Deck 9: Pricing

Question 1

A breakeven can be computed in terms of number of units sold or monetary values.

Answer 1

True

Question 2

Scanner data is only useful for firms that want to do experiments.

Answer 2

False

Question 3

Pricing is as important as any of the other Ps in terms of sending a signal to customers, competitors, and collaborators regarding the positioning and image of the brand.

Answer 3

True

Question 4

Some marketers define a good brand by whether or not the customer is price insensitive and determined to buy the brand, regardless of cost.

Question 5

The highest possible price is set by figuring out just how much a customer is willing to pay, and pricing near that mark.

Question 6

Goods are tricky because they are disproportionately high in variable costs.

Question 7

Grocery stores track customer behavior using scanner data, which is the only research tool used today to assess
customers' willingness to pay.

Question 8

Company ABC's management team needs to determine how many units must be sold before they cover their
costs. They should conduct a breakeven analysis.

Question 9

Breakeven is represented by: BE = [(price - variable costs) x demand] - (fixed costs).

Question 10

In conjoint analysis, customers are directly asked about price.

Question 11

Demand goes up as a function of a customer's desire.

Question 12

Pricing tends to stay the same over the course of product's life cycle.

Question 13

Breakeven is represented by: BE = (fixed costs) / [(price - variable costs)]

Question 14

The trick for marketers is to discover that upper bound and price just below it.

Question 15

If {profit = revenue - expense} and {revenue = price x (quantity sold)}, then to maximize profits we need to find
a price where any further increase in price would lead to a large falloff in demand.

Question 16

Executives at Company XYZ are considering some changes to the firm's best selling product. Modifications to the product are easier than changing other marketing mix variables.

Question 17

If E >1, like in the left plot, demand is said to be inelastic.

Question 18

Elasticity is always computed to be negative.

Question 19

Profits decrease as fixed or variable costs decrease.

Question 20

Randy and Debbie are in charge of training new marketing department employees at Company ABC. In a training session, Debbie comments that price serves as a mechanism to obtain value back from customers. Debbie is correct in her assessment.

Question 21

Quantity discounts occur when "the more you buy, the more you save."

Question 22

When we evaluate a product's price to determine whether we think the price being charged is "fair," we compare
the price to some referent, either an externally available price, or an internally (mentally) stored price.

Question 23

Depending on whether customers experience a price or time shift, it may be unimportant for a company to manage perceptions of price fairness.

Question 24

Marketers frequently use game theory to try to estimate likely results of various actions, most frequently price cuts and competitive response.

Question 25

The processing of alternative currencies by consumers, such as loyalty program points, is a recent phenomenon gaining the attention of marketers.

Question 26

Price drops attract loyal customers.

Question 27

When a brand has one foot in the ground, prices often tumble as the firm wants to dump inventory.

Question 28

Temporary price cuts and coupons are reliable in generating a modest short-term up-tick in sales.

Question 29

From the company's perspective, price promotions are intended to increase sales.

Question 30

Both parties acting selfishly on their own accord always yields better results than mutual cooperation.

Question 31

Some prices are set using a "two­part tariff," meaning that a customer pays some amount for one part of the
service and another part of the service is free of charge.

Question 32

Study after study has demonstrated that there is a correlation between price and quality for most product categories.

Question 33

Higher prices set lower expectations.

Question 34

Companies are allowed to charge different prices to different people for the same goods or services.

Question 35

Consumers process absolute numbers and relative numbers differently.

Question 36

Pricing for market penetration and skimming are contrasting strategies.

Question 37

In most markets, there is almost always a "price sensitive" segment, and another that seeks "quality."

Question 38

Coupons are especially effective at encouraging new (current) customers to try current (new) products and brand extensions.

Question 39

With dynamic pricing, the buyer sets the price at an auction.

Question 40

For some products and services, higher prices can make a purchase seem more appealing to customers.

Question 41

What is the marketing manager's favorite tool to study pricing?

