Deck 10: Pricing Decisions

Question 1

How can the price at which a new product is introduced influence the entrance of competition into a market?

Answer 1

no answer

Question 2

A car insurance company advertises its low-cost automobile insurance as 'minimum coverage for minimum budgets'.They are engaging in:

A)non-price competition.
B)demand-based pricing.
C)prestige pricing.
D)price differentiation.
E)price competition.

Answer 2

E

Question 3

Advertisements for Dove shampoos emphasise that other shampoos may cost more but do not work any better than Dove.In this example, Dove is competing on the basis of:

A)service.
B)market share.
C)price.
D)selection.
E)packaging.

Answer 3

C

Question 4

Compare and contrast price and non-price competition.Give examples of firms that compete on a price basis and firms that compete on a non-price basis.

Question 5

Describe the six steps of the process that marketers use to establish prices.

Question 6

A danger associated with engaging in price competition is that competitors can also change prices quickly and aggressively, which can result in a(n) __________ that will be harmful to both companies.

A)reduction in cost
B)price war
C)competitive draw
D)industry collapse
E)advertising battle

Question 7

Sellers that emphasise distinctive product features to encourage brand preferences among customers are practising:

A)product competition.
B)non-price competition.
C)brand differentiation.
D)price competition.
E)competitor differentiation.

Question 8

One advantage of non-price competition is that:

A)a firm can react quickly to competitive efforts.
B)market share becomes less important.
C)a firm can build customer loyalty.
D)marketing efforts are completely eliminated.
E)pricing is no longer a factor.

Question 9

A product under non-price competition would most likely not succeed in the market if:

A)a new advertising campaign is established for it.
B)it is easy to duplicate.
C)it is packaged differently than similar products.
D)it is priced similarly to competitors' products.
E)its quality has been upgraded.

Question 10

How might a marketer find out information about a competitor's prices? Why is this information important?

Question 11

Which of the following statements about non-price competition is false?

A)Companies that use non-price competition do not need to keep track of their competitors' prices.
B)A company must be able to distinguish its brand through some unique feature in order to successfully engage in non-price competition.
C)A firm using non-price competition can build loyalty to both its company and its products.
D)When using non-price competition, a company should promote the distinguishing characteristics of its brand.
E)Buyers must view the distinguishing characteristics of a product offered through non-price competition as being important.

Question 12

When marketers emphasise price as an issue and match or beat the prices of other companies, they are using:

A)price competition.
B)non-price competition.
C)competitive pricing strategies.
D)demand-based pricing.
E)supply-based pricing.

Question 13

Which equation shows the organisation's relationship between price and profit?

A)Total variable costs + total fixed costs = sales - profits
B)Price = profit per item × number of units sold
C)(Price × quantity sold) - total costs = profits
D)(Price - profits) × total costs = sales
E)Total costs = (price × quantity sold) - profits

Question 14

For most products, a(n) __________ relationship exists between the price of a particular product and the quantity demanded.

A)inelastic
B)inverse
C)positive
D)unknown
E)elastic

Question 15

Price is:

A)the value that is exchanged for products in a marketing transaction.
B)money paid in a transaction.
C)not important to buyers.
D)of limited interest to sellers.
E)the most inflexible marketing mix decision variable.

Question 16

Discuss the role of product costs in setting prices.

Question 17

How does demand affect price?

Question 18

Identify and describe the major factors that affect pricing decisions.

Question 19

Which of the following is not a concern of the practice of price competition?

A)Emphasis on price
B)Frequent price changes
C)Price flexibility
D)Focus on product features
E)Competitors' prices

Question 20

What are the differences among value-conscious, price-conscious and prestige-sensitive customers?

Question 21

Temporary price reductions through sales, rebates and special discounts are often used to:

A)raise cash quickly.
B)decrease costs.
C)increase profitability.
D)run off the competition.
E)create a value image.

