Deck 10: Manage Pricing Decisions

Question 1

In price lining,the escalation of product prices up the product line no longer have to consider factors such as real cost differences among the various features offered,customer assessments of the value added by the increasing level of benefits,and prices competitors are charging for similar products.

Answer 1

False
Explanation: Product line pricing (or price lining) affords the marketing manager an opportunity to develop a rational pricing strategy across a complete line of related items. As a customer is evaluating the choices available within a firm's product line, the price points established for the various items in the line need to make sense and reflect the differences in benefits offered as the customer moves up and down the product line.

Question 2

Price objectives are the desired or expected result associated with a pricing strategy and can be inconsistent with other marketing-related objectives such as positioning or branding.

Answer 2

False
Explanation: Pricing objectives are the desired or expected result associated with a pricing strategy. Pricing objectives must be consistent with other marketing-related objectives (positioning, branding, etc.) as well as with the firm's overall objectives (including financial objectives) for doing business. Exhibit 10.2 portrays several of the most common pricing objectives, along with their related strategies.

Question 3

Regardless of whether the setting is B2C or B2B,the vast majority of costs are associated with the purchase price.

Answer 3

True
Explanation: There are other types of costs, such as time invested in the purchase process or the opportunity costs of choosing one offering over another. But for most purchasers, regardless of whether the setting is B2C or B2B, the vast majority of costs are associated with the purchase price. As such, price-or more specifically the customer's perception of the offering's pricing-is a key determinant of perceived value.

Question 4

Firms that have an objective of utilizing pricing to communicate positioning use a stability pricing.

Question 5

Since a product's price tends to be so visible and definitive,customers rarely have trouble moving past price to consider other critical benefits the product affords.

Question 6

A competitor's price is one of the most visible elements of its marketing strategy,and you can often infer the pricing objective by carefully analyzing historical and current pricing patterns.

Question 7

Pricing decisions can be made by the accounting department and do not need to consider the whole of the firm's offering.

Question 8

Odd pricing can backfire if misapplied,specifically to service industries.

Question 9

The just noticeable difference (JND)in a price is the amount of price increase that can be taken without affecting customer demand.

Question 10

Firms frequently rely on combinations of pricing tactics in the marketplace rather than putting all their eggs in one basket.

Question 11

In 1975,the federal Consumer Goods Pricing Act repealed all state fair trade laws and minimum markup laws.

Question 12

When formulating a response to a competitor's price reduction,remember to consider your offering from the perspective of its overall value proposition to customers.

Question 13

With prestige pricing,some of the traditional price/demand curves cannot properly predict sales or market response because it violates the common assumption that increasing price decreases volume.

Question 14

Firms and brands that continually attempt to operate in the high-price/low-benefits environment do not survive over the long run as customer trust is damaged.

Question 15

Effectively communicating a product's differential advantages is at the heart of positioning strategy,and exposure to these elements spurs the customer to develop perceptions of value and a subsequent understanding of the value proposition.

Question 16

Among the marketing mix variables,price is the easiest and quickest to alter,so sometimes firms overrely on price changes to stimulate additional sales or gain market share.

Question 17

A variable pricing strategy makes planning and forecasting infinitely easier than the alternative approach,one-price.

Question 18

To set an exact price for an offering,be it a good or service,marketing managers can consider few calculations to arrive at the optimal price.

Question 19

Captive pricing is sometimes called complementary pricing.

Question 20

Target and Walmart both rely on high/low pricing with heavy promotion.

Question 21

A strategy of _______________ addresses the objective of entering a market at a relatively high price point.

A)Penetration pricing
B)Price skimming
C)Target ROI
D)Competitor-based pricing
E)Value pricing

Question 22

Amelie is the marketing manager at a café in Charleston,South Carolina.The chef/owner is about to introduce a new dish and Amelie is planning on pricing the dish low to begin,but slowly raising the price over time.Amelie is utilizing _______________.