A) conjoint
B) surveys
C) scanner data
D) meta-analysis

Question 42

Which of the following is the formula for cost-plus pricing?

A) (unit cost) / (1-X%)
B) (unit cost) x (1-X%)
C) (unit cost) + (1-X%)
D) (unit cost) - (1-X%)

Question 43

Customers are more price sensitive if all of the following apply EXCEPT:

A) they don't care much about the purchase
B) they don't care much about the purchase category
C) they don't care much about the product
D) they don't care much about the brand

Question 44

National Product Company is indecisive about what prices it should charge for items in its new product line. The company wants the most accurate data on customers' willingness­to­pay for its products. By using , which can yield very precise estimates of demand and price sensitivities at numerous price points, National Product Company can gather the data it needs to set prices.

A) survey data
B) conjoint analysis
C) online data
D) scanner data

Question 45

When we draw a graph of price and demand, elasticity is defined by which of the following?

A) the y-intercept of the line
B) the x-intercept of the line
C) the number of points we plot to create the line
D) the slope of the line

Question 46

A survey asks the following two questions: Q1) $25.00 definitely would not buy 1 2 3 4 5 6 7 definitely would buy
Q2) $35.00 definitely would not buy 1 2 3 4 5 6 7 definitely would buy
There is a segment of people who are not really interested in the product regardless of the price. What are their answers most likely to be?

A) Q1=2 or 3, and Q2=1 or 2
B) Q1=6 or 7, and Q2=5 or 6
C) Q1=4 or 5, and Q2=3 or 4
D) Q1=1 or 2, and Q2= 2 or 3

Question 47

(Price - variable costs) is also called .

A) profit
B) contribution per unit to fixed costs
C) maximum sales volume
D) fixed price units per contribution

Question 48

If a change in price barely effects demand, that means the demand is .

A) supplied
B) inelastic
C) unstable
D) relative

Question 49

Which of the following is NOT one of the three ways for companies to set prices?

A) medium prices
B) high prices
C) low prices
D) discretionary prices

Question 50

What does it mean for demand to be "unitary?"

A) prices go up or down but revenues remain about the same
B) prices remain the same but revenue goes up and down
C) prices and revenue change unpredictably
D) there is never a change in price or revenue

Question 51

All of the following are indicators of scanner data EXCEPT:

A) which brands are bought
B) the quantities bought
C) product advertising
D) the paid price

Question 52

Which of the following formulas defines profit?

A) (price x demand) - (fixed costs) - (variable costs x demand)
B) price - demand - (fixed costs x variable costs)
C) price + (demand - fixed costs) x variable costs
D) price x (demand - fixed costs) + variable costs

Question 53

If E = 1, demand is said to be .

A) elastic
B) inelastic
C) unitary
D) invalid

Question 54

If your fixed costs (including marketing, advertising, R&D, depreciation, etc.) are high relative to variable costs (which include labor or unit components), the strategic objective is to:

A) maximize per unit margins
B) eliminate advertising
C) maximize sales volume
D) raise the price as much as possible

Question 55

Which of the following is NOT true about the price-sensitive segment?

A) They are deal-prone.
B) They will run to competitor if we raise prices.
C) If prices get too high, they may completely drop out of the category.
D) They'll buy our brand no matter what.

Question 56

What term refers to the "wiggle room" in the supply and demand curve?

A) price insensitivity
B) elasticity
C) variance
D) error

Question 57

Lee is the product manager for a software program sold by Company ABC. In evaluating the product, Lee determines that something just isn't right with how the software program is marketed to potential customers, and he feels a change is necessary. Which of the following marketing mix variables is easiest for Lee to change?

A) promotion
B) price
C) place
D) product

Question 58

is greater when the item is a luxury good rather than a necessity, when many substitutes are available, or when the purchase is a relatively big one.

A) Price sensitivity
B) Product sensitivity
C) Place sensitivity
D) Promotion sensitivity

Question 59

Which of the following is true about competitive pricing?

