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

If Profit = Revenue - Expense and Revenue = Price × 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.

Answer 2

True

Question 3

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

Answer 3

True

Question 4

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

Question 5

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

Question 6

Profits decrease as fixed or variable costs decrease.

Question 7

When ABC Gifts reduced its prices, the number of subscriptions it sold increased.This is an example of elasticity.

Question 8

Break-even is represented by: BE = [(Price - Variable costs) × Demand] - (Fixed costs).

Question 9

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 10

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 11

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

Question 12

Company ABC's management team needs to determine how many units must be sold before the company covers its costs.The company should conduct a break-even analysis.

Question 13

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

Question 14

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.

Question 15

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 16

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

Question 17

Pricing always has an element of trial and error.

Question 18

Break-even is represented by: BE = Fixed costs/(Price - Variable costs).

Question 19

Scanner data are the only research tool used today to assess customers' willingness to pay.

Question 20

In conjoint analysis, customers are directly asked about price.

Question 21

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

Question 22

Higher prices set lower expectations.

Question 23

Some prices are set using a two-part 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 24

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

Question 25

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

Question 26

Pricing for market penetration and skimming are contrasting strategies.

Question 27

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

Question 28

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

Question 29

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

Question 30

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

Question 31

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

Question 32

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

Question 33

"This brand has lost all of its popularity," Giovanna informed the management team."We've added every possible feature, but the technology is just too old to make this a viable product.We should reduce the price to empty out our inventory.Let's vote to invest more money to continue to sell the brand or reduce the price to sell all of the units remaining in inventory." The management team should vote to reduce the price.

Question 34

Jessie is just as likely to use a $15 coupon for a $29 item as she is to use a $15 coupon on a $199 product.

Question 35

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

Question 36

Price promotions have predictable negative side effects.

Question 37

Price drops attract loyal customers.

Question 38

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

Question 39

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

Question 40

A quantity discount is a type of segmentation pricing.

Question 41

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 42

__________ 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 43

(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 44

From a marketing perspective, pricing should be about the

A) profit.
B) company.
C) customer.
D) competition.

Question 45

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

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

Question 46

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 revenues go up and down.
C) Prices and revenue change unpredictably.
D) There is never a change in price or revenue.

Question 47

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 48

If demand bounces around when prices change, it is

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

Question 49

If a change in price barely affects demand, it means the demand is

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

Question 50

Which of the following pieces of information is found in scanner data?

A) the quantities bought
B) price of competing products
C) customer's willingness to pay
D) product characteristic that attracted the buyer

Question 51

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' willingness to pay 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 52

Which of the following is true about the price-sensitive segment?

A) They are deal prone.
B) They are inelastic.
C) Demand doesn't change when the price changes.
D) They'll buy our brand no matter what.

Question 53

Which of the following formulas defines profit?

A) (Price × Demand) - (Fixed costs) - (Variable costs × Demand)
B) Price - Demand - (Fixed costs × Variable costs)
C) Price + (Demand - Fixed costs) × Variable costs
D) Price × (Demand - Fixed costs) + Variable costs

Question 54

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

A) Unit cost/(1 - X%)
B) Unit cost × (1 - X%)
C) Unit cost + (1 - X%)
D) Unit cost - (1 - X%)

Question 55

A survey asks the following two questions: ​
Q1 At $25.00, I definitely would not buy 1 2 3 4 5 6 7 definitely would buy
Q2 At $35.00, I 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 56

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 57

The medium price of a product is determined by

A) the customer's willingness to pay.
B) competitors' price ± fudge factor.
C) cost + markup.
D) the product's popularity.

Question 58

If E = 1, demand is said to be

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

Question 59

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 60

Renaud is the marketing manager at EatIt Foods.Although he knows that other tools are available, like other marketing managers, Renaud's favorite tool to study pricing is

A) conjoint.
B) a survey.
C) scanner data.
D) a meta-analysis.

Question 61

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 62

The point of __________ is to get companies to think about the broader market, rather than only optimizing their own needs.This can avoid price wars.

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

Question 63

Company ABA showed its customers products with various combinations of features and attributes, with price being one of them.Its customers were asked: "Which combination do you prefer most, next most, etc.?" What type of study did Company ABA conduct?

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

Question 64

To what does FIFO refer?

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

Question 65

__________ 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 66

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 67

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 68

Ashton wants to generate interest in the new branch of his hobby stores that is opening next week.He plans to offer temporary price cuts and issue coupons.This practice is referred to as

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

Question 69

Profit maximization occurs when marginal revenue equals

A) marginal profit.
B) marginal sale.
C) marginal cost.
D) cost-plus pricing.

Question 70

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

A) error
B) elasticity
C) profit
D) cost

Question 71

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 72

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 73

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

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

Question 74

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 75

__________ is the idea 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 76

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 77

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 78

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) competitive pricing

Question 79

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 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