A)Penetration pricing
B)Price skimming
C)Target ROI
D)Competitor-based pricing
E)Value pricing

Question 23

A firm attempts to find a neutral set point for price that is neither low enough to raise the ire of competition nor high enough to put the value proposition at risk with customers.The firm is adopting a(n)_______ strategy.

A)Stability pricing
B)Target ROI
C)Value pricing
D)Average-cost pricing
E)Target return pricing

Question 24

Jean Claude has just completed a new line of designer handbags.He wants the price to communicate to the customer that the handbags are high quality,so he sets it high.He knows that after this season,the price will lower.Jean Claude is using _______________.

A)Penetration pricing
B)Price skimming
C)Target ROI
D)Competitor-based pricing
E)Value pricing

Question 25

A company's core cost advantages translate directly to an edge over its competitors based on much more flexibility in its __________________ as well as its ability to translate some of the cost savings to the bottom line.

A)Pricing strategies
B)Cost leadership
C)Value ratio
D)Service
E)Quality

Question 26

In markets where customers are sensitive to price and where internal efficiencies lead to cost advantages allowing for acceptable margins even with aggressive pricing,a ______ strategy can create a powerful barrier to market entry for other firms.

A)Penetration
B)Target ROI
C)Price skimming
D)Competitor-based pricing
E)Value pricing

Question 27

Pricing objectives very frequently are designed for profit maximization,which necessitates a ________________________ pricing strategy.

A)Penetration
B)Price skimming
C)Target ROI
D)Competitor-based
E)Value

Question 28

Be careful with a __________________ strategy.Because price is a cue for developing customer perceptions of product quality,the value proposition may be reduced if a low price belies the product's actual quality attributes.

A)Penetration pricing
B)Price skimming
C)Target ROI
D)Competitor-based pricing
E)Value pricing

Question 29

__________________ is(are)considered by the customer when making a purchasing decision.

A)Time invested in the purchasing process
B)Costs incurred by the customer in acquiring that bundle of benefits
C)Opportunity costs of choosing one offering over another
D)Both time invested in the purchasing process and opportunity costs of choosing one offering over another
E)Time invested in the purchasing process, Costs incurred by the customer in acquiring that bundle of benefits, and Opportunity costs of choosing one offering over another

Question 30

Mark runs a driving range in New York City.He has noticed that within a 15-minute walk you can get to three competitors.Mark decides to look at his competitors' pricing and then determine his best pricing strategy based on all of the information.Mark is utilizing ___________________.

A)Penetration pricing
B)Price skimming
C)Target ROI
D)Competitor-based pricing
E)Value pricing

Question 31

______________ is a critical component that plays into a customer's assessment of the value afforded by a firm and its offerings.

A)Price
B)Cost
C)Value
D)Service
E)Quality

Question 32

_______________________ could lead the marketing manager to decide to price at some market average price,or perhaps above or below it in the context of penetration or skimming objectives.

A)Penetration pricing
B)Price skimming
C)Target ROI
D)Competitor-based pricing
E)Value pricing

Question 33

Juan is researching new cars.He would like to buy a car that is both good quality and a good price.After much consideration,Juan purchases a car from a manufacturer where the initial price paid is high,but the cars are known to have much lower maintenance costs.The pricing strategy employed by the dealership where Juan bought his car is _____________________.

A)Penetration pricing
B)Price skimming
C)Target ROI
D)Competitor-based pricing
E)Value pricing

Question 34

When using _______________ a bottom line profit is established first and then pricing is set to achieve the target.

A)Penetration pricing
B)Price skimming
C)Target ROI
D)Competitor-based pricing
E)Value pricing

Question 35

When a firm's objective is to gain as much market share as possible,a likely pricing strategy is _________________,sometimes also referred to as pricing for maximum marketing share.

A)Penetration pricing
B)Price skimming
C)Target ROI
D)Competitor based pricing
E)Value pricing

Question 36

When a company purposefully makes pricing decisions to undercut one or more competitors and gain sales and net market share it is demonstrating a(n)___________________ strategy.

