Deck 11: Pricing: Understanding and Capturing Customer Value

Question 1

An executive fully reimbursed for all travel expenses is most likely to be attracted to a(n):

A) Discount rate offer for a hotel room
B) Discount rate offer for a hotel room and a restaurant offering a $9.99 dinner special
C) Discount rate offer for a hotel room and a restaurant offering a $9.99 dinner special and a free breakfast the next day
D) Upscale hotel, having a room-service breakfast, and eating lunch and dinner in a more expensive restaurant.

Answer 1

D

Question 2

A restaurant seeking to establish an exclusive clientele is likely to:

A) Deflate food and beverage prices
B) Inflate food and beverage prices
C) Keep prices similar to other restaurants in the area
D) None of the above

Answer 2

B

Question 3

When employees try to sell a higher priced alternative to a potential customer, it is called:

A) Up-selling
B) Down-stream selling
C) Cross-selling
D) Internal promotion

Answer 3

A

Question 4

A hotel trying to sell its food and beverage facilities, meeting rooms, retails, etc. to its guests, is an example of:

A) Up-selling
B) Down-stream selling
C) Cross-selling
D) Internal promotion

Question 5

In the short run, the most important pricing strategy is:

A) Survival
B) Penetration
C) Profit maximization
D) Sales maximization

Question 6

Which of the following is NOT a factor affecting price sensitivity?

A) Total expenditure effect
B) Customer satisfaction effect
C) End-benefit effect
D) Unique value effect

Question 7

For which goods could the demand slope curve upward?

A) Necessary goods
B) Prestige goods
C) Discretionary goods
D) Most goods

Question 8

Which of the following statements is TRUE?

A) Price points are rare if not non-existent in the hospitality industry.
B) Today, yield management is used by everyone.
C) Excess capacity is a good reason to cut prices.
D) Business travelers are usually more price-sensitive than pleasure travelers.

Question 9

With increased demand, or higher guest/customer traffic, the total costs are likely to ________.

A) Increase
B) Decrease
C) Stay the same
D) Remain undetermined

Question 10

Which of the following is an example of an elastic demand situation?

A) Demand rises 4% if price falls 6%
B) Demand falls 8% when price increases 5%
C) Demand rises 7% if price falls 10%
D) Demand falls 7% when price increases 9%

Question 11

A restaurant seeking to establish a heavy demand is likely to:

A) Offer high quality products for low prices
B) Offer low quality products for high prices
C) Offer high quality products for high prices
D) Offer low quality products for low prices

Question 12

Customers are more price-sensitive when the price of the product accounts for a large share of the total cost of the ________.

A) Flight ticket
B) Perceived benefit
C) End benefit
D) Monthly budget

Question 13

In the first few months upon opening a new hotel, a hotel company wanting to achieve market share leadership is most likely to:

A) Try to influence supply
B) Try to influence demand by offering buy three nights, get fourth free, packages
C) Use low opening rates to influence demand
D) Charge a high price

Question 14

Hotels often use this strategy when the economy slumps:

A) Price gouging
B) Survival
C) Price hike
D) Price maintenance

Question 15

The factor that sets the floor for a product's price is:

A) Elasticity
B) Quality
C) Availability
D) Cost

Question 16

When families go to the same resort year after year, and get to know and like both the resort employees and friends in the nearby town, they may be less sensitive to price increases at the resort due to the:

A) Sunk investment effect
B) Price quality effect
C) External environment effect
D) Substitute awareness effect

Question 17

Costs that do NOT vary with production levels are called:

A) Non-operating cost
B) Variable cost
C) Fixed cost
D) Permanent cost

Question 18

If a server in a restaurant convinces a patron to buy a t-shirt at the front counter, they are:

A) Upselling
B) Cross-selling
C) Split-selling
D) Overselling

Question 19

Charging $0.99 instead of $1.00, or using 3s in the price instead of 7s, is an attempt to engage in:

A) Competition-based pricing
B) Psychological pricing
C) Yield management
D) Price discrimination

Question 20

The basic break-even price is:

A) Variable costs divided by selling price
B) Fixed costs divided by selling price
C) Fixed costs divided by contribution
D) Contribution divided by variable costs

Question 21

During periods of weak demand, very few competitors escape the effect of a ________ market.

A) Weak
B) Strong
C) Volatile
D) Spiraling

Question 22

Value-pricing is a very safe way to price.

Question 23

Value-based pricing is based on the seller's perception of value.

Question 24

The restaurant industry has adopted a rule of thumb that says the highest-priced entree on a menu should cost no more than 2.5 times the lowest-priced entree.

Question 25

Going-rate pricing is an example of competition-based pricing.

Question 26

Pricing based on segmentation of the market and pricing differences based on price elasticity characteristics of these segments, is called:

A) Elasticity pricing
B) Inelastic pricing
C) Market segmentation
D) Discriminatory pricing

Question 27

The establishment of price based largely on those of competitors, is called:

A) Cost based pricing
B) Value based pricing
C) Going-rate pricing
D) Break-even pricing

Question 28

Fixed costs are the same as overhead.

Question 29

How important is price among the elements of the marketing mix?

Question 30

What can a business learn from a demand curve for their product?

Question 31

What do we know about a product when we understand its price elasticity? What determines the price elasticity of demand?

Question 32

Upselling is part of effective revenue management.

Question 33

One major benefit to yield management is that it is removed from any ethical problems.

Question 34

The more someone spends on a product, the more ________ he or she is to the product's price.

A) Sensitive
B) Insensitive
C) Neither sensitive nor insensitive
D) Comfortable

Question 35

Identify and define the internal factors affecting a firm's pricing decisions.

Question 36

The strategy of setting a high price when the market is price-insensitive, is called:

A) Market-penetration pricing
B) Market skimming pricing
C) Target profit pricing
D) Going-rate pricing

Question 37

Which costs come together to make up a product's total cost?

Question 38

Target profit pricing refers to the profit a company can make from a particular target market.

Question 39

When pricing, creative judgment can be as important as technical expertise.

Question 40

Product-bundling involves combining several products into a package with a reduced price.