Deck 14: Managing Pricing Decisions

Question 1

In 1975, the Federal Consumer Goods Pricing Act repealed all state fair trade laws and minimum markup laws.

Answer 1

True

Question 2

Marketers should over promise benefits instead of communicating and delivering a realistic level of benefits for a price.

Answer 2

False

Question 3

Regardless of whether the setting is B2C or B2B, the vast majority of costs are associated with the purchase price.

Answer 3

True

Question 4

In price lining, the escalation of product prices up the product line no longer have to consider factors such as real cost differences among the various features offered, customer assessments of the value added by the increasing level of benefits, and prices competitors are charging for similar products.

Question 5

Since a product's price tends to be so visible and definitive, customers rarely have trouble moving past price to consider other critical benefits the product affords.

Question 6

To set an exact price for an offering, be it a good or service, marketing managers can consider few calculations to arrive at the optimal price.

Question 7

Pricing decisions can be made by the accounting department and do not need to consider the whole of the firm's offering.

Question 8

A variable pricing strategy makes planning and forecasting infinitely easier than the alternative approach, one-price.

Question 9

Firms frequently rely on combinations of pricing tactics in the marketplace rather than putting all their eggs in one basket.

Question 10

Firms use various elements of promotion to build sales of new products, shore up sales of declining products, or combat competitors' promotional activity in the same marketplace.

Question 11

Captive pricing is not common in the service sector.

Question 12

Odd pricing can backfire if misapplied, specifically to service industries.

Question 13

Customers always find it more agreeable when a firm raises a price than when it reduces a price.

Question 14

A competitor's price is one of the most visible elements of its marketing strategy, and you can often infer the pricing objective by carefully analyzing historical and current pricing patterns.

Question 15

When formulating a response to a competitor's price reduction, remember to consider your offering from the perspective of its overall value proposition to customers.

Question 16

With prestige pricing, some of the traditional price/demand curves cannot properly predict sales or market response because it violates the common assumption that increasing price decreases volume.

Question 17

It is not important for marketing managers to conduct appropriate market research in advance of major price changes.Managers do not need to try to determine the likely impact of a price change on customer perceptions of the offering and likelihood to purchase.

Question 18

Effectively communicating a product's differential advantages is at the heart of positioning strategy, and exposure to these elements spurs the customer to develop perceptions of value and a subsequent understanding of the value proposition.

Question 19

Among the marketing mix variables, price is the easiest and quickest to alter, so sometimes firms over rely on price changes to stimulate additional sales or gain market share.

Question 20

Firms and brands that continually attempt to operate in the high-price/low-benefits environment do not survive over the long run as customer trust is damaged.

Question 21

__________________ is (are)considered by the customer when making a purchasing decision.

A) Time invested in the purchasing process
B) Costs incurred by the customer in acquiring that bundle of benefits
C) Opportunity costs of choosing one offering over another
D) A & C
E) A, B & C

Question 22

When a company purposefully makes pricing decisions to undercut one or more competitors and gain sales and net market share they are demonstrating a ___________________.

A) Cost plus pricing
B) Price war
C) Markup on sales price
D) Average-cost pricing
E) Target return pricing

Question 23

Mark runs a driving range in New York City.He has noticed that within a 15-minute walk you can get to three competitors.Mark decides to look at his competitors pricing and then determine his best pricing strategy based on all of the information.Mark is utilizing ___________________.

A) Penetration pricing
B) Price skimming
C) Target ROI
D) Competitor based pricing
E) Value pricing

Question 24

A strategy of _______________ addresses the objective of entering a market at a relatively high price point.

A) Penetration pricing
B) Price skimming
C) Target ROI
D) Competitor based pricing
E) Value pricing

Question 25

Pricing objectives very frequently are designed for profit maximization, which necessitates a ________________________ pricing strategy.

A) Penetration pricing
B) Price skimming
C) Target ROI
D) Competitor based pricing
E) Value pricing

Question 26

Amelie is the marketing manager at a café in Charleston, South Carolina.The chef/owner is about to introduce a new dish and Amelie is planning on pricing the dish low to begin, but slowly raising the price over time.Amelie is utilizing _______________.

A) Penetration pricing
B) Price skimming
C) Target ROI
D) Competitor based pricing
E) Value pricing

Question 27

Jean Claude has just completed a new line of designer handbags.He wants the price to communicate to the customer that the handbags are high quality, so he sets it high.He knows that after this season, the price will lower.Jean Claude is using _______________.