A)Cost-plus pricing
B)Price war
C)Markup on sales price
D)Average-cost pricing
E)Target return pricing

Question 37

Michael Porter has consistently advocated that firms that are able to compete based on some extraordinary efficiency in one or more internal processes bring to the market a competitive advantage based on _________________.

A)Price perception
B)Cost leadership
C)Value ratio
D)Service
E)Quality

Question 38

Firms that have an objective of utilizing pricing to communicate positioning use a _______ strategy.

A)Penetration pricing
B)Price skimming
C)Target ROI
D)Competitor-based pricing
E)Value pricing

Question 39

The logic of competitor-based pricing is quite rational unless _______.

A)It is the only approach considered when making the ultimate pricing decisions
B)It leads to exaggerated extremes in pricing such that on the high end a firm's products do not project customer value or on the low end price wars ensue
C)It gains a thorough understanding of competitors' marketing practices
D)Both it is the only approach considered when making the ultimate pricing decisions and it leads to exaggerated extremes in pricing such that on the high end a firm's products do not project customer value or on the low end price wars ensue
E)All of these

Question 40

In proposing _______________,the marketing manager usually is convinced that a strong price-quality relationship exists for the product.

A)Penetration pricing
B)Price skimming
C)Target ROI
D)Competitor-based pricing
E)Value pricing

Question 41

For most products,as long as the customer perceives the ratio of price and benefit to be at least at equilibrium,perceptions of __________ will likely be favorable.

A)Market share
B)Quality
C)Value
D)Market share and Quality
E)Market share and Value

Question 42

One rationale for establishing a price skimming objective is that _______________ lends status to a product or brand by virtue of a price relatively higher than the competition.

A)Product line pricing
B)Captive pricing
C)Price bundling
D)Reference pricing
E)Prestige pricing

Question 43

Bright House wants Courtney to buy the full gamut of entertainment products and the more she buys-digital television,premium channels,downloadable movies,local and long-distance phone service,cellular service,high-speed Internet-the better the deal becomes compared to the total of the individual prices of each product.Bright House is using a ______ strategy.

A)Product line pricing
B)Captive pricing
C)Price bundling
D)Reference pricing
E)Prestige pricing

Question 44

Doug runs a hardware store.He learned that customers process the price of $9.99 as significantly lower than the price of $10.00 because of the reduced digit count in the price point.Accordingly,he follows this rule to set up the prices for all products.Doug uses _____.

A)Psychological pricing
B)One-price strategy
C)Variable pricing
D)Everyday low pricing (EDLP)
E)High/low pricing

Question 45

______________ is used by firms that rely on periodic heavy promotional pricing,primarily communicated through advertising and sales promotion,to build traffic and sales volume.

A)Psychological pricing
B)One-price strategy
C)Variable pricing
D)Everyday low pricing (EDLP)
E)High/low pricing

Question 46

Marriott has branded its entire family of accommodations based on different value propositions,supported by clearly delineated pricing strategies.Its offerings include Ritz-Carlton and JW Marriott for the most discriminating patron,Marriott and Renaissance at the next level of full service,and an array of differentially positioned brands such Courtyard and Residence Inn.This is an example where _____ can occur at a level much broader in scope than individual products.

A)Captive pricing
B)Auction pricing
C)Price lining
D)Reference pricing
E)Variable pricing

Question 47

Bella Luna is a specialty baby furniture store.Most of the items in the store are designer,and,therefore,tend to be more expensive than other baby furniture.Recently Bella Luna started to put the manufacturers' suggested retail price next to the price it charges to show the savings.Bella Luna is using ___________________.

A)Product line pricing
B)Captive pricing
C)Price bundling
D)Reference pricing
E)Prestige pricing

Question 48

The fundamental philosophy behind __________________ is to reduce investment in promotion and transfer part of the savings to lower price.

A)Psychological pricing
B)One-price strategy
C)Variable pricing
D)Everyday low pricing (EDLP)
E)High/low pricing

Question 49

Krista wants to buy a new foaming soap dispenser.Currently the store is running a special that she gets the dispenser for free when she purchases the largest refill of soap.The pricing strategy being used for the dispense and soap is _____________________.

