Deck 10: Pricing: Understanding and Capturing Customer Value

Question 1

With ________ pricing, price is set to match consumers' perceptions of product value.
variable cost
cost-plus
cost-based
value-based
everyday low

Answer 1

value-based

Question 2

In ________, price is considered along with the other marketing mix variables before the marketing program is set.
target return pricing
value-based pricing
variable costs
price elasticity
cost-based pricing

Answer 2

value-based pricing

Question 3

Rent, electricity, and executive salaries are examples of ________ costs.
fixed
variable
total
accumulated
marketing

Answer 3

fixed

Question 4

The company designs what it considers to be a good product, totals the expenses of making the product, and sets a price that adds a standard mark-up to the cost of the product.This approach to pricing is called ________ pricing.
value-based
fixed cost
cost-plus
variable
skimming

Question 5

Product costs set a(n) ________ to a product's price.
demand curve
experience curve
floor
ceiling
break-even cost

Question 6

________ are the sum of the ________ and ________ for any given level of production.
Fixed costs; variable; total costs
Fixed costs; total; variable costs
Variable costs; fixed; total costs
Total costs; fixed; variable costs
Break-even costs; fixed; total costs

Question 7

________ uses buyers' perceptions of what a product is worth, not the seller's cost, as the key to pricing.
Customer value-based pricing
Target return pricing
Variable costs
Price elasticity
Product image

Question 8

Measuring ________ can be difficult.A company might conduct surveys or experiments to test this in the different products they offer.
target returns
fixed costs
perceived value
break-even pricing
variable costs

Question 9

Costs that do not vary with production or sales level are referred to as ________ costs.
fixed
variable
target
total
unit

Question 10

When there is price competition, many companies adopt ________ rather than cutting prices to match competitors.
pricing power
value-added pricing strategies
fixed costs
price elasticity
image pricing

Question 11

Price is the only element in the marketing mix that produces ________.
revenue
variable costs
expenses
fixed costs
stability

Question 12

________ is the amount of money charged for a product or service.
Experience curve
Demand curve
Price
Wage
Salary

Question 13

Value-based pricing is the reverse process of ________ pricing.
variable cost
cost-plus
cost-based
good-value
value-added

Question 14

Consumer perceptions of the product's value set the ________ for prices.
demand curve
floor
ceiling
variable cost
image

Question 15

Underpriced products sell very well, but they produce less revenue than they would have if price were raised to the ________ level.
perceived value
value-based
variable
demand curve
price-floor

Question 16

________ involves charging a constant low price with few or no temporary price discounts.
High-low pricing
Target return pricing
Cost-plus pricing
Everyday low pricing (EDLP)
Penetration pricing

Question 17

The simplest pricing method is ________.
value-based pricing
going-rate and sealed-bid pricing
cost-plus pricing
break-even analysis
target return pricing

Question 18

Fixed costs ________ as the number of units produced increases.
decrease
increase
divide in half
remain the same
increase at a diminishing rate

Question 19

Costs that vary directly with the level of production are referred to as ________ costs.
fixed
variable
target
total
unit

Question 20

________ pricing involves setting prices based on the costs for producing, distributing, and selling the product plus a fair rate of return for the company's efforts and risks.
Value-based
Fixed cost
Cost-based
Variable
Skimming

Question 21

When companies set prices, the government and social concerns are two ________ affecting pricing decisions.
external factors
internal factors
economic conditions
demand curves
temporary influences

Question 22

________ that influence pricing decisions include the nature of the market and demand.
Internal factors
Elasticity factors
External factors
Target factors
Domestic factors

Question 23

Price setting is usually determined by ________ in small companies.
top management
marketing departments
sales departments
divisional managers
cross-functional teams

Question 24

Break-even pricing, or a variation called ________, is when the firm tries to determine the price at which it will break even or make the profit it is seeking.
competition-based pricing
target return pricing
fixed cost
value-based pricing
customer-based pricing

Question 25

Which of the following is a cost-based approach to pricing?
value-based pricing
going-rate pricing
break-even pricing
good-value pricing
A and C

Question 26

Which of the following statements about a break-even chart is true?
It is used to determine how the customer-perceived value changes with value-added pricing.
It is a tool used to calculate fixed costs.
It shows the level of earnings a company has during an accounting period.
It is a tool marketers use to examine the relationship between supply and demand.
It uses variable costs, the unit price, and fixed costs.

