Deck 16: Pricing Objectives and Policies

Question 1

A target return pricing objective seeks to obtain a specific level of profit-often stated as a percentage of sales or return on investment.

Answer 1

True

Question 2

Sales-oriented pricing objectives are sensible because sales growth almost guarantees higher profits.

Answer 2

False

Question 3

Many nonprofit organizations try to set a price level that will earn a target return figure of zero.

Answer 3

True

Question 4

Pricing objectives need not be explicitly stated.

Question 5

Sales-oriented pricing objectives-such as maintaining or increasing market share-are unpopular because it is so difficult to measure results.

Question 6

A profit maximization pricing objective may lead to relatively low prices, especially if demand is very elastic.

Question 7

Sales-oriented pricing objectives don't refer to profit.

Question 8

"Meeting competition" is a sales oriented pricing objective.

Question 9

Pricing to achieve profit maximization always leads to high prices.

Question 10

Pricing objectives and policies should flow from company-level objectives.

Question 11

Any business transaction can be thought of as an exchange of "something of value" for money-where money is the price.

Question 12

Almost every business transaction in our modern economy involves an exchange of money.

Question 13

The target return figure is zero for an organization that sets a price level that will just recover costs.

Question 14

A sales-oriented pricing objective seeks some level of unit sales, dollar sales, or share of market-without referring to profit.

Question 15

A target return pricing objective has administrative advantages in a large company where there are many divisions to compare.

Question 16

A marketing manager who sets prices to achieve a given level of market share is using a profit-oriented pricing objective.

Question 17

A target return objective and a profit maximization objective are both profit-oriented objectives.

Question 18

Profit maximization objectives lead to high prices and monopolies-and are generally not in the public interest.

Question 19

Managers satisfied with their current market share and profits are most likely to adopt sales growth oriented objectives.

Question 20

A firm should not simply assume that its profits will grow if its sales grow.

Question 21

A skimming price policy usually involves a slow reduction in price over time.

Question 22

A flexible-price policy is most often used where products are not standardized and where bargaining is common.

Question 23

When the total market is not growing a common strategy adopted is to stabilize prices.

Question 24

Meeting competition and nonprice competition are both status quo objectives.

Question 25

A flexible-price policy is illegal in the U.S.

Question 26

Most firms avoid administered prices because they may be illegal under the Robinson-Patman Act.

Question 27

Nonprice competition, a status quo pricing objective, is never part of an aggressive overall marketing strategy.

Question 28

Status quo pricing objectives might focus on meeting competition, avoiding competition, or stabilizing prices.

Question 29

Flexible pricing is most common in the channels, in direct sales of business products, and at retail for expensive shopping products.

Question 30

Administered prices are prices agreed to by competing firms in a market.

Question 31

Status quo pricing objectives suggest avoiding price competition, but may lead to very aggressive competition with Promotion, Place, or Product.

Question 32

A skimming pricing policy tries to sell to customers who are at the top of the demand curve first, before aiming for more price sensitive customers.

Question 33

The haggling that often occurs when a consumer buys a new car is a direct result of the flexible pricing most auto dealers use.

Question 34

The majority of U.S. firms use a one-price policy.

Question 35

Flexible-price policies are most common in the channels, in direct sales to business customers, and for expensive shopping products because sales reps may need to make adjustments for market conditions.

Question 36

Most firms in the U.S. avoid using a one-price policy because it is so inconvenient to administer and leads to more negotiation and higher selling costs.

Question 37

In the market introduction stage of the product life cycle, if a firm has economies of scale and expects competitors to enter the market soon, it would be wise to adopt a skimming pricing policy.

Question 38

When a firm sells through intermediaries, there is little reason to try to administer the price intermediaries charge final consumers.

Question 39

In less-developed economies, retail shopkeepers typically use a one-price policy.

Question 40

A skimming policy does not involve price reduction over time.

Question 41

Penetration pricing may be wise if the firm expects strong competition very soon after introduction.

Question 42

Many intermediaries seek advertising allowances from manufacturers to help them pay the cost of advertising the products they sell.

