Deck 8: Setting a Price for the Service Rendered

Question 1

A price elastic service is one whose demand is not significantly affected by price changes.

Answer 1

False

Question 2

The inherent tradeoff between price and demand makes yield management an easy strategy for services marketers to use.

Answer 2

False

Question 3

A price floor is the minimum price that covers all costs of producing the service.

Answer 3

True

Question 4

For some types of services,such as restaurants and hospitals,the fixed cost of providing a service is likely to be fairly constant regardless of the number of customers.

Question 5

A competition-based pricing approach is used when a service establishes its price in relation to its competitors.

Question 6

The direct costs of a service are shared by several services and are not directly linked to each unit of sale.

Question 7

The objective of yield management systems is to optimize profits from the service's operating assets (labor,equipment,and facilities).

Question 8

Service organizations can easily determine the value of their service offerings.

Question 9

The variable cost of providing a service refers to the cost of serving one additional customer.

Question 10

Value is an assessment of the benefits of a service versus the costs associated with it.

Question 11

A volume-oriented pricing objective stresses high returns on the service's investments in labor and resources.

Question 12

An operations perspective on pricing is sometimes referred to as a cost-based approach.

Question 13

The difference between the price charged to the service customer and the variable costs attributable to each unit of sales is called net profit.

Question 14

A profit-oriented pricing objective stresses processing large number of customers or their possessions.

Question 15

The value of a service is reflected in the price/demand elasticity of the product.

Question 16

Indirect costs are sometimes called shared costs.

Question 17

A revenue perspective on pricing is sometimes referred to as a customer-based approach.

Question 18

Yield management is a relatively easy process for service marketers.

Question 19

A price ceiling establishes a price in relation to competition.

Question 20

A service organization's pricing strategy is not related to its overall marketing strategy.

Question 21

The breakeven point is calculated by dividing the sum of

A)the total fixed costs and shared costs by the difference between the price and the unit variable cost.
B)the total variable costs and shared costs by the difference between the price and the unit fixed cost.
C)the total fixed costs and variable costs by the difference between the price and the unit shared cost.
D)the total shared costs by the difference between the price and the sum of the total fixed costs.
E)the total fixed costs and shared costs by the difference between the price and the sum of the total variable costs.

Question 22

Indirect costs of a service

A)are associated with each unit of sale.
B)are shared by other services.
C)cannot be directly linked to each unit of sale.
D)Both A and B are correct.
E)Both B and C are correct.

Question 23

A breakeven analysis is used to determine the number of units that need to be sold to cover costs.

Question 24

COMPLETION QUESTIONS
Yield Management Systems
Profit-Oriented
Volume-Oriented
Value
Price/Demand Elasticity
Fixed
Variable
Contribution Margin
Breakeven Point
Price Bundling
Pure Price Bundling
The perceived value of a service is reflected in the __________ for the offering.

Question 25

The ________ characteristic of services makes it difficult for customers to know what a reasonable price should be for a service.

A)intangibility
B)perishability
C)simultaneity of production and consumption
D)Both intangibility and perishability are correct.
E)All of these are correct.

Question 26

Price is a vehicle for

A)building relationships between services and their customers.
B)conveying quality of the service.
C)contributing to the long-term profitability of the service organization.
D)All of these.
E)None of these.

Question 27

The difference between the price charged to the service customer and the total (variable + allocated fixed)costs attributed to the service is called

A)contribution margin.
B)net profit.
C)the breakeven point.
D)revenue.
E)None of these.

Question 28

_______________ approach to pricing focuses attention on the ____________.

A)operations-oriented,price ceiling
B)competition-oriented,price floor
C)revenue-oriented,competition
D)operations-oriented,competition
E)revenue-oriented,price ceiling

Question 29

Service providers that use a yield management strategy

A)attempt to increase the number of people using the service while charging the maximum price possible.
B)attempt to control the costs of producing and delivering the service.
C)recognize that it is a difficult strategy to implement because of the inherent tradeoff between demand and price.
D)All of these are true.
E)None of these is true.

Question 30

COMPLETION QUESTIONS
Yield Management Systems
Profit-Oriented
Volume-Oriented
Value
Price/Demand Elasticity
Fixed
Variable
Contribution Margin
Breakeven Point
Price Bundling
Pure Price Bundling
___________________ are used to set prices that generate or shift demand to create greater efficiency and profitability.