Question 27

Of the following, which is a poor reason for a company to set prices low?
to prevent competition from entering the market
to stabilize the market
to create excitement for a product
to prepare for an easy exit from a market
to match a competitor

Question 28

If demand hardly changes with a small change in price, we say the demand is ________.
variable
inelastic
value-based
at break-even pricing
market penetrating

Question 29

Which of the following is an external factor that affects pricing decisions?
the salaries of production management
competition
the salaries of finance management
overall pricing objectives
the company's overall marketing strategy

Question 30

With target costing, marketers will first ________ and then ________.
build the marketing mix; identify the target market
identify the target market; build the marketing mix
design the product; determine its cost
use skimming pricing; use penetrating pricing
determine a selling price; target costs to ensure that the price is met

Question 31

The relationship between the price charged and the resulting demand level can be shown as the ________.
demand curve
variable cost
target cost
break-even chart
experience curve

Question 32

Which of the following presents the strongest reason that markup pricing is generally illogical?
Sellers earn a fair return on their investment.
By tying the price to cost, sellers simplify pricing.
When all firms in the industry use this pricing method, prices tend to be similar.
This method ignores demand.
With a standard markup, consumers know when they are being overcharged.

Question 33

Under ________, the market consists of many buyers and sellers who trade over a range of prices rather than a single market price.
pure competition
monopolistic competition
oligopolistic competition
a pure monopoly
socialism

Question 34

Under ________, the market consists of many buyers and sellers trading in a uniform commodity such as wheat, copper, or financial securities.
pure competition
monopolistic competition
oligopolistic competition
a pure monopoly
anti-trust agreements

Question 35

Price setting is usually determined by ________ in large companies.
top management
divisional managers
product-line managers
purchasing departments
both B and C

Question 36

If demand changes greatly with a small change in price, we say the demand is ________.
inelastic
variable
elastic
value-based
fixed

Question 37

Under ________, the market consists of a few sellers who are highly sensitive to each other's pricing and marketing strategies.
pure competition
monopolistic competition
oligopolistic competition
a pure monopoly
capitalism

Question 38

Each of the following economic factors can have a strong impact on a firm's pricing strategy except ________.
an economic boom
the reseller's reaction to price changes
an economic recession
inflation
interest rates

Question 39

A company should set prices that will allow ________ to receive a fair profit.
resellers
producers
consumers
the elderly
competitors

Question 40

________ describes how responsive demand will be to a change in price.
Price elasticity
Break-even pricing
The break-even chart
Target costing
Supply

Question 41

Companies involved in deciding which items to include in the base price and which to offer as options are engaged in ________ pricing.
product bundle
optional-product
captive-product
by-product
skimming

Question 42

A firm is using ________ when it charges a high, premium price for a new product with the intention of reducing the price in the future.
price skimming
trial pricing
value pricing
market-penetration pricing
prestige pricing

Question 43

Which of the following conditions would be least likely to support market-penetration pricing?
The market must be highly price sensitive.
Production and distribution costs must fall as sales volume increases.
The product's quality and image must support the price.
The low price must help keep out the competition.
A low price will produce more market growth.

Question 44

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

Question 45

When amusement parks and movie theaters charge admission plus fees for food and other attractions, they are following a(n) ________ pricing strategy.
by-product
optional-product
captive-product
skimming
penetration

Question 46

By definition, this type of pricing 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.
segmented pricing
variable pricing
flexible pricing
cost-plus pricing
reference pricing

Question 47

With product bundle pricing, sellers can combine several products and offer the bundle ________.
as a working unit
at a reduced price
as a complete self-service package
as a reward to loyal customers
as segmented pricing

Question 48

A company sets not a single price, but rather a ________ that covers different items in its line that change over time as products move through their life cycles.
pricing by-product
pricing structure
pricing loop
pricing cycle
pricing bundle

Question 49

Which of the following is not a price adjustment strategy?
segmented pricing
customer value-based pricing
promotional pricing
discount and allowance pricing
dynamic pricing

Question 50

When using price steps, the seller must establish perceived ________ that support the price differences among the products in the line.
non-price competition
value differences
quantity levels
images
strategies

Question 51

Consumers usually perceive higher-priced products as ________.
not within reach of most people
having a higher quality
having high profit margins
popular brands
being in the introductory stage of the product life cycle

Question 52

Hotline Long Distance Service uses captive-product pricing for its phone call charges.Because this is a service, the price is broken into a fixed rate plus a per-call ________.
fixed rate usage
variable usage rate
standard usage rate
market usage rate
fixed fee

Question 53

When General Motors provides payments or price reductions to its new car dealers as rewards for participating in advertising and sales support programs, it is granting a(n) ________.
trade discount
functional discount
allowance
promotional allowance
trade credit

Question 54

It is most typical for producers who use captive-product pricing to set the price of the main product ________ and set ________ on the supplies necessary to use the product.
low; low markups
high; low markups
low; high markups
high; high markups
moderately; moderate markups

Question 55

________ pricing is the approach of setting a low initial price in order to attract a large number of buyers quickly and win a large market share.
Market-skimming
Market-penetration
Below-market
Value-based
Leader

Question 56

A quantity discount is a price reduction to buyers who purchase ________.
frequently
large volumes
close outs
inferior merchandise
superior merchandise

Question 57

The New Age Gallery has different admission prices for students, adults, and seniors.All three groups are entitled to the same services.This form of pricing is called ________.
time-based pricing
location pricing
customer-segment pricing
revenue management pricing
generational pricing

Question 58

When a firm varies its price by the season, month, day, or even hour, it is using ________ pricing.
revenue management
penetration
skimming
time-based
value-added

Question 59

Which of the following would likely be ineffective in supporting a market-skimming policy for a new product?
The product's quality and image must support its higher price.
Enough buyers must want the products at that price.
Competitors are not able to undercut the high price.
Competitors can enter the market easily.
The cost of producing a smaller volume is not so high that it negates the advantage of charging more per unit.