Question 22

A firm's pricing objectives must be compatible with:

A)its competitors' pricing objectives.
B)its historical price objectives.
C)product quality.
D)its marketing objectives.
E)the laws of demand in the industry.

Question 23

A marketer sometimes uses temporary price reductions to:

A)increase the number of competitors.
B)gain market share.
C)increase revenue per item.
D)control demand.

Question 24

Some consumers are concerned about both price and quality when making purchases in certain product categories.In this case, such a consumer would be described as:

A)prestige-sensitive.
B)value-conscious.
C)externally price-conscious.
D)price-conscious.
E)internally price-conscious.

Question 25

A firm might temporarily sell products below their cost in order to:

A)increase profits and revenues.
B)gain tax benefits and remove excesses.
C)raise cash or reduce market share costs.
D)match competition or generate cash flow.
E)appeal to a price-sensitive market.

Question 26

When a customer is considering the purchase of a product in a relatively unfamiliar product category, that individual is likely to rely more heavily on:

A)internal reference prices.
B)symbol prices.
C)high-value products.
D)discounted reference prices.
E)external reference prices.

Question 27

For most consumers, there is an assumed relationship between:

A)price and quality.
B)value and cost.
C)internal and external reference prices.
D)value and price consciousness.
E)prestige prices and value.

Question 28

Which of the following is most likely to influence a buyer's perception of a product's price?

A)An internal reference price
B)A value-conscious price
C)An external reference price
D)A prestige-sensitive price
E)A demand-based price

Question 29

Which factor is least likely to affect pricing decisions?

A)Competitive prices
B)Legal and regulatory issues
C)Organisational and marketing objectives
D)Customers' interpretation and response
E)Shifting stock values

Question 30

A __________ customer is likely to say, 'People notice when you buy the most expensive brand of a product'.

A)price-conscious
B)quality-conscious
C)value-conscious
D)socially conscious
E)prestige-sensitive

Question 31

__________ consumers are concerned about both the price and the quality aspects of a product.

A)Price-conscious
B)Prestige-sensitive
C)Value-conscious
D)Price-conscious and prestige-sensitive
E)Quality-conscious

Question 32

To gain market share, Hyundai entered the Australian car market at a comparatively low price.One of the negative side effects of making this type of pricing decision is:

A)a negative impact on consumers' perceptions of quality.
B)competitive matching.
C)a high return on investment level affecting tax balances owed.
D)poor survival chances.
E)higher developmental costs.

Question 33

If a manufacturer raises the price of a luxury item, then initially the demand for that product will:

A)increase.
B)decrease.
C)shift to the left.
D)become more inelastic.
E)become more elastic.

Question 34

A company trying to position itself as value-oriented should not:

A)use premium pricing for its products.
B)set prices similar to those of its competitors.
C)use any advertising for its products.
D)consider costs when determining the price of products.

Question 35

Which of the following is least likely to influence demand for a product?

A)Changes in buyers' needs
B)The presence of substitute goods
C)Changes in manufacturing capacity in the industry
D)The effectiveness of other marketing mix variables
E)The economic environment

Question 36

Lucy buys a new dress at Supré with a price tag that states, 'Compare at $50.00.Our Price $29.99'.This is an example of the use of:

A)internal referencing.
B)cumulative discounts.
C)seasonal discounts.
D)base-point pricing.
E)an external reference price.

Question 37

A price that develops in the mind of a buyer through experience with the product is known as:

A)an internal reference price.
B)a value-conscious price.
C)an external reference price
D)a prestige-sensitive price.
E)a demand-based price.

Question 38

Which of the following is not a major factor for firms making price decisions?

A)Costs
B)Competition
C)Previous sales
D)Channel member expectations
E)Legal and regulatory issues

Question 39

A consumer is about to buy a product for the first time.He has not had any experience buying or using this product before.In such a case, it is likely that he interprets price as a measure of:

A)product availability.
B)producer profitability.
C)customer acceptance of the product.
D)the time required to purchase the product.
E)product quality.