A)Product line pricing
B)Captive pricing
C)Price bundling
D)Reference pricing
E)Prestige pricing

Question 50

Firms and brands that continually attempt to operate in the _______ price/_____ benefits quadrant do not survive over the long run as customer trust is damaged.Some firms use price skimming strategies,especially on product introductions,even when all the bugs have yet to be worked out of the product.

A)High, high
B)High, low
C)Low, high
D)Low, low
E)None of these

Question 51

Geoff works at an Aspen ski shop.He has just gotten a shipment of new snowboards and realizes that the company has priced its snowboards higher than the rest of the boards in his shop.Since Geoff took a marketing class in college,he knows that the company is using ______________.

A)Product line pricing
B)Captive pricing
C)Price bundling
D)Reference pricing
E)Prestige pricing

Question 52

___________________ entails gaining a commitment from a customer to a basic product or system that requires continual purchase of peripherals to operate.

A)Product line pricing
B)Captive pricing
C)Price bundling
D)Reference pricing
E)Prestige pricing

Question 53

With __________________,customers are allowed-even encouraged-to haggle about prices.

A)Psychological pricing
B)One-price strategy
C)Variable pricing
D)Everyday low pricing (EDLP)
E)High/low pricing

Question 54

As in price bundling,it can be useful for customers to have some type of comparative price when considering a product purchase.Such a comparison is referred to as ______________,which is the total price of the components of the bundle if purchased separately versus the bundled price.

A)Product line pricing
B)Captive pricing
C)Price bundling
D)Reference pricing
E)Prestige pricing

Question 55

Carol Ann is trying to explain to one of her ticket counter associates the differences in price associated with concert tickets.She explains that the lowest-priced tickets are in the least desirable seats and the highest-priced tickets are in the most desirable seats,with the rest of the ticket prices falling somewhere in between.Carol Ann is describing ____________________.

A)Product line pricing
B)Captive pricing
C)Price bundling
D)Reference pricing
E)Prestige pricing

Question 56

When customers are given the opportunity to purchase a package deal at a reduced price compared to what the individual components of the package would cost separately,the firm is using a __________________ strategy.

A)Product line pricing
B)Captive pricing
C)Price bundling
D)Reference pricing
E)Prestige pricing

Question 57

__________________ affords the marketing manager an opportunity to develop a rational pricing strategy across a complete line of related items.

A)Product line pricing
B)Captive pricing
C)Price bundling
D)Reference pricing
E)Prestige pricing

Question 58

Creating a perception about price merely from the image the numbers provide the customer demonstrates ___________________.

A)Psychological pricing
B)One-price strategy
C)Variable pricing
D)Everyday low pricing (EDLP)
E)High/low pricing

Question 59

In markets where customers typically witness rapidly changing prices,________________ can provide a source of competitive advantage.

A)Price elasticity of demand
B)Stability pricing
C)Pricing tactics
D)Auction pricing
E)Reverse auction

Question 60

____________ is known for its everyday low pricing strategy.

A)Walmart
B)JCPenney
C)Sears
D)Best Buy
E)Kmart

Question 61

Veggie Vitality will send retailers a check if they promote its vegetable-based smoothies in the retailer's promotional efforts.Veggie Vitality uses ______________.

A)Cash discounts
B)Trade discounts
C)Quantity discounts
D)Seasonal discounts
E)Promotional allowances

Question 62

Besides the standard auction approach where buyers bid for a seller's offering,_______ is now very common in which sellers bid prices to capture a buyer's business.

A)Price elasticity of demand
B)Stability pricing
C)Pricing tactics
D)Auction pricing
E)Reverse auction

Question 63

James is trying to determine the best price for his new fishing poles and thus uses the sales price as a basis of calculating the markup percentage.He is using _________.

A)Cost-plus pricing
B)Price war
C)Average-cost pricing
D)Markup on sales price
E)Target return pricing

Question 64

The sum of the fixed and variable costs are ______.

A)Marginal costs
B)Total costs
C)Average costs
D)Both marginal costs and total costs
E)Both total costs and average costs

Question 65

__________________ means that title transfer and freight paid on the goods being shipped are based on the free on board location.

