Deck 14: Strategic Pricing Methods

Question 1

3 / 10,n / 30 means a 3 percent discount if paid in full within 10 days,or the net amount is due in 30 days.

Answer 1

True

Question 2

One of the reasons a manufacturer may decide to sell its products in a bundle is to encourage trial of a new product.

Answer 2

True

Question 3

Kristina sells sports equipment and wants to get customers into her store.She knows from past experience that sales generate customer traffic,particularly when she puts children's baseball equipment on sale.She may consider a leader pricing strategy.

Answer 3

True

Question 4

When a retail store rarely sells deeply discounted or sale products,it is known as "everyday low pricing."

Question 5

The methods used to develop pricing strategies are cost-based pricing,competitor-based pricing and value-based pricing.

Question 6

Manufacturers like rebates because it provides them with information they can use in developing new products.

Question 7

Odd prices suggest low quality.

Question 8

Price lining is setting a price floor and a price ceiling for a line of products and then setting price points in between to represent differences in quality.

Question 9

When Sony released their PlayStation 3 game machines,they charged a high price,attracting the most avid game players.This was a market penetration pricing strategy.

Question 10

Slotting allowances are used to get retailers to feature a manufacturer's product in their advertising and promotional efforts.

Question 11

Because market and operating conditions are different in each target market:

A)all consumers will react similarly to the firm's pricing strategy.
B)the choice of a pricing strategy is specific to the target market.
C)prices need to be held constant because everything else is changing.
D)only horizontal price fixing should be used.
E)external reference prices will always be the best strategy.

Question 12

A weakness associated with cost-based pricing methods is that they:

A)are too difficult to calculate.
B)infer a cost-price ratio.
C)do not recognize the role that consumers or competitors' prices play in the marketplace.
D)do not allow for predatory pricing.
E)are structurally inflexible and ignore vertical price fixing alternatives.

Question 13

Cost-based pricing assumes costs will not vary much for different levels of production.

Question 14

Competitor-based pricing is when a company determines the final price of a good based on the cost.

Question 15

Value-based pricing necessitates a great deal of consumer research to be implemented successfully.

Question 16

Cheryl wants to quickly establish a dominant market share for her new line of ergonomic pens.To do this,she will likely use a market penetration pricing strategy.

Question 17

The Robinson-Patman Act does NOT apply to end consumers,at which point many forms of price discrimination occur.

Question 18

Proving that a company has engaged in the deceptive bait and switch practice is easy.

Question 19

Compared to other pricing methods,_______________ pricing is relatively simple.

A)improvement value
B)value-based
C)cost of ownership
D)reference-based
E)cost-based

Question 20

Because market and operating conditions are all very similar,marketers' pricing strategies should be uniform.

Question 21

Dan is especially price sensitive.He has been known to line up on "Black Friday" (the day after Thanksgiving)at 4 a.m.in order to be among the first to buy sale items.Dan would likely respond to a __________________ pricing strategy.

A)high / low
B)premium
C)slotting allowance
D)horizontal flattening
E)vertical triangulation

Question 22

When Sony introduced its new PlayStation 3 game system,buyers who could not get them the first day bid up the price of the systems on eBay and other auction sites.As Sony provided more PlayStation 3 units to the market and early demand was satisfied,prices dropped because:

A)the way consumers perceived their value changed.
B)Sony fully understood its value to consumers.
C)variable costs became constant and fixed costs increased.
D)everyday low pricing neutralized the impact of price on consumers' purchase decisions.
E)all of the above.

Question 23

In determining the price for his company's new pocket digital camera,Matt is assessing what consumers consider the regular or original price for similar cameras available in the market.Matt is assessing the influence of _______ on pricing strategy.

A)improvement value
B)odd-even prices
C)everyday low pricing
D)reference prices
E)cost of ownership

Question 24

It is important to Joanne to get value for her money but,she does not want to spend time comparison shopping.Joanne will likely respond to _______________ pricing but not _______________ pricing.

