Deck 11: Pricing Strategies: Additional Considerations

Question 1

Which of the following is true of market-penetration pricing?

A) It should be used when the product's quality and image support a high price.
B) It involves setting a high price for a new product to appeal to the elite in society.
C) It results in drawing in large numbers of buyers quickly, winning a large market share.
D) It is best used in conjunction with a market-skimming pricing strategy.
E) It results in the company making fewer and less profitable sales.

Answer 1

C

Question 2

A market-penetration pricing policy should LEAST likely be used for a new product when ________.

A) the market is highly price sensitive
B) production and distribution costs fall as sales volume increases
C) the product's quality and image support a high price
D) a high price helps keep out the competition
E) there are few or no competitors in the market

Answer 2

C

Question 3

Which of the following is true of optional product pricing?

A) It involves capitalizing on low value by-products.
B) It involves pricing accessory products sold with the main product
C) It is used to price a company's main product.
D) It involves setting geographically-specific prices.
E) It is used to price products that must be used with the company's main product.

Answer 3

B

Question 4

Midnight Magic, a perfume manufacturing company, plans to release a new fragrance during the holiday season at $99 per bottle. The company intends to bring the price down to $49 within six months of its release to attract buyers who couldn't afford the initial price. Which of the following pricing strategies is Midnight Magic using?

A) market-penetration pricing
B) market-skimming pricing
C) competitive pricing
D) cost-plus pricing
E) product-line pricing

Question 5

Companies set not a single price, but a pricing ________ which covers different items in its line and changes over time as products move through their life cycles.

A) by-product
B) structure
C) loop
D) cycle
E) bundle

Question 6

Whizz Corp. wishes to introduce a new hybrid car into mature markets in developed countries with the goal of gaining mass-market share quickly. Which of the following pricing strategies would help the firm meet its goal?

A) market-skimming pricing
B) market-penetration pricing
C) market-segmentation pricing
D) cost-plus pricing
E) captive-product pricing

Question 7

A market-skimming pricing strategy should NOT be used for a new product when ________.

A) the product's quality and image support its higher price
B) enough buyers want the products at that price
C) competitors are unable to enter the market
D) competitors can undercut prices easily
E) producing a smaller number of goods is feasible

Question 8

In a bid to attract more customers in a market which has several competitors, Barrymore's Bakery slashed the prices of all its products by 50%. Managers at the firm reasoned that lower prices would draw in even more customers, making up for the reduction in price several times over. Which of the following pricing strategies are they using?

A) market-skimming pricing
B) market-penetration pricing
C) captive-product pricing
D) cash discount pricing
E) by-product pricing

Question 9

Electrowhip, a company that manufacturers blenders and electric whisks, has decided to use a market-penetration pricing strategy. Which of the following, if true, proves their decision to be a wise one?

A) Electrowhip's competitors utilize social media for marketing their products.
B) Electrowhip sells products whose image and quality support high prices.
C) Electrowhip operates in a market with many competitors.
D) Electrowhip does not operate in a price sensitive market.
E) Electrowhip's products are intended to appeal to the elite in society.

Question 10

When a company sets a high price for a new product with the intention of reducing the price in the future, it is using the ________ pricing strategy.

A) market-skimming
B) cost-plus
C) market-segmentation
D) market-penetration
E) competitive

Question 11

Multiprint, a printer manufacturing firm, sells ink cartridges for each of its specific models. Only Multiprint cartridges are compatible with Multiprint printers, and no two of the firm's models share the same specifications. What type of pricing does Multiprint use?

A) product line pricing
B) optional product pricing
C) captive product pricing
D) by-product pricing
E) product bundle pricing

Question 12

Which of the following product mix pricing strategies involves pricing products that must or can only be used with the main product?

A) by-product pricing
B) product bundle pricing
C) captive product pricing
D) product line pricing
E) optional product pricing

Question 13

Companies facing the challenge of setting prices for the first time can choose between two broad strategies: market-penetration pricing and ________.

A) comparative pricing
B) competitive pricing
C) market-skimming pricing
D) market-segmentation pricing
E) cost-plus pricing

Question 14

Which of the following is true of price skimming?

A) It is effective in situations in which competitors are able to undercut prices easily.
B) It can be profitably used when the product's quality and image support its price.
C) It involves underpricing products so that companies make larger sales.
D) It is ineffective in situations in which competitors are unable to enter the market easily.
E) It leads to a situation in which the company makes more, though less profitable, sales.