A)FOB pricing
B)Uniform delivered pricing
C)Zone pricing
D)Geographically driven pricing
E)None of these

Question 66

Priceline.com is a firm that serves as a clearinghouse for extra capacity from airlines,hotels,and cruise lines.It is a prominent example of a firm that uses _____ strategy.

A)Cost-plus pricing
B)Price war
C)Reverse auction
D)Average-cost pricing
E)Target return pricing

Question 67

Giovanni's Gems is a high-quality Italian leather goods store in Manhattan.Giovanni runs an Internet site where people can buy his products and he will charge the same delivery fee to any location within the 48 contiguous states.Giovanni utilizes ______________.

A)FOB pricing
B)Uniform delivered pricing
C)Zone pricing
D)Geographically driven pricing
E)None of these

Question 68

Heather runs Cute Cakes,a gourmet cupcake bakery.To set prices for her cupcakes,Heather looks at the cost of making each cupcake and then adds an additional amount on top of that to arrive at her price.Heather is demonstrating _____________.

A)Cost-plus pricing
B)Price war
C)Markup on sales price
D)Average-cost pricing
E)Target return pricing

Question 69

Caution is warranted in employing _________________,as it is always possible that the quantity demanded will not match the marketing manager's forecast.

A)Cost-plus pricing
B)Price war
C)Markup on sales price
D)Average-cost pricing
E)Target return pricing

Question 70

_____________ are incurred over time,regardless of volume,whereas _______ fluctuate with volume.

A)Fixed costs; variable costs
B)Variable costs; fixed costs
C)Total costs; variable costs
D)Variable costs; total costs
E)Marginal costs; total costs

Question 71

_________,which are also called functional discounts,provide an incentive to a channel member for performing some function in the channel that benefits the seller.Examples include stocking a seller's product or performing a service related to that product,such as installation or repair,within the channel.

A)Cash discounts
B)Quantity discounts
C)Trade discounts
D)Seasonal discounts
E)Promotional allowances

Question 72

To accommodate lengthy sales processes,firms offer ______________,which reward the purchaser for shifting part of the inventory storage function away from the manufacturer.

A)Cash discounts
B)Trade discounts
C)Quantity discounts
D)Seasonal discounts
E)Promotional allowances

Question 73

______________ are direct,immediate reductions in price provided to purchasers.

A)Fixed costs
B)Variable costs
C)Total costs
D)Discounts
E)Allowances

Question 74

The Internet created a rise in ___________________ as more and more people decided to meet online to sell products to the highest bidder.

A)Price elasticity of demand
B)Stability pricing
C)Pricing tactics
D)Auction pricing
E)Reverse auction

Question 75

To use target return pricing,one must first calculate total _______________.

A)Fixed costs
B)Variable costs
C)Total costs
D)Both fixed costs and variable costs
E)Both variable costs and total costs

Question 76

To better take into account the differential impact of fixed and variable costs,marketing managers can use _________________.

A)Cost-plus pricing
B)Price war
C)Markup on sales price
D)Average-cost pricing
E)Target return pricing

Question 77

_______________ are typically expressed as greatly extended invoice due dates.

A)Cash discounts
B)Trade discounts
C)Quantity discounts
D)Seasonal discounts
E)Promotional allowances

Question 78

_____________ remit monies to purchasers after the fact.

A)Fixed costs
B)Variable costs
C)Total costs
D)Discounts
E)Allowances

Question 79

As with average-cost pricing,the effectiveness of __________________ is highly dependent on the accuracy of the forecast.

A)Cost-plus pricing
B)Price war
C)Markup on sales price
D)Average-cost pricing
E)Target return pricing

Question 80

Solid Surface,a countertop store,will give customers a 10 percent discount if they pay their bills in full in 20 days; however,after 20 days they do not receive a discount.This is an example of _______________.

A)Cash discounts
B)Trade discounts
C)Quantity discounts
D)Seasonal discounts
E)Promotional allowances