A)high / low; everyday low
B)premium; everyday low
C)discount; vertical
D)horizontal; flattening
E)everyday low; high / low

Question 25

In a ______________________ pricing strategy,marketers rely on the promotion of sales,during which prices are temporarily reduced to encourage purchases.

A)high / low
B)premium
C)discount
D)horizontal flattening
E)vertical triangulation

Question 26

A reference price is:

A)the actual price.
B)the price against which buyers compare the actual selling price.
C)the manufacturer's cost.
D)a cumulative quantity discount price.
E)the external horizontal fixed price.

Question 27

An everyday low pricing strategy stresses the continuity of retail prices:

A)at a level above regular retail prices and below deep-discount prices.
B)based on horizontal price fixing.
C)bundled with cost-based,cash discounts.
D)at a level somewhere between the regular price and the deep-discount sale prices competitors may offer.
E)at a price skimming level.

Question 28

Ben owns a lawn care business.From experience,Ben has found that John Deere equipment lasts almost twice as long as competitors' machines.For John Deere,Ben's perception about its products makes ______________ pricing possible.

A)improvement value
B)odd-even
C)everyday low pricing
D)reference-based
E)cost of ownership

Question 29

Value-based pricing methods include approaches to setting prices that focus on the overall value of the product offering:

A)when the product is produced.
B)as recognized by competitors.
C)as perceived by the consumer.
D)in order to minimize bundling charges.
E)relative to production costs.

Question 30

One of the difficulties associated with value-based pricing is that:

A)costs are impossible to compute.
B)only the creator of a new product can fully understand its value to consumers.
C)value depends on variable costs and not fixed costs.
D)everyday low pricing has neutralized the impact of price on consumers' purchase decisions.
E)it necessitates a great deal of consumer research to be implemented successfully.

Question 31

A company can win a price war and capture market share from competitors if:

A)the competitor doesn't notice.
B)the market actually shrinks,so that if the firm simply maintains its volume its market share will increase.
C)the company has a strong cost advantage and can lower prices without sustaining a loss.
D)the company doesn't actually lower its prices but only appears to.
E)None of the above.A company cannot win a price war.

Question 32

Everyday low pricing (EDLP)provides value to consumers by:

A)continually offering items on sale.
B)minimizing the number of options a consumer can evaluate.
C)noncumulative quantity discounts.
D)reducing their search costs.
E)price discrimination.

Question 33

Yvonne estimates the average cost of her floral arrangements is $14 regardless of whether she is doing 5 or 20 arrangements that day.She adds a standard markup to the $14 estimate to determine her price.Yvonne is using a ________________ pricing method.

A)improvement value
B)value-based
C)everyday low pricing
D)reference-based
E)cost-based

Question 34

Cost-based pricing assumes costs:

A)vary with the level of prices.
B)are used to estimate value.
C)will not vary much for different levels of production.
D)are calculated based on historical consumer perceptions of what things should cost.
E)All of these.

Question 35

Each generation of cell phones has provided greater clarity,range,and multi-functionality.Marketers of cell phones can use these upgrades in ____________________ pricing.

A)everyday low pricing
B)odd-even
C)improvement value
D)reference-based
E)cost-based

Question 36

Firms using a ____________ pricing method set their prices relative to what other firms are charging.

A)improvement value
B)value-based
C)competitor-based
D)reference-based
E)cost-based

Question 37

One of the difficulties associated with value-based pricing is that:

A)the way consumers perceive value constantly changes.
B)only the creator of a new product can fully understand its value to consumers.
C)value depends on variable costs and not fixed costs.
D)everyday low pricing has neutralized the impact of price on consumers' purchase decisions.
E)costs are invaluable.

Question 38

In determining the price for his company's new small business accounting software,Raymond is assessing how much better the software is as compared to alternative products available in the market.Raymond is using _______________ pricing.

A)improvement value
B)odd-even
C)everyday low pricing
D)reference-based
E)cost-based

Question 39

When Greenbelt Construction Company began building houses in a large subdivision with many other builders,they priced their homes slightly higher than their competitors and promoted the added quality features in their homes.Greenbelt was using a ________________ pricing strategy.