Question 15

Which of the following companies uses product line pricing?

A) Photo Genie, which sells inexpensive cameras that run only on their own expensive batteries
B) Mobile Point, which launched a range of cell phone models, each priced according to its features
C) Penguin's Parlor, which offers customers a 20% discount on their birthdays and certain holidays
D) Green Thumb, which gives away free watering cans with the purchase of certain potted plants
E) Panizza, whose combo meals are priced lower than the individual components sold together

Question 16

Which of the following is true of product line pricing?

A) The price steps take cost differences between products in the line into account.
B) The pricing strategy cannot be availed of by companies in developed countries.
C) The price steps do not account for the prices of similar products from competitors.
D) The pricing strategy involves overpricing products so that they appeal to the elite.
E) The customer's perception of the value of different features is considered irrelevant.

Question 17

Which of the following product mix pricing strategies involves setting prices across an entire product range based on cost differences between the products, customer evaluations of different features, and competitors' prices?

A) by-product pricing
B) product bundle pricing
C) optional product pricing
D) captive product pricing
E) product line pricing

Question 18

Tone Zone plans to introduce four mp3 player models over the next year. These models range from basic players at $99 per unit, to more sophisticated players at $399 per unit. The more features a model has, the more expensive it is. What pricing strategy is Tone Zone using for its range of mp3 players?

A) product line pricing
B) product bundle pricing
C) captive product pricing
D) by-product pricing
E) optional product pricing

Question 19

Which of the following product mix pricing strategies involves pricing additional/accessory products sold along with the main product?

A) inclusive product pricing
B) exclusive product pricing
C) by-product pricing
D) product bundle pricing
E) optional product pricing

Question 20

Companies which set a low price for a new product in order to attract a large number of buyers and a large market share are using the ________ strategy.

A) market-skimming pricing
B) market-penetration pricing
C) cost-plus pricing
D) inclusive pricing
E) exclusive pricing

Question 21

When amusement parks charge customers for admission and later for food and beverages, they are following a ________ pricing strategy.

A) by-product
B) product line
C) two-part
D) skimming
E) penetration

Question 22

Which of the following is a price adjustment strategy?

A) product bundle pricing
B) by-product pricing
C) product line pricing
D) optional product pricing
E) discount and allowance pricing

Question 23

A seller offers a ________ to trade-channel members who perform certain functions, such as selling, storing, and record keeping.

A) functional discount
B) storage allowance
C) cash discount
D) promotional allowance
E) quantity discount

Question 24

A quantity discount is a price reduction for buyers who ________.

A) buy merchandise out of season
B) buy merchandise in bulk
C) pay their bills on time
D) buy discontinued products
E) return old items while buying new ones

Question 25

Which of the following price adjustment strategies involves reducing prices to reward customer responses such as volume purchases, paying early, or promoting the product promptly?

A) product bundle pricing
B) captive product pricing
C) product line pricing
D) dynamic pricing
E) discount and allowance pricing

Question 26

Leicestershire Renovations has a history of problems with customers who do not pay their bills on time. Leicestershire Renovations wants to improve its cash situation, reduce bad debts, and reduce credit-collection costs. Which of the following forms of pricing would most likely help the firm achieve its goal?

A) by-product pricing
B) zone pricing
C) cash discounts
D) product bundling
E) quantity discounts

Question 27

Using ________ pricing, companies are able to turn their trash into cash, allowing them to make the price of their main product more competitive.

A) product bundle
B) optional product
C) captive product
D) by-product
E) product line

Question 28

A(n) ________ refers to promotional money paid by manufacturers to retailers in return for an agreement to feature the manufacturer's products in some way.

A) allowance
B) sample
C) discount
D) tax credit
E) tax exemption

Question 29

Which of the following companies uses product bundle pricing?

A) Photo Genie, which sells inexpensive cameras that run only on their own, expensive, batteries
B) Tune Zone, which launched a range of mp3 player models, each priced according to its features
C) Penguin's Parlor, which offers customers a 20% discount on their birthdays
D) Green Thumb, which gives away free watering cans with the purchase of certain potted plants
E) Panizza, whose combo meals are priced lower than its individual components sold together

Question 30

Which of the following price adjustment strategies offers a price reduction to buyers who pay their bills promptly?

