Deck 14: Developing Pricing Strategies and Programs

Question 1

Executives often complain that pricing is a big headache.Common mistakes include: price is not revised often enough to capitalize on market changes; price is set ________ of the rest of the marketing mix rather than an intrinsic element of a market-positioning strategy.

A) divergently
B) too high
C) intrinsically
D) independently
E) concurrently

Answer 1

D

Question 2

Many consumers use price as an indicator of ________.Image pricing is especially effective with ego-sensitive products such as perfumes and expensive cars.

A) status
B) quality
C) ability
D) capability
E) size

Answer 2

B

Question 3

Market-skimming prices make sense under the following conditions EXCEPT ________.

A) the high price communicates high value
B) the high initial price blocks competition from entering the market
C) the unit costs of producing a small number of units are not too high
D) the product is a "me-too" and contains no new technology or points of difference
E) a sufficient number of buyers have a high current demand

Answer 3

D

Question 4

Purchase decisions are based on how consumers perceive prices and what they consider to be the ________ price-not the marketer's stated price.

A) current actual
B) last purchased price
C) current sale price
D) referent price
E) none of the above

Question 5

If demand hardly changes with a small change in price,we say that the demand is ________.

A) equal
B) marginal
C) inelastic
D) elastic
E) none of the above

Question 6

A firm must consider many factors in setting its pricing policy.We list these as a six-step process.Which of the following is NOT one of these steps

A) Determining demand
B) Selecting the pricing objective
C) Researching reference prices in the target market
D) Selecting the final price
E) Selecting a pricing method

Question 7

A firm first decides where it wants to position its market offering.A company can pursue any of five major objectives through pricing.Which of the following is NOT one of these objectives

A) Predatory pricing
B) Survival
C) Maximum current profit
D) Maximum market share
E) Product-quality leadership

Question 8

Pricing cues such as sale signs and prices that end in 9 become more influential when ________.

A) consumer price knowledge is poor
B) items are purchased frequently
C) items have been on the market a long time
D) prices are consistent year-round
E) they are employed frequently

Question 9

Traditionally,________ has operated as the major determinant of buyer choice.

A) promotion
B) packaging
C) placement
D) distribution
E) price

Question 10

Companies pursue survival as their major objective if they are plagued with ________.

A) legal prosecution
B) weak competition
C) static consumer wants
D) shareholder activism
E) overcapacity

Question 11

The last price paid,competitors' prices,and the expected future price all serve as customer ________.

A) given prices
B) odd prices
C) reference prices
D) price-quality inferences
E) market skimmings

Question 12

To maximize market share,a firm may use _____________ pricing,which is based on the theory that as sales volume increases,unit costs will decrease.

A) market-penetration
B) market-skimming
C) value pricing
D) demand pricing
E) price bands

Question 13

________ communicates to the market the company's intended value positioning of its product or brand.

A) Packaging
B) Price
C) Place
D) Promotion
E) Product features

Question 14

Today,________ is partially reversing the fixed pricing trend.

A) volume discounting
B) big-box retailing
C) the Internet
D) high-margin niching
E) all of the above

Question 15

Consumers ________ low-cost products or items they buy infrequently.

A) prefer the lowest total cost of ownership of
B) remember prices of
C) are ambivalent to prices of
D) are more price sensitive to
E) are less price sensitive to

Question 16

The definition of ________ prices is: In considering an observed price,consumers often compare it to an internal memory reference price or an external frame of reference (such as a posted "regular retail price").

A) historical
B) reference
C) promotional
D) everyday low price
E) none of the above

Question 17

The concept of the lowest ________ means that a seller can charge a higher price if they can convince the customers that price is only a small part of the total cost of obtaining,operating,and servicing the product over its lifetime.

A) prestige pricing
B) total cost of ownership
C) convenience pricing
D) key price points
E) none of the above

Question 18

A firm must set a price for the first time when it develops a new product,when it introduces its regular product into a new distribution channel or geographical area,and when it ________.

