) after markdowns, the planned maintained markup will be achieved
B) merchandise looks attractive to shoppers
C) a variety of vendors cater to the retailers
D) a value is given to the merchandise because of the price
E) all of these

Question 41

A retailer can reduce price competition by:

A) collecting competitive price data on a more regular basis
B) pricing merchandise consistent with their initial strategy
C) consistently pricing lower than the market leader
D) creating private-label merchandise
E) considering a high/low strategy in setting prices

Question 42

What type of retailer is most likely to use first-degree price discrimination?

A) A candy store
B) A sub shop
C) A newspaper stand
D) A pet store
E) An antiques shop

Question 43

Why might a store that specializes in items for the kitchen markdown a line of dishtowels that depict scenes from current Disney movies?

A) The store wants to increase store traffic
B) The store does not want the merchandise to become obsolete
C) The store bought dish towels that depict movies that its target markets do not admire
D) The store is afraid the dish towels will become too shopworn to sell later
E) All of these are reasons

Question 44

Jessica runs a neighbourhood produce stand in a downtown neighbourhood.With the recent layoffs,she has become popular because she gives her day-old produce to the local charity for struggling members of her community.Obviously,she takes a loss,but what is the benefit from this act of altruism?

A) She frequently has homeless members of her community asking for personalized assistance
B) Because of the service to the community, Revenue Canada looks the other way as her write-offs surpass what is acceptable for deductions
C) It has strong public relations benefits
D) The produce doesn't become garbage, attracting vermin
E) All of these

Question 45

When making a good markdown decision,a retailer needs to:

A) partner with the vendors to coordinate deliveries and help share the financial burden of the markdowns
B) heed the opinions of the consumer groups who monitor pricing practices
C) rely exclusively on the computer software designed for optimal pricing
D) consider only the rules-based approach because it has proven its reliability
E) limit markdowns, as they hinder customer loyalty

Question 46

What is a benefit of markdowns for a department store?

A) It rids the store of obsolete merchandise.
B) It is a way to make room for new merchandise.
C) Markdowns generate cash flow to pay for new merchandise.
D) It increases customers' traffic.
E) All of these.

Question 47

__________________ is gross margin less any expense that can be directly assigned to the merchandise.

A) Contribution margin
B) Net sales
C) Gross profit
D) Break-even point
E) Revenue

Question 48

Elizabeth bought a worm farm.She plans to sell small cartons of worms for $4 each.Her fixed costs are $2,500,and her variable costs for each carton sold are $1.50.How many small cartons of worms does Elizabeth need to sell to break-even?

A) 455 cartons
B) 625 cartons
C) 1000 cartons
D) 1667 cartons
E) Cannot be determined from the information given

Question 49

Some retailers liquidate end-of-season merchandise to retailers like Winners,who in turn sell it at deep discounts.What is the benefit to the retailer who liquidates using this strategy?

A) The retailer is able to replace the merchandise with other markdowns
B) It provides space for new merchandise
C) Vendors like it because they are able to sell the merchandise to another retailer
D) Manufacturers know they should produce less of the product for replenishment
E) It lowers the reputation of the company who purchases the liquidated merchandise

Question 50

Which of the following is a viable method that a retailer can use to liquidate merchandise?

A) It can carry it over to the next season
B) It can sell it to an off-price retailer, such as Winners
C) It can mark it down
D) The retailer can give it to charity
E) It can do all of these

Question 51

What is a limitation of the rules-based approach for taking markdowns?

A) The rules-based approach is based upon gross margin
B) The approach prohibits input from the vendor
C) The approach does not follow a fixed schedule
D) Its only goal is to clear inventory
E) The approach assumes that items in a category do not exhibit the same behaviour

Question 52

Reductions in the initial retail price are called:

A) sales
B) price decreases
C) markdowns
D) merchandise effect
E) liquidation

Question 53

Elizabeth has bought a worm farm.She plans to sell cartons of worms for $4 each.Her fixed costs are $2,500,and her variable costs for each carton sold are $1.50.When Elizabeth's dollar sales reach ___________,she will have broken even.

A) $1562.50
B) $1820
C) $2500
D) $4000
E) $6668

Question 54

Which of the following is an example of a fixed cost for a bridal gown shop?

A) The services of the seamstress to fit each gown
B) The costs associated with dying the shoes to match the bridesmaids' dresses
C) The costs associated with the layaway of variously priced gowns
D) The cost of the mannequin used to display current gowns
E) The costs associated with a generous return policy

Question 55

Which of the following statements describes situations in which markdowns would be appropriate?

A) Markdowns would be appropriate on a pair of pillows that had been part of a display and were showing light wear
B) Markdowns would be an appropriate pricing strategy for winter parkas that are still in stock in March
C) Markdowns would be appropriate for licensed merchandise supporting a movie that was not as popular as predicted
D) Markdowns would be appropriate for national brand merchandise that were priced 15 percent lower in a neighbouring store
E) All of these statements

Question 56

What is one way some customers initialize first-degree price discrimination?

A) Walking out
B) Haggling
C) Shoplifting
D) Bargain basement shopping only
E) Threatening to shop elsewhere

Question 57

Which of the following statements about markdowns is true?

A) Markdowns are part of the cost of doing business
B) Markdowns are an opportunity to increase sales
C) Markdowns are initiated to induce price-sensitive customers to buy more
D) Retailers should plan for markdowns
E) All of these

Question 58

Which of the following is an example of a variable cost for a retailer of electronic equipment?