A) cash discount
B) season discount
C) quantity discount
D) trade discount
E) functional discount

Question 31

Which of the following companies uses captive product pricing?

A) Photo Genie, which sells inexpensive cameras that run only on their own expensive batteries
B) Tune Zone, which launched a range of mp3 player models, each priced according to its features
C) Penguin's Parlor, which offers customers a 20% discount on their birthdays
D) Sportsprint, which prices sports equipment according to customer evaluations
E) Burger Den, whose combo meals are priced lower than its individual components sold together

Question 32

Cellpoint uses two-part pricing for its long-distance call charges. Because this is a service, the price is broken into a fixed fee plus a(n) ________ rate.

A) fixed usage
B) variable usage
C) standard usage
D) market usage
E) optional usage

Question 33

Which of the following product mix pricing strategies involves pricing multiple products to be sold together?

A) product line pricing
B) product bundle pricing
C) optional product pricing
D) by-product pricing
E) captive product pricing

Question 34

Which of the following is true of product bundle pricing?

A) It promotes the sale of products that consumers might not otherwise buy.
B) It is used to set prices across an entire product range based on customer evaluations.
C) It forces customers to buy product parts that are only compatible with the main product.
D) It results in companies making fewer-though more profitable-sales.
E) It involves pricing the main product low and setting high markups on the supplies.

Question 35

Solar Tanning Salon prices tanning sessions at $25 per visit. It also offers seasonal passes for $175 which permit the customer to visit the salon multiple times in a year. This is an example of a(n) ________.

A) sample
B) promotional allowance
C) product bundle
D) discount
E) product line

Question 36

Which of the following product mix pricing strategies did Polaroid use when it set the general price range of its cameras low and the markup on its film high?

A) product-segmented pricing
B) by-product pricing
C) customer-segmented pricing
D) captive product pricing
E) product bundling pricing

Question 37

A(n) ________ is a straight reduction in price on purchases during a stated period of time or of larger quantities.

A) allowance
B) free sample
C) discount
D) tax credit
E) intromit

Question 38

________ allowances are price reductions given for turning in an old item when buying a new one.

A) Promotional
B) Trade-in
C) Depreciation
D) Segmented
E) Functional

Question 39

In the case of services, captive product pricing is called ________ pricing.

A) by-product
B) optional product
C) two-part
D) bundle
E) segmented

Question 40

The discount offered by Glamor Gifts to customers who bought Valentine-themed merchandise the week following Valentines Day is an example of a ________.

A) functional discount
B) seasonal discount
C) trade discount
D) cash discount
E) time-based discount

Question 41

Which term refers to prices that buyers carry in their minds and check with when they look at a given product?

A) product line prices
B) reference prices
C) location-based prices
D) product-form prices
E) time-based prices

Question 42

Shoe Trends, a company that manufactures formal shoes for men and women, offers to give its customers $10 for an old pair of shoes when they buy a new pair. In essence, they're reducing the price of the new shoes by $10. What is this type of price adjustment called?

A) functional discount
B) captive product pricing
C) seasonal discount
D) trade-in allowance
E) by-product pricing

Question 43

A supermarket places its store brand of blackberry jam priced at $5 per jar in the fruit preserves aisle, alongside the jam jars of a better known brand-whose products are priced at $8 apiece. Store managers reason that customers are more likely to choose the store brand instead of the better known brand when they realize the price difference. What price adjustment strategy is evident in the supermarket's reasoning?

A) by-product pricing
B) product bundle pricing
C) captive product pricing
D) psychological pricing
E) seasonal pricing

Question 44

Consumers are less likely to use price to judge the quality of a product when they ________.

A) have never tried the product before
B) have little knowledge of the brand
C) have experience with the product
D) are shopping for luxury items
E) cannot physically examine the product

Question 45

Which of the following is a price adjustment strategy that considers how a customer's perception of a product is influenced by its price?

A) captive product pricing
B) psychological pricing
C) by-product pricing
D) promotional pricing
E) international pricing

Question 46

________ are formed by noting current prices, remembering past prices, or assessing the buying situation.

A) Product line prices
B) Seasonal prices
C) Reference prices
D) Time-based prices
E) Product bundle prices

Question 47

When a firm varies its price by the season, it is using ________.