A) needs to increase bottom-line results
B) raises prices due to cost escalation
C) rolls out an improved product
D) enters bids on new contract work
E) changes styles

Question 19

In market-penetration pricing,the company's objective is to ________,believing that higher sales volume will lead to lower unit costs and higher long-run profits.

A) block competitive launches
B) maximize their market share
C) minimize their market share
D) maximize volume
E) none of the above

Question 20

The first step in estimating demand is to understand what affects price sensitivity.Generally speaking,customers are most price sensitive to products that cost a lot or are ________.

A) priced low to begin with
B) low cost
C) bought frequently
D) bought infrequently
E) none of the above

Question 21

An increasing number of companies now base their price on the customer's ________ of their products.

A) usage
B) EDLP pricing
C) everyday value pricing
D) perceived value
E) value proposition

Question 22

Price elasticity depends on the magnitude and direction of the price change.If may differ for a price cut versus a price increase.When the price changes have little or no effect,there might exist a ________ for your product.

A) selective price
B) price indifference band
C) substitute product
D) promotional price
E) collective price

Question 23

Auction-type pricing is becoming very popular due to the Internet.The three types of auction pricing include sealed-bid auctions,descending bids auctions,and ________.

A) EDLP auctions
B) ascending bid auctions
C) high-low bid auctions
D) going-rate bidding auctions
E) value pricing auctions

Question 24

Despite its weaknesses,markup pricing remains popular for which of the following reasons

A) Sellers can determine demand much more easily than they can estimate costs.
B) By tying the price to cost, sellers make the pricing task more nuanced.
C) When all firms in the industry use markup pricing, price competition flourishes.
D) Sellers take advantage of buyers when the latter's demand becomes acute.
E) Many people feel that cost-plus pricing is fairer to both buyers and sellers.

Question 25

Value pricing is not a matter of simply setting lower prices; it is a matter of reengineering the company's operations to become a low-cost producer without sacrificing quality and lowering prices significantly to attract a large number of ________ customers.

A) expert
B) price-orientated
C) value-conscious
D) product-orientated
E) none of the above

Question 26

In ________,the retailer charges higher prices on an everyday basis but then runs frequent promotions in which prices are temporarily lowered below the EDLP level.

A) going-rate pricing
B) EDLP pricing
C) value pricing
D) high-low pricing
E) everyday low pricing

Question 27

Your competitor has reduced prices on his entire line of products.You can interpret these price cuts by assuming that your competitor is trying to gain market share,is doing poorly and wants to increase revenue quickly,or ________.

A) signals an end to price/promotion wars
B) signals that price is no longer a competitive advantage
C) wants the whole industry to reduce prices
D) wants you to reduce your prices below his
E) none of the above

Question 28

The key to perceived-value pricing is to deliver more value than your competitors and to ________ this to prospective buyers.

A) demonstrate
B) communicate
C) advertise
D) promote
E) convince

Question 29

________ sets a ceiling on the price the company can charge for its products.

A) Government regulations
B) Market forces
C) Costs
D) Demand
E) Competition

Question 30

The decline in the average cost of production with accumulated production experience is called the ________.

A) demand curve
B) cost curve
C) learning curve
D) cost target
E) indifference band

Question 31

________ is the result of a concentrated effort by designers,engineers,and purchasing agents to reduce the product's overall costs.

A) Learning curve
B) Target costing
C) Least cost producer
D) Experience curve
E) None of the above

Question 32

Today's companies try to adapt their offers and terms to different buyers.________ accounting tries to identify the real costs associated with serving each customer.It allocates indirect costs to the activities that use them and are tagged back to each customer.

A) Cost
B) Experience cost
C) Target costing
D) Direct product profitability
E) Activity-based cost

Question 33

In one type of ________,the auctioneer announces a high price for a product and then slowly decreases the price until a bidder accepts the price.