A) Penetration pricing
B) Price skimming
C) Target ROI
D) Competitor based pricing
E) Value pricing

Question 28

When a firm's objective is to gain as much market share as possible, a likely pricing strategy is _________________, sometimes also referred to as pricing for maximum marketing share.

A) Penetration pricing
B) Price skimming
C) Target ROI
D) Competitor based pricing
E) Value pricing

Question 29

_______________________ could lead the marketing manager to decide to price at some market average price, or perhaps above or below it in the context of penetration or skimming objectives.

A) Penetration pricing
B) Price skimming
C) Target ROI
D) Competitor based pricing
E) Value pricing

Question 30

Michael Porter has consistently advocated that firms that are able to compete based on some extraordinary efficiency in one or more internal processes bring to the market a competitive advantage based on _________________.

A) Price perception
B) Cost leadership
C) Value ratio
D) Service
E) Quality

Question 31

Gaining a thorough understanding of competitors' marketing practices is a key element of successful marketing planning and execution; utilizing that information to determine your pricing is an example of ___________________.

A) Penetration pricing
B) Price skimming
C) Target ROI
D) Competitor based pricing
E) Value pricing

Question 32

Be careful with a __________________ strategy.Because price is a cue for developing customer perceptions of product quality, the value proposition may be reduced if a low price belies the product's actual quality attributes.

A) Penetration pricing
B) Price skimming
C) Target ROI
D) Competitor based pricing
E) Value pricing

Question 33

The measure of customers' price sensitivity estimated by dividing relative changes in quantity sold by relative changes in price-becomes central to whether a product can even be viably introduced within the context of a firm's financial objectives

A) Price elasticity of demand
B) Stability pricing
C) Pricing tactics
D) Auction pricing
E) Reverse auction

Question 34

When using _______________ a bottom line profit is established first and then pricing is set to achieve the target.

A) Penetration pricing
B) Price skimming
C) Target ROI
D) Competitor based pricing
E) Value pricing

Question 35

In proposing _______________, the marketing manager usually is convinced that a strong price-quality relationship exists for the product.

A) Penetration pricing
B) Price skimming
C) Target ROI
D) Competitor based pricing
E) Value pricing

Question 36

A company's core cost advantages translate directly to an edge over its competitors based on much more flexibility in its __________________ as well as its ability to translate some of the cost savings to the bottom line.

A) Pricing strategies
B) Cost leadership
C) Value ratio
D) Service
E) Quality

Question 37

Juan is researching new cars.He would like to buy a car that is both good quality and a good price.After much consideration, Juan purchases a car from a manufacturer where the initial price paid is high, but the cars are known to have much lower maintenance costs.The pricing strategy employed by the dealership where Juan bought his car is _____________________.

A) Penetration pricing
B) Price skimming
C) Target ROI
D) Competitor based pricing
E) Value pricing

Question 38

________________ is the percentage of total category sales accounted for by a firm.

A) Market share
B) Value Ratio
C) Cost
D) a & c
E) a, b & c

Question 39

__________________ overtly attempts to consider the role of price as it reflects the bundle of benefits sought by the customer.

A) Penetration pricing
B) Price skimming
C) Target ROI
D) Competitor based pricing
E) Value pricing

Question 40

______________ is a critical component that plays into a customer's assessment of the value afforded by a firm and its offerings.

A) Price
B) Cost
C) Value
D) Service
E) Quality

Question 41

As in price bundling, it can be useful for customers to have some type of comparative price when considering a product purchase.Such a comparison is referred to as ______________ and, in the case of price bundling, the _____________ is the total price of the components of the bundle if purchased separately versus the bundled price.

A) Product line pricing
B) Captive pricing
C) Price bundling
D) Reference pricing
E) Prestige pricing

Question 42

Carol Ann is trying to explain to one of her ticket counter associates the differences in price associated with concert tickets.She explains that the lowest priced tickets are in the least desirable seats and the highest priced tickets are in the most desirable seats, with the rest of the ticket prices falling somewhere in-between.Carol Ann is describing ____________________.

A) Product line pricing
B) Captive pricing
C) Price bundling
D) Reference pricing
E) Prestige pricing

Question 43

For most products, as long as the customer perceives the ratio of price and benefit to be at least at equilibrium, perceptions of __________ will likely be favorable.

A) Market share
B) Quality
C) Value
D) A & B
E) A & C

Question 44

The fundamental philosophy behind __________________ is to reduce investment in promotion and transfer part of the savings to lower price.