A) product-form pricing
B) customer-segment pricing
C) location-based pricing
D) time-based pricing
E) value-added pricing

Question 48

In return for participating in Honda advertising and sales support programs, Honda dealerships are rewarded with payments or price reductions, which are known as ________.

A) seasonal discounts
B) functional allowances
C) cash discounts
D) promotional allowances
E) trade-in allowances

Question 49

Which of the following is true of promotional pricing?

A) It leads to 'deal-prone' customers who buy products only during sales.
B) It fortifies the brand's image in the eyes of customers if relied upon extensively.
C) It simplifies shopping for customers if used simultaneously by multiple stores.
D) It makes balancing short-term sales incentives against long-term brand building unnecessary.
E) It is extremely beneficial for the brand's profitability if practiced repeatedly.

Question 50

Hearth & Home, a store which sells household products, has announced a one-week sale on its new carpet line. This is an example of ________.

A) promotional pricing
B) seasonal pricing
C) by-product pricing
D) product bundle pricing
E) time-based pricing

Question 51

________ allowances are payments or price reductions that reward dealers for participating in advertising and sales support programs.

A) Promotional
B) Trade-in
C) Segmented
D) Functional
E) Dynamic

Question 52

When theaters vary their seat prices because of audience preferences for seats in coveted rows, they use ________.

A) customer-segment pricing
B) location-based pricing
C) time-based pricing
D) product line pricing
E) captive product pricing

Question 53

Under ________, different versions of the product are priced differently but not according to differences in their costs.

A) product-form pricing
B) optional product pricing
C) captive product pricing
D) by-product pricing
E) seasonal pricing

Question 54

Trade-in allowances are most commonly used in the ________ industry.

A) real estate
B) automobile
C) dairy products
D) financial services
E) health care

Question 55

La Belle released a a cut glass bottle of perfume at $299 per item, even though its major competitor prices its signature scent at $99 per item. La Belle reasons that customers in search of luxury goods will prefer its product because they are likelier to believe that high price indicates superior quality. What price adjustment strategy is evident in its reasoning?

A) seasonal pricing
B) time-based pricing
C) captive product pricing
D) psychological pricing
E) location-based pricing

Question 56

Segmented pricing is only effective when ________.

A) the segments show similar degrees of demand
B) the cost of segmenting does not exceed the revenue obtained from the price difference
C) the segmented prices do not reflect real differences in customers' perceived value
D) the customers of different socio-economic classes are treated according to their rank
E) companies make their services and products accessible exclusively to wealthy patrons

Question 57

By definition, ________ is used when a firm sells a product or service at two or more prices, even though the difference in price is not based on differences in cost.

A) segmented pricing
B) variable pricing
C) flexible pricing
D) cost-plus pricing
E) reference pricing

Question 58

Sparkling Valley, a luxury resort, prices cottages facing the lake higher than cottages that do not, even though the cottages and services offered are identical in every other aspect. This form of pricing is called ________.

A) location-based pricing
B) time-based pricing
C) by-product pricing
D) seasonal pricing
E) captive product pricing

Question 59

What type of pricing is being used when a company temporarily prices its product below the list price or even below cost to create buying excitement and urgency?

A) segmented pricing
B) international pricing
C) reference pricing
D) promotional pricing
E) basing-point pricing

Question 60

The New Age Gallery has three admission prices for students, adults, and seniors, even though all three groups are entitled to the same services. This form of pricing is called ________.

A) psychological pricing
B) product-form pricing
C) customer-segmented pricing
D) captive product pricing
E) by-product pricing

Question 61

With which pricing strategy does the seller take responsibility for part or all of the actual freight charges in order to get the desired business?

A) FOB origin pricing
B) freight-absorption pricing
C) basing-point pricing
D) location-based pricing
E) uniform-delivered pricing

Question 62

Which of the following would most likely lead to a company initiating a price increase?

A) weakened economy
B) possession of outdated merchandise
C) excess capacity
D) overdemand
E) possession of defective merchandise

Question 63

Freight-absorption pricing is used for ________.

A) penetrating international markets
B) generating customer buzz about new products
C) holding on to increasingly competitive markets
D) generating quick profits to offset input costs
E) maintaining quality service records

Question 64

Which of the following factors would most likely lead to a company initiating a price cut?

