Deck 8: Pricing and Credit Strategies

Question 1

Which of the following is not included in the eight steps to better pricing in the text?

A) Assess what value your customers place on the product or service.
B) Assess customers' price sensitivity.
C) Consider competitors' reactions.
D) Assess customers' emotional response.
E) Adjust prices based on the consumer price index.

Answer 1

E

Question 2

Wholesalers often operate on ________ profit margins.

A) Small
B) Medium
C) Large
D) Enormous
E) Tiny

Answer 2

A

Question 3

Manufacturers must control ________ to create sustainable profits.

A) Raw material costs
B) Raw material supplies
C) Raw material storage
D) Raw material usage
E) All of the above

Answer 3

A

Question 4

If a product is retail priced at $20 and the wholesale markup is 50%, what was the cost that the wholesaler charged?

A) $10
B) $12
C) $15
D) $16
E) $20

Question 5

Which of the following is not a typical discounting method for manufacturers?

A) Volume discounts
B) Credit terms
C) Seasonal sales
D) All of the above
E) None of the above

Question 6

Which of the following types of businesses do not typically use a follow-the-leader pricing strategy?

A) Wholesale
B) Manufacturing
C) Retail
D) Service
E) All of the above typically use a follow-the-leader pricing strategy.

Question 7

An incentive for early payment, a discount, can be added. A 2 percent discount for payment within 10 days or full payment within 30 days is an example and is denoted as which of the following?

A) 2/10, net 30
B) 2/30, net 10
C) 10/30, net 2
D) 30/2, net 10
E) 10/2, net 30

Question 8

As you define the marketing strategy for your company, including ________, the range of appropriate pricing strategies emerges.

A) Your target market(s)
B) Competitive advantages
C) Overall marketing mix
D) All of the above
E) None of the above

Question 9

Which of the following are examples of price adjustments?

A) Order size discounts
B) Dealer and distributor discounts
C) Merchandising discounts
D) Promotion discounts and bonuses
E) All of the above

Question 10

Markup pricing is commonly used as a form of ________ pricing.

A) Cost plus
B) Cost positive
C) Cost favorable
D) Cost and more
E) All of the above

Question 11

If prices are too ________, the supply will ________ demand.

A) High, exceed
B) High, be less than
C) Low, exceed
D) Low, be more than
E) None of the above

Question 12

The ________ price is what remains after all pricing factors, such as discounts and allowances, are deducted from list or invoice to reach final prices.

A) Pocket
B) Concise
C) Abridged
D) Portable
E) Mini

Question 13

The manufacturer and retailer typically ________ their costs to determine a selling price.

A) Double
B) Triple
C) Quadruple
D) All of the above
E) None of the above

Question 14

A service business may use which of the following types of pricing strategies?

A) Competition
B) Penetration
C) Personalized
D) All of the above
E) None of the above

Question 15

Which of the following is not a factor to consider in pricing strategy for your business?

A) Desired profitability
B) Market positioning
C) Psychology of pricing
D) The message you are sending customers
E) The lowest sale price you can afford

Question 16

In order to price objectively, the ________ of extending credit must be fully incorporated into the pricing decision.

A) Costs
B) Benefits
C) Rate
D) Value
E) None of the above

Question 17

Which of the following products is likely to have the most elastic demand?

A) Gas
B) Milk
C) Bread
D) Digital cameras
E) Toothpaste

Question 18

Value pricing means finding the balance between ________ and ________ that will give your target customers the value they seek.

A) Quality, price
B) Quality, quantity
C) Quantity, price
D) Price, features
E) Cost, price

Question 19

Which of the following is not a type of credit?

A) Credit cards
B) Merchant credit cards
C) Installment credit
D) Trade credit
E) Good-will credit

Question 20

An industry that has traditionally used the skimming price strategy is ________.

A) Technology
B) Clothing
C) Grocery stores
D) Household cleaners
E) Restaurants

Question 21

Value pricing is just price cutting.

Question 22

Calculate the price per hour for a service business based on 75% profit with cost per hour of $30.

A) $120
B) $130
C) $100
D) $140
E) $90

Question 23

Retailers who buy goods wholesale and resell them in stores sometimes keystone, or triple, the cost of goods sold, as a rule of thumb for estimating what price to charge.

Question 24

Cash-in-advance (CIA) terms require prepayment from the customer before either shipping or production.

Question 25

Extending credit has costs and benefits to few types of organizations.

Question 26

Many firms use a variable pricing strategy, often without conscious recognition of it.

Question 27

Tracking receivables helps to manage ________.

A) Cash flow
B) Assets
C) Owner's equity
D) COGS
E) Fixed costs

Question 28

The retailer's rule of thumb is to keystone, meaning to increase the price by ________.

A) 50%
B) Double
C) Triple
D) 80%
E) 75%

Question 29

A wholesaler usually marks up the selling price by about ________ percent.

A) 20
B) 10
C) 5
D) 15
E) 25

Question 30

A firm that sets high prices on their products or services to send a message of uniqueness or premium quality is using a prestige pricing strategy.

Question 31

The primary cost of production in a service business is which of the following?

A) Labor
B) Land
C) Building
D) Capital goods
E) All of the above

Question 32

Price lining is the process of creating distinctive pricing levels.

Question 33

Cost-plus pricing is rarely used.

Question 34

A penetration pricing strategy uses a ________ price during the early stages of a product's life cycle to gain market share.

A) Low
B) High
C) Competitive
D) Mid-range
E) Fixed

Question 35

Which of the following statements are not true regarding credit cards?

A) They can be issued directly by a merchant.
B) They can be issued through a third party.
C) Cardholders may be eligible for special discounts.
D) Cardholders may be eligible for special store events.
E) Cardholders are usually not driven to return to the store.

Question 36

Which of the following is not a dimension of price and quality?

A) Penetration Pricing
B) Value Pricing
C) Prestige Pricing
D) Skimming Pricing
E) Feasibility Pricing

Question 37

It is common for ________ businesses to use a meet-or-beat-the-competition pricing strategy, which entails constantly matching or undercutting the pricing of your competition.

A) Service
B) Manufacturing
C) Distribution
D) All of the above
E) None of the above

Question 38

Inelastic demand is demand that does not change in a significant way when prices change.

Question 39

The supply of products and/or services exceeds the demand for them at market clearing prices.

Question 40

If prices are too low, there may be ________ of products.

A) Shortages
B) Surplus
C) Excess
D) Less demand
E) All of the above

Question 41

Pay Pal requires sellers to obtain merchant status prior to offering their services.

Question 42

If you were to use credit, how would you deal with aging receivables?

Question 43

Price is simply the amount that a seller requires in exchange for the use of a product or service or for transferring its ownership.

Question 44

Would you use credit in your business? Why or why not?

Question 45

Service businesses need to have reliable and accurate costing information to set even approximate prices.

Question 46

Entrepreneurs should always sell their products at the lowest price they can afford.

Question 47

How would you price your item based on the price and quality dimensions in Figure 8-1? Why?

Question 48

Apply cost-plus pricing to your business idea. How much would your price be, based on your desired profit? Is it affordable?

Question 49

Consumers may assume that a low price indicates low quality.

Question 50

Discuss how you would apply the eight steps to better pricing.