A) ascending auction
B) English auction
C) sealed-bid auction
D) going-rate auction
E) Dutch auction

Question 34

________ consist of the sum of the fixed and variable costs for any given level of production.

A) Total costs
B) Manufacturing costs
C) Delivery costs
D) Fixed costs
E) Variable costs

Question 35

A company's costs take two forms.________ are costs that do not vary with production or sales revenue.

A) Fixed costs
B) Variable costs
C) Adjusted costs
D) Attributed costs
E) Unknown costs

Question 36

________ differ greatly depending upon the level of production.

A) Fixed costs
B) Adjusted costs
C) Attributed costs
D) Unknown costs
E) Variable costs

Question 37

If demand changes considerably,we say that the demand is ________.

A) equal
B) elastic
C) inelastic
D) marginal
E) none of the above

Question 38

The most elementary pricing method is to add a standard ________ to the product's cost.

A) target margin
B) target price
C) markup
D) margin
E) target-return

Question 39

In recent years,companies have adopted ________,trying to win loyal customers by charging a fairly low price for a high-quality offering.

A) EDLP
B) high-low pricing
C) value pricing
D) everyday low pricing
E) none of the above

Question 40

The three major considerations in price setting are: costs set the floor price; ________; and customers' assessment of unique features establishes the price ceiling.

A) competitors' prices and the price of substitutes provide an orientation point
B) competitors' prices establishes a "target price" goal
C) the price of substitutes establishes a "target price"
D) the price of competitors and substitutes does not enter into the pricing considerations.
E) none of the above

Question 41

When supermarkets and department stores drop the price on well-known brands to stimulate store traffic,this is called ________.

A) EDLP
B) loss-leader pricing
C) special-event pricing
D) net pricing
E) none of the above

Question 42

Companies sometimes initiate price cuts in a drive to dominate the market through lower costs.One of the possible traps of a price-cutting strategy is ________.

A) secure target market customer
B) consistent high-quality consumer
C) dependence on a firm market
D) loyal customer market
E) shallow pockets

Question 43

Given strong consumer resistance to price hikes,marketers go to great lengths to find alternative approaches that will allow them to postpone a price increase.Which of the following is NOT one of these approaches

A) Reduce or eliminate some product features.
B) Reduce or eliminate some services, such as free delivery.
C) Shrink package sizes.
D) Demand upfront payment before shipping goods.
E) None of the above

Question 44

A major circumstance provoking price increases is ________.

A) market demand
B) profitability versus target
C) cost inflation
D) price versus competition
E) stock price versus target price

Question 45

Varying prices by time of the day,the season of the year,or the day of the week is called ________.

A) discounting
B) time pricing
C) price discrimination
D) product-form pricing
E) channel pricing

Question 46

Generally,consumers prefer ________ price increases on a regular basis to sudden,sharp increases.

A) large
B) consistent
C) small
D) reciprocal
E) trade

Question 47

Pricing methods narrow the range from which the company selects its final price.In selecting that price,the company must consider additional factors,including the impact of other marketing activities,company pricing policies,gain-and-risk-sharing pricing,and the impact of price on ________.

A) other parties
B) channels of distribution
C) channel partners
D) marketing activities
E) none of the above

Question 48

________ occurs when a company sells a product or service at two or more prices that do not reflect a proportional difference in costs.

A) Psychological pricing
B) Loss-leader pricing
C) Product-form pricing
D) Customer-segment pricing
E) Price discrimination

Question 49

In ________ pricing,the company decides how to price its products to different customers in different locations and countries.

A) specialty
B) geographical
C) offset
D) regional
E) none of the above

Question 50

The seller sells a plant,equipment,or technology to another country and agrees to accept as partial payment products manufactured with the supplied equipment in a ________.

A) buyback arrangement
B) co-optation
C) barter
D) offset
E) none of the above

Question 51

A British aircraft manufacturer sold planes to Brazil for 70% cash and the rest in coffee.This is an example of ________.

