Question 1

When higher-priced competitors match the lower prices but have longer staying power because of deeper cash reserves, it leads to a(n) ________.

Accepted Answer

The answer of When higher-priced competitors match the lower prices...

Question 2

A low price buys market share but not market loyalty. The same customers will shift to any lower-priced product that may come along. This is called the ________.

Accepted Answer

The answer of A low price buys market share but...

Question 3

When Alan bought his car, the bank gave him 24 months to repay his car loan. But when Alan made a request to increase the time frame to 36 months, the bank granted the extension. The bank was willing to offer Alan a ________.

Accepted Answer

The question states that Alan requested to increase the time frame (or payment term) of his car loan from 24 months to 36 months. The bank granted this extension, indicating that they were willing to offer a longer payment term. Therefore, the correct choice is A) longer payment term.

Question 4

When a company maintains its price but removes or prices separately one or more elements that were part of the former offer, such as free delivery or installation, it is known as ________.

Accepted Answer

Unbundling is the practice of removing or pricing separately one or more elements that were previously part of a bundled offer. This allows companies to maintain their price while giving customers the option to pay for only what they want or need.

Question 5

Madame Tussaud's wax museum is a popular tourist attraction. The museum charges higher entry rates for tourists compared to locals. This form of price discrimination is known as ________.

Accepted Answer

Customer-segment pricing involves charging different prices to different groups of customers for the same product or service, based on factors like age, occupation, or in this case, whether they are locals or tourists. Madame Tussaud's practice of charging tourists more than locals is an example of this strategy.

Question 6

In markets that are characterized by products that are highly homogeneous, how should a firm react to a competitor's reduction in price?

Accepted Answer

In a market where products are highly homogeneous, it is difficult to differentiate based on price. Therefore, the best option is to augment the product with additional features or benefits that add value to the customer's experience. This can help the firm maintain its price point and increase customer loyalty. Additionally, reducing features or services may harm the firm's reputation and even cause customers to switch to the competitor who lowered their price.

Question 7

________ reward dealers for participating in advertising and sales support programs.

Accepted Answer

Promotional allowances are rewards given to dealers for participating in advertising and sales support programs. Functional discounts refer to discounts given for performing certain functions such as handling, storage, and transportation. Trade discounts are discounts given to channel partners for reselling the products. Rebates are discounts given after the sale has been made. Quantity discounts are discounts given for larger orders.

Question 8

For price discrimination to work, ________.

Accepted Answer

The answer of For price discrimination to work, ________.
...

Question 9

When museums charge a lower admission fee to students and senior citizens, such a form of price discrimination is known as ________.

Accepted Answer

Customer-segment pricing is the practice of charging different prices to different groups of customers, such as students and senior citizens, based on their willingness and ability to pay. It is a common form of price discrimination used by many businesses, including museums.

Question 10

When hotels drop their rates on the weekends, then this form of price discrimination is known as ________.

Accepted Answer

When hotels drop their rates on the weekends, it is a form of time pricing as they are offering different prices based on the time period or day of the week. Channel pricing refers to offering different prices through different sales channels (e.g. online versus in-person), image pricing is where a product's price is set at a level to reflect a certain image, product-form pricing involves different pricing based on variations in the product (e.g. different sizes of a product have different prices), and location pricing involves offering different prices based on the location of the customer.

Question 11

A company does not set a final price until the product is finished or delivered. This is known as ________.

Accepted Answer

The practice of not setting a final price until the product is finished or delivered is called delayed quotation pricing. This approach allows companies to consider all of the costs associated with producing and delivering the product before determining an appropriate price.

Question 12

The price of tickets to the opera vary depending on where the person would like to be seated-in the gallery or in the stalls. This is an example of ________.

Accepted Answer

The pricing strategy in this scenario is based on the location of the seat, hence it can be termed as location pricing.

Question 13

In ________, the seller charges a separate price to each customer depending on the intensity of his or her demand.

Accepted Answer

First-degree price discrimination, also known as perfect price discrimination, occurs when a seller charges a different price for each unit sold or to each customer based on their willingness to pay. This approach aims to capture the maximum amount of consumer surplus for the seller by tailoring prices to the individual demand of each customer.

Question 14

When supermarkets and department stores drop the price on well-known brands to stimulate store traffic, they are said to be following ________.

Accepted Answer

This situation describes a loss-leader pricing strategy, where a product is sold below its cost to attract customers into the store in hopes they will make additional purchases at full price.

Question 15

________ refers to selling below cost with the intention of destroying competition.

Accepted Answer

Predatory pricing refers to selling products below cost with the intention of driving competitors out of business. This strategy is illegal in many countries as it harms fair competition and can lead to monopolies.

Question 16

When a company requires the customers to pay today's price and all or part of any inflation increase that takes place before delivery, it is known as ________.

Accepted Answer

This is known as an escalator clause, where the price of a product is subject to change due to inflation or other factors, and the customer agrees to pay any increase in price that occurs before delivery.

Question 17

In second-degree price discrimination, the seller charges ________.

Accepted Answer

In second-degree price discrimination, the seller charges different prices based on the volume of the purchase. This means that buyers who purchase larger volumes receive a lower price per unit than those who purchase smaller volumes.

Question 18

The airline and hospitality industries use ________, by which they offer discounted but limited early purchases, higher-priced late purchases, and the lowest rates on unsold inventory just before it expires.

Accepted Answer

Yield pricing is a pricing strategy used by the airline and hospitality industries, among others. This strategy involves offering discounted early purchases, higher-priced late purchases, and the lowest rates on unsold inventory just before it expires. The goal is to maximize revenue by adjusting prices based on demand and capacity.

Question 19

When Coca-Cola carries a different price depending on whether the consumer purchases it in a fine restaurant, a fast-food restaurant, or a vending machine, then this form of price discrimination is known as ________.

Accepted Answer

The answer of When Coca-Cola carries a different price depending...

Question 20

In ________, the seller charges different amounts to different classes of buyers.

Accepted Answer

Third-degree price discrimination involves charging different prices to different groups of customers. This can be based on factors such as age, location, or willingness to pay. This type of pricing strategy is used to maximize profits by charging customers different prices based on their perceived value of the product or service.

Quiz 14: Developing Pricing Strategies and Programs