Question 40

To maintain market share and revenue in an increasingly price-sensitive market, companies have focused on quality, used labour-saving technologies and used efficient manufacturing processes.These tactics have provided gains in productivity that have translated into __________ for the company and __________ for the consumer.

A)higher costs; higher prices
B)higher costs; lower prices
C)lower costs; lower prices
D)lower costs; higher prices
E)no change in costs; no changes in prices

Question 41

Which of the following strategies assumes that demand is inelastic for groups or sets of products?

A)Captive pricing
B)Price lining
C)Bait pricing
D)Premium pricing
E)Price skimming

Question 42

The Dan-Eco Company utilises a special strategy to sell its EcoShirt line.Its basic promotional tool is the discount.These discounts offered to middlemen for performing certain channel activities are referred to as __________ discounts.

A)trade
B)cumulative
C)non-cumulative
D)push
E)intermediary

Question 43

What type of discount is given to a business purchaser for performing activities such as transporting, storing and selling?

A)Quantity
B)Cash
C)Geographic
D)Service
E)Trade

Question 44

Laura Spangler of North Novelties reduces the prices of games sold to Robertson's Entertainment by 10 per cent to allow for expenses associated with Robertson's promoting the games to consumers.This is an example of a __________ discount.

A)quantity
B)cash
C)seasonal
D)trade

Question 45

When Mia and Shane are planning their honeymoon, their travel agent tells them that if they buy a special package, their trip to Paris will include meals, tickets to the theatre and a hire car, in addition to airfare and hotel.This is an example of the use of:

A)multiple-unit pricing.
B)bundle pricing.
C)prestige pricing.
D)price lining.
E)price packaging.

Question 46

Bundle pricing is perceived by customers to be of value because:

A)they always pay a lower price per item than they would if they bought each item separately.
B)they prefer buying a combination of bundled products in a single transaction, which saves time, effort and perhaps money.
C)the companies selling the products can sell them at a lower price because their packaging costs are lower.
D)they are purchasing complementary products, which is convenient for them.
E)they can purchase items that are consumed frequently in larger quantities.

Question 47

When a company attempts to influence a consumer's perception of price to make a product's price more attractive and reduce sticker shock, it is using a __________ pricing strategy.

A)competition-based
B)professional
C)promotional
D)comparison
E)psychological

Question 48

Which of the following is not a discount provided to business customers?

A)Trade
B)Cumulative
C)Cash
D)Seasonal
E)Differentiated

Question 49

Which of the following is a requirement for setting pricing objectives?

A)The objectives should be short-term oriented.
B)There should only be one pricing objective.
C)An evaluation of competitors' prices should be made.
D)The cost structure should be identified.
E)The objective should be explicitly stated.

Question 50

A manager at Myer designs the casual clothing department so that Myer's private-label jeans, priced at $29.99, are displayed next to a national brand of jeans, such as Levi's, priced at $37.99.Which pricing strategy is the manager attempting to use?

A)Everyday low prices
B)Odd-even pricing
C)Prestige pricing
D)Special-event pricing
E)Reference pricing

Question 51

If local Shell service stations look at BP and Caltex service stations' prices as the primary method of determining their own prices, Shell is using:

A)price fixing, which considers competition to be less important than costs.
B)price fixing, which considers costs to be less important than competitors' prices.
C)market share pricing, which considers competition to be the ultimate pricing goal.
D)competition-based pricing, which considers profit to be the ultimate pricing goal.
E)competition-based pricing, which considers costs to be less important than competitors' prices.

Question 52

When an organisation sets a number of different prices for selected groups of merchandise, this strategy is commonly referred to as:

A)prestige pricing.
B)price lining.
C)customary pricing.
D)odd-even pricing.
E)ethical pricing.