A)improvement value
B)value-based
C)everyday low pricing
D)reference-based
E)competitor-based

Question 40

In determining the price for his company's new personal computer photography printer,Raymond is assessing the total cost of owning his printer as compared to alternative products available in the market.Raymond is using _______________ pricing.

A)improvement value
B)odd-even
C)everyday low pricing
D)reference-based
E)cost of ownership

Question 41

When the first hybrid automobiles became available on the market,manufacturers had only minimal production capacity.They used a price skimming strategy primarily to:

A)recoup high research and development costs.
B)signal high quality.
C)limit demand.
D)penetrate a market.
E)test consumers' price sensitivity.

Question 42

Mario is the first retailer in town to sell games for Sony's new PlayStation 3 machine.Mario wants to quickly capture as much of the market for the new games as possible.Mario will likely use a __________________ pricing strategy.

A)market penetration
B)bundling
C)price fixing
D)reference
E)skimming

Question 43

Pricing ________________ products is especially challenging because little or nothing is known about consumers' perceptions of value.

A)cost-based
B)seasonal
C)large-quantity
D)new-to-the-world
E)zone pricing

Question 44

Charging a relatively high price for new and innovative products to those consumers most willing and able to pay the high price is called price:

A)penetration.
B)bundling.
C)fixing.
D)referencing.
E)skimming.

Question 45

One reason marketers of new,innovative products often start out with a price skimming strategy rather than a market penetration strategy is that:

A)few consumers understand a penetration strategy.
B)a price skimming strategy lowers the value for consumers.
C)few marketers understand pricing.
D)it is easier to lower prices than to raise them.
E)price skimming is legal while price penetration is not.

Question 46

Research shows that odd prices signal to the consumers that the price:

A)is guaranteed.
B)is likely to be adjusted daily.
C)is low.
D)is part of a noncumulative discount strategy.
E)is part of a price skimming strategy.

Question 47

For marketers using a price skimming strategy,once the initial demand is met for new and innovative products,they will likely:

A)leave the market.
B)discontinue the product and create a new one.
C)offer deep discounts in order to create a loss leader pricing strategy.
D)lower the price to capture the next most price sensitive market segment.
E)use zone pricing to maximize differences.

Question 48

Marketers use a price skimming strategy for any or all of the following reasons EXCEPT:

A)to recoup high research and development costs.
B)to signal high quality.
C)to limit demand.
D)to gain market share quickly.
E)to test consumers' price sensitivity.

Question 49

With a ________________ pricing strategy,marketers set a low initial price for the introduction of a new product or service.

A)market penetration
B)bundling
C)price fixing
D)reference
E)skimming

Question 50

Price skimming focuses on selling products to ______________ and _____________ in the consumer adoption process model.

A)innovators and early adopters
B)early adopters and early majority
C)early majority and late majority
D)late majority and laggards
E)laggards and innovators

Question 51

When Burroughs-Welcome introduced the first anti-AIDS drugs,they initially set the price at $10,000 for a year's supply.Burroughs-Welcome was probably pursuing a _____________________ pricing strategy.

A)skimming
B)introductory
C)slotting allowance
D)market penetration
E)cost-based

Question 52

For a price skimming strategy to work,the product or service must:

A)be bundled with products or services already available on the market.
B)be similar to what consumers are already comfortable with.
C)have wide market appeal.
D)have low production costs.
E)offer consumers some new benefit currently unavailable.

Question 53

Odd prices:

A)suggest low quality.
B)show the experience curve effect.
C)are predatory prices.
D)allow marketers to avoid having to do markdowns.
E)are consistent with price discrimination.

Question 54

Developing pricing strategies for __________________ is one of the most challenging tasks a manager can undertake.

A)cost-based pricing
B)seasonal rebate items
C)new products
D)zone pricing products
E)quantity discounts

Question 55

The manufacturers of the early electric cars are charging relatively high prices to consumers who are willing to pay the price.They need to use a price skimming strategy because of:

A)the relatively high emissions produced by electric cars.
B)the potential benefits of price bundling.
C)the high costs associated with producing a small volume of cars.
D)the slotting allowances needed to gain greater distribution.
E)a vertical price fixing arrangement among vendors supplying the needed components.