Question 31

COMPLETION QUESTIONS
Yield Management Systems
Profit-Oriented
Volume-Oriented
Value
Price/Demand Elasticity
Fixed
Variable
Contribution Margin
Breakeven Point
Price Bundling
Pure Price Bundling
____________ pricing objectives stress generating high returns on the service's investments in resources and labor.

Question 32

Short-term profitability and maximization of revenues from assets should always be the driving force behind services' pricing decisions.

Question 33

Which of the following is NOT a type of price?

A)Commission paid to a stockbroker
B)Membership fee
C)Finance charge
D)All of these are types of prices.
E)None of these are types of prices.

Question 34

Price bundling allows service providers to meet wider ranges of their customers' needs.

Question 35

COMPLETION QUESTIONS
Yield Management Systems
Profit-Oriented
Volume-Oriented
Value
Price/Demand Elasticity
Fixed
Variable
Contribution Margin
Breakeven Point
Price Bundling
Pure Price Bundling
_________ is an assessment of the benefits of a service less the costs associated with it.

Question 36

The net profit per unit is the difference between the price charged to service customer and the total cost per unit.

Question 37

COMPLETION QUESTIONS
Yield Management Systems
Profit-Oriented
Volume-Oriented
Value
Price/Demand Elasticity
Fixed
Variable
Contribution Margin
Breakeven Point
Price Bundling
Pure Price Bundling
____________ pricing objectives stress processing large numbers of customers or their possessions.

Question 38

Price inelastic services tend to be

A)discretionary services.
B)necessities.
C)Both A and B are correct.
D)Neither A nor B are correct.
E)There is not enough information to answer the question.

Question 39

The variable costs of producing a service are much smaller proportionately to the total costs of the offering than is typical of packaged goods.

Question 40

COMPLETION QUESTIONS
Yield Management Systems
Profit-Oriented
Volume-Oriented
Value
Price/Demand Elasticity
Fixed
Variable
Contribution Margin
Breakeven Point
Price Bundling
Pure Price Bundling
__________ costs do not change regardless of the number of customers.

Question 41

Describe the relationship between the service price and value.

Question 42

COMPLETION QUESTIONS
Yield Management Systems
Profit-Oriented
Volume-Oriented
Value
Price/Demand Elasticity
Fixed
Variable
Contribution Margin
Breakeven Point
Price Bundling
Pure Price Bundling
_________ indicates that only the specified bundle of offerings is available to the customer.

Question 43

Describe the different types of costs that a service must consider when pricing its products.

Question 44

Describe the relationship between pricing objectives and pricing strategies.

Question 45

Your manager recently overheard a conversation regarding price bundling and wanted to know more about it.He asked you to find out what is meant by price bundling and why services would want to use it.What would you report to your manager?

Question 46

Describe the relationship between a contribution margin and net profit.

Question 47

You and a friend were comparing prices for the same service and noticed that wide price discrepancies existed.Explain why these wide price variations may exist for the same service.

Question 48

COMPLETION QUESTIONS
Yield Management Systems
Profit-Oriented
Volume-Oriented
Value
Price/Demand Elasticity
Fixed
Variable
Contribution Margin
Breakeven Point
Price Bundling
Pure Price Bundling
_________ refers to linking several service offerings or features under one attractive price so that customers from different segments can be given a packaged service offering that includes service features that may not have been desirable when priced individually.

Question 49

COMPLETION QUESTIONS
Yield Management Systems
Profit-Oriented
Volume-Oriented
Value
Price/Demand Elasticity
Fixed
Variable
Contribution Margin
Breakeven Point
Price Bundling
Pure Price Bundling
A service's _____________ is the number of units of a service that need to be sold or the number of customers that need to be served to cover costs.

Question 50

Why is it important for service organizations to conduct breakeven analyses for their products?

Question 51

Why is the pricing of services often confusing for both the service organizations and their customers?

Question 52

COMPLETION QUESTIONS
Yield Management Systems
Profit-Oriented
Volume-Oriented
Value
Price/Demand Elasticity
Fixed
Variable
Contribution Margin
Breakeven Point
Price Bundling
Pure Price Bundling
The difference between the price charged to the service customer and the ___________ costs attributable to each unit of sale is the ____________.

Question 53

What is meant by yield management systems,and when is a service likely to use such a system?

Question 54

What is meant by the 3 Cs of Pricing?