A) bartering
B) a compensation deal
C) a buyback arrangement
D) an offset
E) a price allowance

Question 52

A(n)________ is offered by a manufacturer to trade-channel members if they will perform certain functions,such as selling,storing,and record keeping.

A) functional discount
B) quantity discount
C) allowance
D) cash discount
E) none of the above

Question 53

When different customer groups are charged different prices for the same product or service,it is called ________.

A) price discrimination
B) customer-segment pricing
C) illegal
D) product-form pricing
E) channel pricing

Question 54

Some of the considerations that companies face when deciding to match a competitor's price decline include the product's importance in the company's portfolio,the competitor's intentions,and the ________.

A) reaction by the channels of distribution
B) shareholder value
C) market's price and quality sensitivity
D) ordering time frames for the product
E) ordering ease for the product

Question 55

Most companies will ________ their list price and give discounts and allowances for early payments,volume purchases,and off-season buying.

A) raise
B) increase
C) reduce
D) adjust
E) none of the above

Question 56

Companies often adjust their basic price to accommodate differences in customers,products,locations,and so forth.Examples of these differentiated prices include all of the following EXCEPT ________.

A) new-product pricing
B) customer-segment pricing
C) product-form pricing
D) channel pricing
E) none of the above

Question 57

In markets that are characterized by products that are highly homogenous,how should a firm react to a competitor's price decline

A) Reduce product performance levels.
B) Enhance services.
C) Reduce services.
D) Reduce product characteristics.
E) Augment the product.

Question 58

Companies often raise their prices by more than the inflationary cost increases as preparation for further inflation or government price controls.This practice is known as ________.

A) anticipatory pricing
B) delayed quotation pricing
C) escalator pricing
D) unbundling
E) discount pricing

Question 59

One of the traps of instituting a price decrease is when that low price buys market share in the short term.The same customers will shift to any lower-priced product that may come along.This trap is called ________.

A) low-price trap
B) market-loyalty trap
C) shallow-pockets trap
D) low-quality trap
E) fragile-market-share trap

Question 60

________ is the direct exchange of goods,with no money and no third party involved.

A) Co-optation
B) Buyback
C) Barter
D) Offset
E) Compensation

Question 61

Trying to maximize market share,a firm would be best served to use a market-skimming pricing strategy.

Question 62

The Internet is largely a one-sided tool that benefits buyers,but not sellers.

Question 63

Research on reference prices has found that "unpleasant surprises"-when perceived price is lower than the stated price-can have a greater impact on purchase likelihood than pleasant surprises.

Question 64

Consumers are "price takers" and accept prices at "face value" or as given.

Question 65

Price elasticity depends upon the magnitude and direction of the contemplated price change.

Question 66

Consumers often rank brands according to price tiers in a category.

Question 67

A price indifference band is that section of the price increase in which the consumer does not notice or does not have any effect in demand.

Question 68

Most firms have no trouble estimating the demand and cost functions for their products.

Question 69

In the case of prestige goods,the demand curve sometimes slopes upward.

Question 70

The price a firm charges for its product does not affect where it chooses to position the product in the marketplace.

Question 71

Many consumers use price as an indicator of quality and value.

Question 72

Although consumers may have fairly good knowledge of the range of prices involved,very few can accurately recall specific prices of products.

Question 73

Price is one of the two elements of the marketing mix that produce revenue.

Question 74

Nonprofit organizations have the same pricing objectives as private enterprise.

Question 75

When prices start off high and are slowly lowered over time,this is called market-skimming pricing.

Question 76

In large companies,pricing is typically set by the boss.

Question 77

Purchase decisions are based on how consumers perceive prices and what they consider the current actual price and not the marketer's stated price.

Question 78

Companies prefer customers who are less price sensitive.

Question 79

A well-designed and marketed product can command a price premium and reap big profits.

Question 80

All products have experienced heavy discounting in recent years.