Question 43

The exchange rate affects what is a competitive price for products sold in international markets, but not local markets.

Question 44

There are two kinds of quantity discounts: cumulative and accumulative.

Question 45

Not taking advantage of cash discounts may have the same effect as paying a fairly large "interest charge."

Question 46

A low penetration price discourages competitors from entering the market.

Question 47

Basic list prices are the prices that final consumers or users are normally asked to pay.

Question 48

The term "3/10, net 30" means that a 3 percent discount off the face value of the invoice is allowed if the invoice is paid within 10 days, and that otherwise the full face value is due within 30 days.

Question 49

Exchange rate changes can be an important factor even for a small firm that sells only in its own local market.

Question 50

If a firm's demand curve is fairly elastic, a penetration pricing policy would be more suitable than a skimming pricing policy.

Question 51

Allowances are given to final consumers, business customers, or channel members for accepting more of something.

Question 52

Noncumulative quantity discounts are intended to encourage customers to make more of their on-going purchases from the same seller.

Question 53

The term "3/10, net 30" means that thirty percent of the face value of the invoice is due immediately, and that the rest must be paid within 30 days.

Question 54

Introductory price dealing means setting a low "penetration" price early in the product life cycle to discourage competitors from entering the market.

Question 55

Quantity discounts encourage customers to buy in larger amounts.

Question 56

How much a nation's money is worth in some other nation's currency can impact the price level in both local and international markets.

Question 57

Introductory price dealing involves setting high initial prices on a product when it is introduced-to see how much consumers are willing to pay.

Question 58

A seasonal discount encourages buyers to stock products earlier than present demand requires.

Question 59

Seasonal discounts tend to smooth out sales during the year and therefore permit year-round operation.

Question 60

Cumulative quantity discounts encourage repeat buying from the same seller, while noncumulative quantity discounts encourage large individual orders.

Question 61

When a seller uses "zone pricing," all customers who are in the same zone are charged the same freight charge-even if the actual shipping cost varies.

Question 62

There are more pricing options in pure competition than in monopolistic competition.

Question 63

If a seller wanted to pay the delivery charges and keep title to the products until delivered to a buyer, the seller could use "F.O.B. buyer's factory" geographic pricing terms.
F.O.B. buyer's factory. In this case, title does not pass until the products are delivered.
F.O.B. delivered or

Question 64

Freight-absorption pricing basically amounts to cutting list price on sales to distant customers.

Question 65

Uniform delivered pricing is most commonly used when transportation costs are relatively low.

Question 66

F.O.B. "shipping point" pricing simplifies the seller's pricing, but tends to reduce the size of the seller's market.
F.O.B. shipping point pricing simplifies the seller's pricing but it may narrow the market.

Question 67

When a seller uses "zone pricing," the actual freight charge for delivering each order is included in the price the buyer pays for the product.

Question 68

Value pricing involves developing a "bare bones" marketing mix and a cheap price.

Question 69

Push money allowances are intended to make the retailers' salespeople sell particular products very aggressively.

Question 70

"Value pricing" means setting a fair price level for a marketing mix that gives the target market superior customer value.

Question 71

Unfair trade practice acts put a higher limit on prices, especially at the wholesale and retail levels.

Question 72

In oligopoly situations, the only sensible policy is meeting competition.

Question 73

A value pricer tries to offer a target market the same marketing mix as competitors but with a below-the-market price.

Question 74

In mature markets there is downward pressure on both prices and profit margins. In this situation retailers often have to set prices to meet the competition.

Question 75

Most firms operate in monopolistic competition instead of pure competition.

Question 76

The unfair trade practices acts are intended to prevent intermediaries from using "outrageously" high markups that would cheat consumers.

Question 77

Most firms operate in monopolistic competition, where products and whole marketing mixes are not exactly the same.

Question 78

Meeting the competitive price often makes sense for a firm in an oligopoly situation, because setting a price above the market will usually result in a large loss of sales it might have gotten at the competitive price.

Question 79

In zone pricing, the seller pays the actual freight charges and bills each customer the exact amount.

Question 80

Stocking allowances are given to an intermediary to get shelf space for a product.