A) Psychological pricing
B) One price strategy
C) Variable pricing
D) Every day low pricing (EDLP)
E) High/low pricing

Question 45

Doug runs a hardware store.He puts prices on the products and scans them when they get to the register.The price that is marked is the price that will be charged, no exceptions.Doug uses ___________________.

A) Psychological pricing
B) One price strategy
C) Variable pricing
D) Every day low pricing (EDLP)
E) High/low pricing

Question 46

Bella Luna is a specialty baby furniture store.Most of the items in the store are designer, and, therefore, tend to be more expensive that other baby furniture.Recently Bella Luna started to put the manufacturer's suggested retail price next to the price they charge in order to show the savings.Bella Luna is using ___________________.

A) Product line pricing
B) Captive pricing
C) Price bundling
D) Reference pricing
E) Prestige pricing

Question 47

____________ is known for its every day low pricing strategy.

A) Wal-mart
B) J C Penney
C) Sears
D) Best Buy
E) Kmart

Question 48

With __________________, customers are allowed-even encouraged-to haggle about prices.

A) Psychological pricing
B) One price strategy
C) Variable pricing
D) Every day low pricing (EDLP)
E) High/low pricing

Question 49

Creating a perception about price merely from the image the numbers provide the customer demonstrates ___________________.

A) Psychological pricing
B) One price strategy
C) Variable pricing
D) Every day low pricing (EDLP)
E) High/low pricing

Question 50

Lauren went to Leisure Travel to book a vacation to the Bahamas.The travel agent told her about multiple all-inclusive resorts where the price of the airfare, hotel, and food are all included.The resort is using a __________________ strategy.

A) Product line pricing
B) Captive pricing
C) Price bundling
D) Reference pricing
E) Prestige pricing

Question 51

______________ is used by firms that rely on periodic heavy promotional pricing, primarily communicated through advertising and sales promotion, to build traffic and sales volume.

A) Psychological pricing
B) One price strategy
C) Variable pricing
D) Every day low pricing (EDLP)
E) High/low pricing

Question 52

Krista wants to buy a new foaming soap dispenser.Currently the store is running a special that she gets the dispenser for free when she purchases the largest refill of soap.The pricing strategy being used for the dispense and soap is _____________________.

A) Product line pricing
B) Captive pricing
C) Price bundling
D) Reference pricing
E) Prestige pricing

Question 53

When customers are given the opportunity to purchase a package deal at a reduced price compared to what the individual components of the package would cost separately, the firm is using a __________________ strategy.

A) Product line pricing
B) Captive pricing
C) Price bundling
D) Reference pricing
E) Prestige pricing

Question 54

Geoff works at an Aspen ski shop.He has just gotten a shipment of new snowboards and realizes that the company has priced its snowboards higher than the rest of the boards in Geoff's shop.Since Geoff took a marketing class in college, he knows that the company is using ______________.

A) Product line pricing
B) Captive pricing
C) Price bundling
D) Reference pricing
E) Prestige pricing

Question 55

In markets where customers typically witness rapidly changing prices, ________________ can provide a source of competitive advantage.

A) Price elasticity of demand
B) Stability pricing
C) Pricing tactics
D) Auction pricing
E) Reverse auction

Question 56

___________________ entails gaining a commitment from a customer to a basic product or system that requires continual purchase of peripherals to operate.

A) Product line pricing
B) Captive pricing
C) Price bundling
D) Reference pricing
E) Prestige pricing

Question 57

One rationale for establishing a price-skimming objective is that _______________ lends status to a product or brand by virtue of a price relatively higher than the competition.

A) Product line pricing
B) Captive pricing
C) Price bundling
D) Reference pricing
E) Prestige pricing

Question 58

__________________ affords the marketing manager an opportunity to develop a rational pricing strategy across a complete line of related items.

A) Product line pricing
B) Captive pricing
C) Price bundling
D) Reference pricing
E) Prestige pricing

Question 59

Amit, a marketing manager for a large retail chain store uses many different ________________ when establishing his overall pricing objectives and strategies.

A) Price elasticity of demand
B) Stability pricing
C) Pricing tactics
D) Auction pricing
E) Reverse auction

Question 60

Operating with _______ price/_____ benefits can be problematic.Some firms use price skimming strategies, especially on product introductions, even when all the bugs have yet to be worked out of the product.

A) High, high
B) High, low
C) Low, high
D) Low, low
E) None of the above

Question 61

Veggie Vitality will send retailers a check if they promote their vegetable-based smoothies in the retailer's promotional efforts.Veggie Vitality uses ______________.