A) overdemand
B) weakened economy
C) poor competition
D) cost inflation
E) weak price competition

Question 65

Big Mike's Health Food Store sells nutritional energy foods. The price of the products sold varies according to individual customer accounts and situations. For example, long-time customers receive discounts. This strategy is an example of ________.

A) time-based pricing
B) seasonal pricing
C) dynamic pricing
D) promotional pricing
E) penetration pricing

Question 66

Motorzone offers replacement parts for old Volkswagen Beetles. The company calculates shipping charges based on shipping parts from Boston, even though some parts actually ship from St. Louis. Motorzone most likely practices ________ pricing.

A) FOB-origin
B) uniform-delivered
C) zone
D) basing-point
E) freight-absorption

Question 67

Which of the following is an adverse effect of using promotional pricing?

A) It makes shopping stressful if used by multiple stores simultaneously.
B) It erodes the value of competing brands in the eyes of customers.
C) It gives pricing secrets away to competitors.
D) It creates "deal-immune" customers if used often.
E) It delays the company's focus on short-term strategies.

Question 68

Which of the following is true of price changes?

A) Overdemand leads to companies initiating price cuts.
B) Changes in price do not affect a brand's image.
C) Customer reaction to price changes is not as important as competitor reaction.
D) A drop in price can adversely affect how consumers view the brand.
E) Excess capacity is a factor which causes increases in price.

Question 69

Under which type of geographic pricing strategy does each customer take responsibility for the freight charges for the product from the factory to its destination?

A) zone pricing
B) basing-point pricing
C) uniform-delivered pricing
D) FOB-origin pricing
E) dynamic pricing

Question 70

If Detroit DLX charges the same price for the delivery of its product to customers located within the Great Lakes states, but a different price to customers elsewhere, the company is using ________.

A) psychological pricing
B) promotional pricing
C) reference pricing
D) zone pricing
E) uniform-delivered pricing

Question 71

Which form of geographic pricing is a company using when it charges the same rate to ship a product anywhere in the United States?

A) FOB-origin pricing
B) psychological pricing
C) zone pricing
D) uniform-delivered pricing
E) basing-point pricing

Question 72

Which of the following is true of the bottom of the pyramid?

A) It is a market segment that has been tapped into and depleted.
B) It consists of people who have easy access to luxury goods.
C) It comprises people who have easy access to the basic amenities of life.
D) It is considered a source of fresh growth opportunities.
E) It is a market segment which has insignificant purchasing power.

Question 73

Which of the following involves adjusting prices to account for the physical location of customers?

A) location-based pricing
B) geographic pricing
C) domestic pricing
D) interior pricing
E) captive pricing

Question 74

The Internet offers ________, where the price can easily be adjusted to meet changes in demand.

A) captive pricing
B) dynamic pricing
C) basing-point pricing
D) price bundling
E) cost-plus pricing

Question 75

The "bottom of the pyramid" refers to ________.

A) the world's poorest consumers
B) the middle classes of Brazil, Russia, India, and China
C) a market with little or no purchasing power
D) people with easy access to luxury goods
E) the middle class of high income countries

Question 76

Which of the following is true of FOB-origin pricing?

A) It is a strategy in which the company charges the same price plus freight to all customers.
B) It is a costly option for customers who are located near the company.
C) It charges all customers the freight cost from a base city to the customer location.
D) It is an expensive alternative for customers in distant locations.
E) It is a strategy in which the seller absorbs all or part of the freight charges.

Question 77

Low-interest financing and longer warranties are both examples of ________.

A) segmented pricing
B) promotional pricing
C) product bundling pricing
D) captive product pricing
E) product-form pricing

Question 78

Which of the following is a geographical pricing strategy?

A) basing-point pricing
B) segmented pricing
C) dynamic pricing
D) internet pricing
E) location-based pricing

Question 79

________ is a pricing strategy in which the company sets up two or more clearly identified geographic regions within which all customers pay the same total price.

A) Freight-absorption pricing
B) Zone pricing
C) Uniform-delivered pricing
D) FOB-origin pricing
E) Basing-point pricing

Question 80

In which of the following geographic pricing strategies would customers located close to the company pay the same amount as customers in distant locations?

A) uniform-delivered pricing
B) zone pricing
C) FOB-origin pricing
D) location-based pricing
E) reference pricing