Question 53

Marketers must take steps to make sure that the pricing objectives they set are consistent with the organisation's __________objectives and __________objectives

A)advertising; marketing
B)overall; marketing
C)marketing; promotional
D)overall; promotional
E)overall; revenue

Question 54

Officeworks has just adjusted its price levels so that it can increase its sales volume to match its expenses.Officeworks is most likely employing a __________ objective

A)market share
B)cash flow
C)return on investment
D)survival
E)profit

Question 55

If Ralph Lauren offers to reduce the price of its women's blazers when retailers buy over 100 pieces, the designer is offering a __________ discount.

A)quantity
B)cash
C)seasonal
D)trade

Question 56

Research has shown that an isolation effect occurs with consumers, meaning that an alternative is less attractive when viewed alone than when viewed alongside other alternatives.Which pricing strategy takes this effect into consideration?

A)Everyday low prices
B)Bundle pricing
C)Reference pricing
D)Prestige pricing
E)Odd-even pricing

Question 57

In business markets, a(n) __________ is a concession in price to achieve a desired goal.

A)allowance
B)objective-oriented discount
C)cash discount
D)trade discount
E)cumulative discount

Question 58

When establishing prices, a marketer's first step is to:

A)determine demand.
B)develop pricing objectives.
C)select a pricing policy.
D)evaluate competitors' prices.
E)determine a pricing method.

Question 59

To attract and keep effective resellers, producers often offer discounts that compensate resellers for performing certain functions such as transportation or storage.This type of discount is called a(n):

A)trade discount.
B)allowance.
C)quantity discount.
D)seasonal discount.
E)cash discount.

Question 60

The three primary bases for developing prices are:

A)profit, demand and value and/or competition.
B)supply, demand and marketing objectives.
C)demand, value and/or competition, and cost.
D)markup, cost and cost-plus.
E)negotiation, periodicity and randomness.

Question 61

Today, many marketers are attempting to reduce the use of frequent short-term price reductions.Which strategy would likely accomplish this objective?

A)Everyday low prices
B)Bundle pricing
C)Reference pricing
D)Customary pricing
E)Odd-even pricing

Question 62

Some companies attempt to reduce or eliminate the use of frequent short-term price reductions by using:

A)odd-even pricing.
B)customary pricing.
C)everyday low prices.
D)price leaders.
E)reference pricing.

Question 63

All of the following are psychological techniques except:

A)customary pricing.
B)prestige pricing.
C)price lining.
D)odd-even pricing.
E)price skimming.

Question 64

Price is the value that is exchanged for products in a marketing transaction.

Question 65

Price competition gives marketers flexibility.

Question 66

Use the following to answer questions
Glenwood Pet Hospital is considering implementing a new pricing strategy for its veterinarian services.After reviewing the previous three years' revenue, Glenwood finds that most of its customers bring their pets in for the required annual vaccinations and then only if the animal is ill.Glenwood's objective is to generate more income per customer on an annual basis.The hospital has previously priced its services by charging a flat fee for an office visit, a fee for each vaccine and a fee for each type of examination beyond the basic office visit.Most customers pay the flat office fee and a fee for a rabies vaccine.Glenwood is now considering a new plan where the pet owner would pay one fee that would cover an office visit, the required rabies vaccine and additional vaccines that prevent heartworm, kennel cough and fleas.Glenwood hopes to encourage the pet owners to view their pet's health as part of a prevention program rather than as a one-time annual visit.
Glenwood's new strategy is an example of __________ pricing.

A)cost-based
B)psychological
C)customary
D)bundle
E)demand-based

Question 67

Price promotion can be an expensive undertaking in many consumer product categories.Which pricing strategy would likely be most effective in helping to reduce these promotional costs?

A)Everyday low prices
B)Bundle pricing
C)Reference pricing
D)Prestige pricing
E)Odd-even pricing

Question 68

Organisations that stress low price as a key marketing mix element tend to market unusual products.