A) Cash discounts
B) Trade discounts
C) Quantity discounts
D) Seasonal discounts
E) Promotional allowances

Question 62

As with average-cost pricing, the effectiveness of __________________ is highly dependent on the accuracy of the forecast.

A) Cost plus pricing
B) Price war
C) Markup on sales price
D) Average-cost pricing
E) Target return pricing

Question 63

_______________ are typically expressed as greatly extended invoice due dates.

A) Cash discounts
B) Trade discounts
C) Quantity discounts
D) Seasonal discounts
E) Promotional allowances

Question 64

_________________ uses the sales price as a basis of calculating the markup percentage.

A) Cost plus pricing
B) Price war
C) Markup on sales price
D) Average-cost pricing
E) Target return pricing

Question 65

__________________ means that title transfer and freight paid on the goods being shipped are based on the free on board location.

A) FOB pricing
B) Uniform delivered pricing
C) Zone pricing
D) Geographically driven pricing
E) None of the above

Question 66

To accommodate lengthy sales processes, firms offer ______________, which reward the purchaser for shifting part of the inventory storage function away from the manufacturer.

A) Cash discounts
B) Trade discounts
C) Quantity discounts
D) Seasonal discounts
E) Promotional allowances

Question 67

The Internet helped to create a market for ___________________ where sellers bid prices to capture a buyer's interest.

A) Price elasticity of demand
B) Stability pricing
C) Pricing tactics
D) Auction pricing
E) Reverse auction

Question 68

_____________ are incurred over time, regardless of volume.

A) Fixed costs
B) Variable costs
C) Total costs
D) Both A & B
E) Both B & C

Question 69

Solid Surface, a countertop store will give customers a 10% discount if they pay their bills in full in 20 days, however after 20 days they do not receive a discount.This is an example of _______________.

A) Cash discounts
B) Trade discounts
C) Quantity discounts
D) Seasonal discounts
E) Promotional allowances

Question 70

_____________ remit monies to purchasers after the fact.

A) Fixed costs
B) Variable costs
C) Total costs
D) Discounts
E) Allowances

Question 71

Giovanni's Gems is a high quality Italian leather goods store in Manhattan.Giovanni runs an Internet site where people can buy his products and he will charge the same delivery fee to any location within the 48 contiguous states.Giovanni utilizes ______________.

A) FOB pricing
B) Uniform delivered pricing
C) Zone pricing
D) Geographically driven pricing
E) None of the above

Question 72

To better take into account the differential impact of fixed and variable costs, marketing managers can use _________________.

A) Cost plus pricing
B) Price war
C) Markup on sales price
D) Average-cost pricing
E) Target return pricing

Question 73

The Internet created a rise in ___________________ as more and more people decided to meet online in order to sell products to the highest bidder.

A) Price elasticity of demand
B) Stability pricing
C) Pricing tactics
D) Auction pricing
E) Reverse auction

Question 74

Caution is warranted in employing _________________, as it is always possible that the quantity demanded will not match the marketing manager's forecast.

A) Cost plus pricing
B) Price war
C) Markup on sales price
D) Average-cost pricing
E) Target return pricing

Question 75

To use target return pricing, one must first calculate total _______________.

A) Fixed costs
B) Variable costs
C) Total costs
D) Both A & B
E) Both B & C

Question 76

James is trying to determine the best price for his new fishing poles.He decided to divide all of his costs by the number of fishing poles he will be manufacturing, to come up with a price.James is using _________________.

A) Cost plus pricing
B) Price war
C) Markup on sales price
D) Average-cost pricing
E) Target return pricing

Question 77

From a legal standpoint, it is essential that ________________ are offered to all customers on an equally proportionate basis so that small buyers as well as large buyers follow the same rules for qualification.

A) Cash discounts
B) Trade discounts
C) Quantity discounts
D) Seasonal discounts
E) Promotional allowances

Question 78

Heather runs Cute Cakes, a gourmet cupcake bakery.In order to set prices for her cupcakes Heather looks at the costs of making each cupcake and then adds an additional amount on top of that to arrive at her price.Heather is demonstrating _____________.

A) Cost plus pricing
B) Price war
C) Markup on sales price
D) Average-cost pricing
E) Target return pricing

Question 79

_____________ fluctuate with volume.

A) Fixed costs
B) Variable costs
C) Total costs
D) Both A & B
E) Both B & C

Question 80

______________ are direct, immediate reductions in price provided to purchasers.

A) Fixed costs
B) Variable costs
C) Total costs
D) Discounts
E) Allowances