A) The display tables for mounting the computer, monitor, and printer
B) The cost of coaxial cables to connect the computers and their peripheral devices
C) The store rent charged by the mall
D) The cost of the licenses required by the local government
E) All of these

Question 59

Which of the following would be an example of a second-degree price discrimination strategy?

A) Coupons
B) Rebates
C) Price bundling
D) Multiple-unit pricing
E) All of these are examples of a second-degree price discrimination strategy.

Question 60

The selling price for the handmade sweater sold at the Village Boutique is $80.The cost of the materials and labour used to make the sweater are $28.25.The store's owner pays $500 a month in rent and has other monthly fixed costs that average $175.Calculate its percent contribution margin.

A) 15.88 percent
B) 62.33 percent
C) 42.50 percent
D) 64.68 percent
E) 75 percent

Question 61

Neal was considering the use of coupons for canned vegetables at his corner grocery.He knows coupons can encourage customers to try his store,or even help them to purchase additional items as they shop,but he is concerned about:

A) price-sensitive customers avoiding his store
B) the promotion stealing sales of canned vegetables in the future
C) decreasing visits from loyal customers
D) customers forgetting to mail in the proof-of-purchase to the manufacturers
E) variable pricing

Question 62

What was the initial reason for odd pricing?

A) It saved on distribution costs
B) It reduced losses due to employee theft of cash
C) It offered a limited number of predetermined price points making pricing easier
D) It eliminated confusion when a customer shopped in different locations
E) It was used to increase traffic flow

Question 63

Anne Marie made an effort to stop into the Irving convenience store on her way home each Friday to pick up a gallon of milk,because it was priced lower than the local Walmart.In this case,the milk is an example of Irving's use of:

A) stimulus pricing
B) leader pricing
C) follow-up pricing
D) price lining
E) none of these

Question 64

________________________ include markdowns,discounts to employees and customers,and inventory shrinkage (due to shoplifting,breakage,or loss).

Question 65

Retailers prefer rebates to coupons because:

A) consumers do not view rebates as affecting the price of a product
B) rebates are most often offered on products that are usually considered to be commodities
C) rebates work even when the dollar amount is low
D) rebates have lower handling costs than coupons
E) retailers incur no handling costs with rebates

Question 66

Charging different prices in different stores,markets or zones is called:

A) line pricing
B) locale pricing
C) price bundling
D) leader pricing
E) zone pricing

Question 67

At the supermarket today,Nelson noticed all the canned vegetables were priced at $.39,$.49,$.59,or $.69 per can.This type of pricing is:

A) odd pricing
B) unit pricing
C) price unbundling
D) mixed pricing
E) promotional pricing

Question 68

A strategy that stresses continuity of retail prices at a level somewhere between the regular nonsale price and the deep-discount sale price of the retailer's competitors is called the ___________________ strategy.

Question 69

An appliance store wants to get customers who are buying an upright freezer to trade up to the more expensive self-defrosting model.Which of the following practices can be used by the store to achieve this goal?

A) Price bundling
B) Price lining
C) Odd pricing
D) Variable pricing
E) Leader pricing

Question 70

Which of the following would be considered an example of a second-degree price discrimination strategy?

A) Variable pricing
B) Leader pricing
C) Contribution pricing
D) Break-even pricing
E) All of these are examples of a second-degree price discrimination strategy.

Question 71

Jeff wanted to increase the traffic in his convenience store.Which type of pricing strategy should Jeff consider when posting cigarette prices?

A) Variable pricing
B) Zone pricing
C) Item pricing
D) Leader pricing
E) Price lining

Question 72

__________________ are given to customers when merchandise is out of stock; they are written promises to sell customers merchandise at the sale price when the merchandise arrives.

Question 73

Which of the following is a benefit of price lining?

A) Confusion from multiple price choices is eliminated
B) The merchandising task is simplified
C) Price lining gives buyers greater flexibility
D) It can be used to get customers to "trade up" to a more expensive model
E) All of these are benefits of price lining

Question 74

___________ is the relationship of what you get to what you have to pay for it.

Question 75

A ___________ is money returned to the buyer based on a portion of the purchase price.

A) coupon
B) rebate
C) price bundle
D) multiple-unit price
E) zone price

Question 76

Search engines or ________________________ are computer programs that search for and provide a list of all Internet sites selling a product category or price of specific brands offered.

Question 77

As Jerome was leaving Ed's Electric,he noticed a bulletin board that featured small applications that he can send to the manufacturer with his receipt and receive a portion of what he spent on his digital TV back in the mail.What is this returned money called?

A) A coupon
B) A rebate
C) A price bundle
D) A multiple-unit price
E) A zone price

Question 78

___________ is the practice of offering two or more different products or services for sale at one price.

A) Conjoint pricing
B) Psychological pricing
C) Price grouping
D) Price bundling
E) Price lining

Question 79

Instead of relying on rules developed from averages,a retailer can benefit significantly from _______________________________________,a set of algorithms that monitors merchandise sales,promotions,competitors' actions,and other factors to determine the optimal (most profitable)price and timing for merchandising activities,especially markdowns.

Question 80

Target offered 2 six-packs of any Pepsi product for $5 last week,and the price for a single carton was $2.69.What pricing strategy was Target using?

A) Conjoint pricing
B) Psychological pricing
C) Multiple-unit pricing
D) Price bundling
E) Price lining