Question 69

Goods that are priced based primarily on the way they always have been priced are examples of:

A)traditional pricing.
B)professional pricing.
C)everyday low prices.
D)price lining.
E)customary pricing.

Question 70

Products such as light globes, canned soft drinks and ice-cream sandwiches are usually priced with:

A)multiple-unit pricing.
B)reference pricing.
C)price lining.
D)bundle pricing.
E)odd-even pricing.

Question 71

Odd-even pricing is:

A)a cost-based strategy.
B)competition based.
C)a rarely used technique.
D)a psychological pricing strategy.
E)a form of unethical pricing.

Question 72

If MAKO sets the price for its sunglasses at $240, it is using psychological pricing to convey:

A)thrift.
B)cost cutting.
C)value.
D)prestige.
E)availability.

Question 73

When engaging in price competition, a marketer emphasises price as an issue and matches or beats the prices of competitors.

Question 74

Use the following to answer questions
Glenwood Pet Hospital is considering implementing a new pricing strategy for its veterinarian services.After reviewing the previous three years' revenue, Glenwood finds that most of its customers bring their pets in for the required annual vaccinations and then only if the animal is ill.Glenwood's objective is to generate more income per customer on an annual basis.The hospital has previously priced its services by charging a flat fee for an office visit, a fee for each vaccine and a fee for each type of examination beyond the basic office visit.Most customers pay the flat office fee and a fee for a rabies vaccine.Glenwood is now considering a new plan where the pet owner would pay one fee that would cover an office visit, the required rabies vaccine and additional vaccines that prevent heartworm, kennel cough and fleas.Glenwood hopes to encourage the pet owners to view their pet's health as part of a prevention program rather than as a one-time annual visit.
Glenwood's closest competitor, Hearthstone Pet Hospital, currently charges $60 for each basic office visit.If Glenwood were to price its basic office visit at $45, it would most likely be employing which type of pricing?

A)Customary pricing
B)Penetration pricing
C)Prestige pricing
D)Price skimming
E)Cost-based pricing

Question 75

Total costs are influenced by quantities sold.

Question 76

A major disadvantage of non-price competition is that a company cannot build customer loyalty towards its brand using price.

Question 77

Use the following to answer questions
Glenwood Pet Hospital is considering implementing a new pricing strategy for its veterinarian services.After reviewing the previous three years' revenue, Glenwood finds that most of its customers bring their pets in for the required annual vaccinations and then only if the animal is ill.Glenwood's objective is to generate more income per customer on an annual basis.The hospital has previously priced its services by charging a flat fee for an office visit, a fee for each vaccine and a fee for each type of examination beyond the basic office visit.Most customers pay the flat office fee and a fee for a rabies vaccine.Glenwood is now considering a new plan where the pet owner would pay one fee that would cover an office visit, the required rabies vaccine and additional vaccines that prevent heartworm, kennel cough and fleas.Glenwood hopes to encourage the pet owners to view their pet's health as part of a prevention program rather than as a one-time annual visit.
Glenwood is considering a markup pricing basis, with the cost for office visit plus vaccines at $45.If Glenwood were to add a markup of 33.3 per cent of the costs, its price would be:

A)$79.
B)$65.
C)$55.
D)$78.
E)$60.

Question 78

Price is a key element in the marketing mix because it relates directly to the generation of total revenue.

Question 79

Price leaders, comparison discounting and special-event pricing are applications of:

A)psychological pricing.
B)professional pricing.
C)product-line pricing
D)bait-and-switch.
E)promotional pricing.

Question 80

The decision by David Jones to use even prices, such as $60 for a Ralph Lauren Polo shirt, is an application of odd-even pricing, in which even prices often are used to:

A)give a product an upscale or exclusive image.
B)show customers that products are priced based on tradition.
C)coordinate efforts with a promotional campaign.
D)indicate that prices have been cut to the last penny.
E)facilitate comparison to competitors' prices.