Question 1

Companies that aim to ________ strive to be affordable luxuries.
A) survive in the market
B) partially recover their costs
C) maximize their market share
D) pursue value pricing
E) be product-quality leaders

Accepted Answer

E

Question 2

Which of the following is the first step in setting a pricing policy?
A) selecting a pricing method
B) selecting the pricing objective
C) determining demand
D) estimating cost
E) analyzing competitors' costs, prices, and offers

Accepted Answer

Before setting the price, the company needs to determine its pricing objective. This objective may be to maximize profits, increase market share, or simply survive. Once the pricing objective is set, the other steps such as determining demand, estimating cost, selecting a pricing method, and analyzing competitors' costs, prices, and offers can be taken.

Question 3

Many consumers are willing to pay $100 for a perfume that contains $10 worth of scent because the perfume is from a well-known brand. What kind of a pricing is the company depending on?
A) going-rate pricing
B) image pricing
C) market-skimming pricing
D) target pricing
E) markup pricing

Accepted Answer

The company is depending on image pricing, which sets a higher price for a product based on its brand or image rather than its intrinsic value or cost. In this case, the consumers are willing to pay a premium for the perfume because it is associated with a well-known brand.

Question 4

The minimum price that most consumers would pay for a given product is known as the ________ price.
A) everyday low
B) usual discounted
C) fair
D) typical
E) lower-bound

Accepted Answer

The answer of The minimum price that most consumers would...

Question 5

A market-penetration pricing strategy is most suitable when _______.
A) a low price slows down market growth
B) production and distribution costs fall with accumulated production experience
C) a high price dissuades potential competitors from entering the market
D) the market is characterized by inelastic demand
E) a low price encourages actual competition

Accepted Answer

Market-penetration pricing strategy is most suitable when production and distribution costs fall with accumulated production experience. This strategy involves setting a low price for a new product with the aim of attracting a large number of customers and gaining a significant market share. This strategy is effective when the production and distribution costs decrease with experience, allowing the company to maintain profitability despite the low price. It helps to establish a customer base and gain market share quickly.

Question 6

A company that is looking to maximize its market share would do well to follow ________ pricing.
A) markup
B) market-penetration
C) market-skimming
D) survival
E) target-return

Accepted Answer

Market-penetration pricing is a strategy where a company sets a low price for its products or services to enter into a new market and gain maximum market share. By setting a low price, the company attracts more customers and builds a loyal customer base, which helps in increasing sales volume and market share over time. This strategy works best for companies that want to dominate the market and drive out competitors.

Question 7

When Apple introduced its iPhone, it was priced at $599. This allowed Apple to earn the maximum amount of revenue from the various segments of the market. Two months after the introduction, the price has come down to $399. What kind of a pricing did Apple adopt?
A) loss-leader pricing
B) market-penetration pricing
C) market-skimming pricing
D) target-return pricing
E) value pricing

Accepted Answer

Apple adopted market-skimming pricing, which involves charging a high price for a new product before lowering the price to reach a wider market. This strategy allows a company to earn maximum revenue from early adopters willing to pay a premium price and later capture more price-sensitive consumers by reducing the price.

Question 8

Market skimming pricing makes sense under all the following conditions, EXCEPT ________.
A) if a sufficient number of buyers have a high current demand
B) if the unit costs of producing a small volume are high enough to cancel the advantage of charging what the traffic will bear
C) if the high initial price does not attract more competitors to the market
D) if consumers are likely to delay buying the product until its price drops
E) if the high price communicates the image of a superior product

Accepted Answer

Market skimming pricing may not make sense if consumers are likely to delay buying the product until its price drops. In such cases, the initial high price may deter potential buyers who are waiting for the price to come down.

Question 9

After estimating the demand and costs associated with alternative prices, a company has chosen to price its product in such a way that it gains the highest rate of return on its investment. The company is looking to ________.
A) maximize its market share
B) skim the market
C) become a product-quality leader
D) survive in the market
E) maximize its current profit

Accepted Answer

The company's goal is to gain the highest rate of return on its investment, which indicates that it is seeking to maximize its current profit. Therefore, option E is the best choice.

Question 10

When consumers examine products, they often compare an observed price to an internal price they remember. This is known as a(n)________ price.
A) markup
B) reference
C) market-skimming
D) accumulated
E) target

Accepted Answer

The described phenomenon is known as a reference price, where consumers compare the observed price of a product to an internal reference point or price they remember.

Question 11

Companies who believe that a higher sales volume leads to lower unit costs and higher long-run profits are attempting to ________.
A) maximize their market share
B) skim the market
C) become a product-quality leader
D) merely survive in the market
E) maximize their current profits

Accepted Answer

The strategy of believing that higher sales volume leads to lower unit costs and higher long-run profits is typically associated with maximizing market share. This involves aggressively competing to sell as much of the product as possible in the market.

Question 12

A firm that is plagued with overcapacity, intense competition, or changing wants would do better if it pursues ________ as its major objective.
A) market skimming
B) product-quality leadership
C) survival
D) profit maximization
E) market penetration

Accepted Answer

When a firm is struggling with overcapacity, intense competition or changing market wants, its primary objective becomes survival. The business must focus on staying afloat, rather than pursuing aggressive strategies like market skimming, profit maximization, or product-quality leadership. Market penetration may also be difficult in such a situation, as the market may be saturated with too many players already. Therefore, the best choice in this scenario is to ensure that the firm can continue to operate and weather the challenging business environment.

Question 13

A company decided to conduct a market survey for its new MP3 player which it had priced at $150. However, in the survey, 95 percent of the participants said that the maximum they would pay for the MP3 player is $100. This is an example of which of the following possible consumer reference prices?
A) historical competitor price
B) expected future price
C) usual discounted price
D) upper-bound price
E) last price paid

Accepted Answer

The 95% of the participants stating that they would only pay a maximum of $100 suggests an upper-bound price, indicating the highest price that consumers would be willing to pay for the product.