A) It is set by covering costs and then adding some margin.
B) It is set by covering costs only.
C) It is set by figuring out just how much a customer is willing to pay, and pricing near that mark.
D) It is at a medium level, somewhere in between extremes, using competitors' prices as a starting point, and adjusting from there.

Question 60

If demand bounces around when prices change, it's .

A) elastic
B) stable
C) absolute
D) unreliable

Question 61

is an assessment of what the customer gets compared with what the customer gives up.

A) Market research
B) Value
C) Price
D) Auction

Question 62

If the inner/middle pricing choice between two extremes looks particularly attractive, we call this the .

A) reference
B) median
C) compromise
D) average

Question 63

The idea that price is actually negotiated between the buyer and seller refers to which of the following terms?

A) fixed pricing
B) sensitivity pricing
C) dynamic pricing
D) none of these

Question 64

Customers are shown products with various combinations of features and attributes, with price being one of them. The customers are asked, "Which combination do you prefer most?," and then, "Next most?" etc. What type of study is being done?

A) meta-analysis
B) scanner survey
C) price survey
D) conjoint analysis

Question 65

Profit maximization occurs when marginal revenue equals .

A) marginal profit
B) marginal sale
C) marginal cost
D) none of these

Question 66

BigTime Products, Inc. sets high prices for its products, and the company seeks profit margin, not volume. In which strategy is BigTime Products engaged?

A) market production
B) market skimming
C) market penetration
D) price fixing

Question 67

ABC Company has several product models within its product line. The company charges different prices, which can reflect different functionality.

A) product
B) place
C) promotion
D) aberrant

Question 68

Since we read from left to right, when we see a price, we process the number of dollars before the number of cents. This is why so many prices end in what number?

A) 0
B) 11
C) 33
D) 99

Question 69

What type of consumer is represented by the left side of this figure?

A) one who wants the brand, and is willing to pay more to get it
B) one who appreciates a good deal and will give up the brand to retain the lower price
C) one who values low price and brand name both highly
D) one who does not care about brand name or price

Question 70

is the idea is that the price (on the sticker) is much higher than the referent.

A) Price fixing
B) Sticker shock
C) Predatory pricing
D) Price discrimination

Question 71

What are temporary price cuts or the issuance of coupons referred to as?

A) price promotion
B) price sensitivity
C) price discrimination
D) price instability

Question 72

Which of the following is represented by the Greek letter Epsilon?

A) error
B) elasticity
C) excess
D) endpoint

Question 73

A price's role as a cue is so strong that prices are known to contribute to the formation of prior to a purchase.

A) beliefs
B) expectations
C) decisions
D) explanations

Question 74

Marketers frequently use to try to estimate likely results of various actions, most frequently price cuts and competitive response.

A) strategies
B) promotions
C) competition
D) game theory

Question 75

Services are said to be , which means there is no such thing as storing inventory or excess capacity.

A) perishable
B) price sensitive
C) legitimate
D) concrete

Question 76

The point of is to find a solution to price wars by getting each player to think about the broader market, rather than only optimizing their own needs.

A) conjoint analysis
B) game theory
C) elasticity
D) auctions

Question 77

The point of indifference at which you say, "If you raise the price, forget it, I won't buy; if you drop the price, okay, I will," refers to which of the following terms?

A) reservation price
B) predatory pricing
C) deceptive pricing
D) vertical price fixing

Question 78

To what does FIFO refer?

A) four in, four out
B) first in, first out
C) front it, front out
D) financially fit, financial options

Question 79

Based on this figure, if American charges $209 for a flight, and Delta charges $279, how much does Southwest charge?

A) $209
B) $279
C) $99
D) $309

Question 80

Company XYZ manufactures quality widgets, but does not invest a significant effort in marketing the company or its widgets. If Company XYZ were to develop a , one of the benefits it would realize is the ability to charge premium prices.

A) company
B) product
C) marketing strategy
D) brand