Question 60

A challenge for management in product line pricing is to decide on the price steps between the ________.
various products in a line
product mixes
product groupings
product lines
various target markets

Question 61

A company faces fixed costs of $100,000 and variable costs of $8.00/unit.They plan to directly sell their product to the market for $12.00.How many units must they produce and sell to break even?
20,000
25,000
40,000
50,000
not enough information to calculate

Question 62

When a manufacturer offers a ________, customers buy products from manufacturers' dealers within a specified time period and the manufacturer sends the customer a check.
cash rebate
special event price
dealer reduction
promotional pricing reward
discount allowance

Question 63

Price discrimination is legal under which of the following conditions?
when a manufacturer and reseller have agreed upon a specified retail price for a product
when a manufacturer sells to retailers in different markets
if a seller can prove its costs per unit are different when selling to different retailers
if a seller advertises prices that are not actually available to consumers
if a seller has not communicated with competitors before announcing prices

Question 64

When a competitor cuts its price, a company might decide to ________ if it believes it will not lose much market share or would lose too much profit by cutting its own price.
reduce its production costs
reduce its marketing costs
maintain its current price and profit margin
increase its marketing budget to raise the perceived value of its product
increase its production costs to improve the quality of the product

Question 65

Under which type of geographic pricing strategy does each customer pay the exact freight for the product from the factory to its destination?
basing-point pricing
freight-absorption pricing
FOB-origin pricing
dynamic pricing
zone pricing

Question 66

Which of the following is a reason for a company to raise its prices?
to address the issue of overdemand for a product
to win a larger share of the market
to use excess capacity
to boost sales volume
to balance out decreasing costs

Question 67

The Internet offers ________, where the price can easily be adjusted to meet changes in demand.
captive pricing
dynamic pricing
basing-point pricing
price bundling
cost-plus pricing

Question 68

Which of the following is likely to be the least effective action that a company can take to combat a competitor's price cut on a product?
reduce price
raise perceived value
improve quality and increase price
bundle products together
launch a low-price "fighting brand"

Question 69

Price escalation in international markets is most likely to result from the higher costs of selling in another country and differences in market conditions or ________.
cultural preferences
selling strategies
regional tastes
customer perceptions
language barriers

Question 70

Consumers use price less to judge the quality of a product when they ________.
lack information
lack skills to use the product
have experience with the product
are shopping for a specialty item
cannot physically examine the product

Question 71

________ prices are the prices that buyers carry in their mind and refers to when looking at a given product.
Psychological
Reference
Promotional
Geographical
Dynamic

Question 72

Which of the following is the least likely reason for a company to initiate a price cut?
to boost sales
to obtain prestige
to dominate the market
to relieve excess capacity
to influence falling demand

Question 73

The Competition Act is the federal law that were enacted to curb the formation of ________.
unfair competition
oligopolies
competitive markets
international markets
limited partnerships

Question 74

Xbox 360 decides to add a free subscription to XBOX magazine with every game bought in an effort to differentiate its offering from PS3 games.This is an example of ________.
good-value pricing
add-on pricing
product-support pricing
value-added pricing
cost-based pricing

Question 75

Federal legislation on price-fixing requires that sellers set their prices ________.
based on their fixed and variable costs
without communication with competitors
to achieve a specified profit margin
with the intention of putting competitors out of business
consistently throughout a region

Question 76

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?
segmented pricing
psychological pricing
referent pricing
promotional pricing
dynamic pricing

Question 77

General Motors prices its automobiles to achieve a 15 to 20 percent profit on its investment.This approach is called ________.
value-based pricing
going-rate pricing
cost-plus pricing
low-price image
target return pricing

Question 78

In Lima, Peru, 20 stores specializing in selling the same quality and brand of wheat products are located on one street.An individual seller cannot charge more than the going price without the risk of losing business to the other stores.This is an example of what type of market?
pure competition
monopolistic competition
oligopolistic competition
pure monopoly
socialist

Question 79

Swatch surveyed the market and identified an unserved segment of watch buyers.Using these results, they created a watch at a price consumers were willing to pay.The unorthodox order of this marketing mix decision is an example of ________.
competition-based pricing
cost-plus pricing
target costing
value-based pricing
penetration pricing

Question 80

Which of the following is the opposite of FOB-origin pricing?
basing-point pricing
absorption pricing
uniform-delivered pricing
freight-absorption pricing
zone pricing