Question 14

After determining its pricing objectives, what is the next logical step a firm should take in setting its pricing policy?
A) It should analyze its competitors' costs, prices, and offers.
B) It should select its pricing method.
C) It should select its final price.
D) It should determine the demand for its product.
E) It should estimate the cost of its product.

Accepted Answer

After determining its pricing objectives, the next logical step a firm should take is to determine the demand for its product. This helps the firm understand the market's response to different pricing strategies that it can implement to reach its pricing objectives. Analyzing competitors' costs, prices, and offers, selecting pricing method, selecting final price, and estimating the cost of the product are all important steps in pricing policy, but they come after determining the demand for the product.

Question 15

While shopping at the mall, Jane was asked by one of the sales representatives at the cosmetics counter to try out a new lipstick that her company was test marketing. The company representative asks her how much she would be willing to pay for the lipstick. After trying it out, Jane is of the opinion that $5 is just the right price for it. What type of a reference price is Jane using?
A) usual discounted price
B) fair price
C) maximum retail price
D) last price paid
E) historical competitor price

Accepted Answer

Jane is using a fair price as the reference point because she tried the lipstick and then decided what price she thought was appropriate for the product. She did not reference any previous prices or competitor prices. The other options don't fit the scenario - usual discounted price assumes there is an established typical price that has previously been discounted, maximum retail price implies a cap on the highest price, and last price paid is irrelevant since Jane did not mention any previous purchases.

Question 16

________ price refers to what the consumers feel the product should cost.
A) Fair
B) Typical
C) Usual discounted
D) List
E) Maximum retail

Accepted Answer

Fair price is the amount that consumers believe is reasonable to pay for a product or service, taking into account factors such as quality, demand, and competition. This is an important consideration for businesses when pricing their products, as they need to ensure that the price is not so high that it discourages potential customers, but also not so low that it signals low quality.

Question 17

Pricing cues such as sale signs and prices that end in 9 are more influential ________.
A) when customers have substantial knowledge about prices
B) when customers purchase the particular item regularly
C) when product quality is standardized
D) when product designs vary over time
E) when prices do not vary from time to time

Accepted Answer

The answer of Pricing cues such as sale signs and...

Question 18

When a company introduces a product at a very high price and then gradually drops the price over time, it is pursuing a ________ strategy.
A) market-penetration pricing
B) market-skimming pricing
C) value-pricing
D) switching cost
E) loss-leader pricing

Accepted Answer

This is the definition of market-skimming pricing. The company sets a high price initially to capture the most that it can from the market before competition sets in, and then gradually lowers the price as time goes on to attract more price-sensitive consumers.

Question 19

The reservation price or the maximum that most consumers would pay for a given product is known as the ________ price.
A) expected future
B) usual discounted
C) upper-bound
D) typical
E) historical competitor

Accepted Answer

The reservation price represents the upper-bound price that consumers are willing to pay for a product. It is the maximum price they are willing to pay. Therefore, the correct answer is C, upper-bound price. The other options, such as expected future, usual discounted, typical, and historical competitor, do not accurately describe the reservation price.

Question 20

A company has developed the prototype of a mobile phone which it plans to launch in the next few months. The phone comes equipped with the most advanced technological features. As part of its test marketing efforts, it allows customers to examine and use the prototype and also gathers feedback regarding product features and price. The results of this test marketing effort show that customers are willing to pay at least $500, considering the phone's various features. As such, the company has found out about the customers' ________.
A) last paid price
B) expected future price
C) lower-bound price
D) upper-bound price
E) typical price

Accepted Answer

The test marketing effort showed that customers are willing to pay at least $500, which indicates the lower-bound price that the company can charge for the product. Therefore, the company has found out about the customers' lower-bound price.

Quiz 14: Developing Pricing Strategies and Programs

Companies that aim to ________ strive to be affordable luxuries.

Which of the following is the first step in setting a pricing policy?

Many consumers are willing to pay $100 for a perfume that contains $10 worth of scent because the perfume is from a well-known brand. What kind of a pricing is the company depending on?

The minimum price that most consumers would pay for a given product is known as the ________ price.

A market-penetration pricing strategy is most suitable when _______.

A company that is looking to maximize its market share would do well to follow ________ pricing.

When Apple introduced its iPhone, it was priced at $599. This allowed Apple to earn the maximum amount of revenue from the various segments of the market. Two months after the introduction, the price has come down to $399. What kind of a pricing did Apple adopt?

Market skimming pricing makes sense under all the following conditions, EXCEPT ________.

After estimating the demand and costs associated with alternative prices, a company has chosen to price its product in such a way that it gains the highest rate of return on its investment. The company is looking to ________.

When consumers examine products, they often compare an observed price to an internal price they remember. This is known as a(n) ________ price.

Companies who believe that a higher sales volume leads to lower unit costs and higher long-run profits are attempting to ________.

A firm that is plagued with overcapacity, intense competition, or changing wants would do better if it pursues ________ as its major objective.

A company decided to conduct a market survey for its new MP3 player which it had priced at $150. However, in the survey, 95 percent of the participants said that the maximum they would pay for the MP3 player is $100. This is an example of which of the following possible consumer reference prices?

After determining its pricing objectives, what is the next logical step a firm should take in setting its pricing policy?

________ price refers to what the consumers feel the product should cost.

Pricing cues such as sale signs and prices that end in 9 are more influential ________.

When a company introduces a product at a very high price and then gradually drops the price over time, it is pursuing a ________ strategy.

The reservation price or the maximum that most consumers would pay for a given product is known as the ________ price.