Question 56

For a price skimming strategy to be successful,

A)price need to be reduced on a slow,uniform basis.
B)horizontal zone pricing needs to be employed.
C)marketers need to somehow get consumers to redeem coupons.
D)the price should be odd,not even.
E)it must be difficult for competitors to enter the market.

Question 57

With a price skimming strategy,a marketer will NOT benefit from:

A)increased consumer value associated with price increases.
B)the ability to use seasonal discounts.
C)the opportunity to offer advertising allowances.
D)economies of scale associated with a larger volume of production.
E)market substitution price elasticity.

Question 58

Marketers of new and innovative products or services are more likely to use a price skimming strategy if:

A)they can patent their innovation.
B)they control access to materials used in production of the product.
C)their innovation is complex and will take time to duplicate.
D)entry costs for competitors are high.
E)all of the above.

Question 59

When Apple Computer Company introduced the iPhone--a combination phone,MP3 player,and Internet access device--in 2007,it was priced at $499,considerably higher than either the iPod or competing cell phones.Apple was probably pursuing a ___________________ pricing strategy.

A)market penetration
B)slotting allowance
C)price fixing
D)reference price
E)skimming

Question 60

One of the problems associated with an everyday low pricing (EDLP)strategy is that:

A)stores may have to offer too many noncumulative wholesale discounts.
B)some consumers may associate EDLP with lower quality goods.
C)the retailer may be accused of price discrimination.
D)too many coupons may be redeemed.
E)it may conflict with price-based cost calculations.

Question 61

Chris works for a hardware store.His boss directs him to make a list of manufacturers whose brand names were included in the store's recent newspaper ads and to put copies of the ads with the invoices from each manufacturer.Chris's boss is documenting a(n):

A)advertising allowance.
B)slotting allowance.
C)quantity discount.
D)loss leader pricing deduction.
E)seasonal discount.

Question 62

A pricing strategy is:

A)a long-term approach to setting prices in an integrated effort.
B)the use of seasonal discounts to reduce inventory.
C)the use of slotting allowances to gain access to distribution channels.
D)a short-term approach to setting prices.
E)associated with competitive threats in the marketplace.

Question 63

Production of the De Lorean car,made famous in the film,"Back to the Future," never got above 25,000 units during its lifetime.Automobile industry analysts estimate that production of a car needs to reach around 300,000 units to achieve the ______________,a decrease in unit cost as product volume increases.

A)slotting allowance benefit
B)price fixing return
C)improvement value effect
D)experience curve effect
E)cumulative bundling benefit

Question 64

Marlys designs and manufactures specialty furniture.She has a number of unique products but can only produce in limited quantities.Marlys will probably NOT use a market penetration strategy because:

A)there are few barriers to competitive entry in the market.
B)she could not meet a rapid rise in demand.
C)a low price might signal low quality.
D)she would have to determine zone pricing discounts.
E)the experience curve effect would drop unit costs too rapidly.

Question 65

The saying,"leaving money on the table," is associated with:

A)the use of odd pricing to force consumers to use their coins in making purchases.
B)loss leader pricing.
C)a predatory pricing strategy that results in excessive seasonal discounts.
D)using a market penetration strategy when there is an opportunity for price skimming.
E)vertical price fixing in markets where horizontal price fixing would be more appropriate.

Question 66

3 / 10,n / 30 means:

A)a 10 percent discount if paid in full within 3 days,or the net amount is due in 30 days.
B)a 3 percent discount if paid in full within 10 days,or the net amount is due in 30 days.
C)a 3 percent discount if paid in full within 3 days,or the net amount is due in 10 days.
D)a 3 percent discount if paid in full within 30 days,or the net amount is due in 10 days.
E)none of the above.

Question 67

Generally,a ___________________ represents either a short-term response to a competitive threat or a broadly accepted method of calculating a final price for the customer that is short-term in nature.

A)pricing strategy
B)reference price
C)high / low strategy
D)loss leader price
E)pricing tactic

Question 68

The ____________ occurs when unit cost drops as the quantity sold increases.

A)slotting allowance benefit
B)price fixing return
C)improvement value effect
D)experience curve effect
E)cumulative bundling benefit

Question 69

Manufacturers use cash discounts primarily because they benefit from:

A)uniformed delivered pricing.
B)seasonal slotting allowances.
C)price skimming.
D)the time value of money.
E)high / low pricing.

Question 70

Christina owns and operates a shop that sells home furnishings.One of her vendors has just offered her a greatly reduced price for some traditional Christmas decorations,even though it is really too early to be thinking about holiday merchandise.One of the main pricing issues Christina will have to address as she considers the offer is:

A)whether the cost reduction will be low enough to cover the additional inventory costs she will have to incur.
B)whether she can get an even lower price by waiting.
C)whether the company is going out of business.
D)whether this offer is legal.
E)whether she should open a Christmas shop instead of her home furnishing store.

Question 71

A pricing tactic is:

A)a short-term approach to pricing.
B)a response to a competitive threat.
C)an approach that can be used with intermediaries or consumers.
D)a broadly accepted method of calculating a final price for consumers that is short term in nature.
E)All of the above.

Question 72

If a market penetration pricing strategy results in lower per-unit cost,competitors will be discouraged from entering the market because:

A)selective consumer demand will increase gross profit margins.
B)a high / low cost-based pricing strategy will not work.
C)they would likely need to quickly produce a large volume in order to compete.
D)profits would increase too rapidly.
E)they will only be able to advertise in the same media as the firm using the market penetration strategy.

Question 73

Which of the following is NOT a common business-to-business pricing tactic?

A)Seasonal discounts.
B)Slotting allowances.
C)Quantity discounts.
D)Loss leader pricing.
E)Advertising allowances.

Question 74

Jill knows her wholesaler will give an additional 20 percent off if she orders more than 100 new swimsuits at a time for her store.The wholesaler is using a _______________ pricing tactic.

A)uniformed delivered pricing subsidy
B)seasonal slotting allowance
C)cumulative quantity discount
D)horizontal fixed wholesale price discount
E)noncumulative quantity discount

Question 75

Clark Manufactured Housing Company charges $500 for deliveries within 50 miles and $800 for deliveries 51 to 100 miles away from their factory.The company is using a ____________ pricing tactic.

A)uniformed delivered
B)zone
C)cumulative
D)horizontal
E)noncumulative

Question 76

Yurgen is opening a financial consulting service for high-income retirees in his area.This target market is used to paying for quality and associates high quality with high prices.Yurgen should probably NOT use a market penetration pricing strategy because:

A)he might be missing out on customers who would pay more for his products.
B)there are moderate barriers to competitive entry in the market.
C)a low price might signal low quality.
D)he would have to determine zone pricing discounts.
E)the experience curve effect would drop unit costs too rapidly.

Question 77

The major objectives associated with a market penetration pricing strategy are to:

A)capture the high end of the market demand curve and lower introduction costs.
B)build sales and market share.
C)minimize customer dissatisfaction and maximize reference price value.
D)provide an incentive to purchase a less desirable product in order to obtain a more desirable product.
E)match competitors' prices and communicate high quality.

Question 78

The primary reasons manufacturers offer seasonal discounts to retailers are to more easily plan production schedules and to:

A)lessen inventories of finished goods.
B)reduce advertising allowances.
C)increase price skimming.
D)control vertical pricing.
E)alter consumers' perceived reference price.

Question 79

When HP first introduced their Inkjet printers,consumers could only buy refill cartridges from HP.HP made significant profits from the sale of replacement cartridges.In this situation,HP logically used a ______________ pricing strategy for their printers.

A)market penetration
B)loss leader
C)price fixing
D)reference
E)skimming

Question 80

B2B quantity discounts:

A)are used to encourage consumers to purchase larger quantities each time they buy.
B)might be cumulative or noncumulative.
C)are considered illegal under the Robinson-Patman Act.
D)usually lead to price wars.
E)can only be offered to large purchasers.