Question 1

Which of the following is an internal factor that affects pricing decisions in a company?
A) the nature of the market
B) the degree of inflation in the economy
C) the overall marketing strategy of the company
D) the forces of demand and supply in the market
E) consumers' perception of value

Accepted Answer

The overall marketing strategy of the company is an internal factor that affects pricing decisions as it considers the company's goals, objectives, and positioning in the market. A company's marketing strategy plays a significant role in determining the price of its products or services.

Question 2

Distinguish between value-based pricing and cost-based pricing.

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Question 3

Companies using target costing ________.
A) first design a new product and then determine its cost
B) tailor their products to be in line with the marketing mix
C) routinely neglect customer value considerations
D) avoid determining an ideal selling price until analyzing test market results
E) start with an ideal selling price and then target costs that will ensure that the price is met

Accepted Answer

Companies using target costing start with an ideal selling price and then target costs that will ensure that the price is met. This involves considering customer value considerations and tailoring the product to fit within the marketing mix while also keeping costs within target levels. They do not first design a new product and then determine its cost, routinely neglect customer value considerations, or avoid determining an ideal selling price until analyzing test market results.

Question 4

Explain the significance of a downward-sloping experience curve.

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Question 5

What is high-low pricing?

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Question 6

Explain break-even pricing.

Accepted Answer

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Question 7

Briefly describe the process of value-based pricing.

Accepted Answer

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Question 8

DivetheBlue, a company marketing deep-sea diving equipment, charges very high prices for its products. Despite the availability of many low-priced products in the market, customers seem to prefer DivetheBlue, which has earned a reputation for selling high-quality products. This exemplifies ________.
A) a pure monopoly
B) an oligopoly
C) a nonprice position
D) break-even pricing
E) target costing

Accepted Answer

This exemplifies nonprice position, where a company competes on factors other than price, such as quality, brand image, and customer service. DivetheBlue has established a reputation for selling high-quality products, which has led customers to prefer its products even though they are priced higher than competitors.

Question 9

A marketer's fixed costs are $400,000. The variable cost is $16 per unit, and the price of the product is $24 per unit. If the company wants to make a profit, how many units must it sell and at what price?

Accepted Answer

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Question 10

A marketer's fixed costs are $400,000, the variable cost is $16 per unit, and the price of the product is $24 per unit. What is the company's break-even point in dollar sales?

Accepted Answer

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Question 11

Markup pricing is used when a firm tries to determine the price at which it will break even or make the target return it is seeking.

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Question 12

Which of the following is an external factor that affects pricing decisions in a company?
A) the company's overall marketing strategy
B) the nature of the market
C) the organizational objectives of the company
D) elements of the company's marketing mix
E) the annual advertising budget of rival firms

Accepted Answer

The answer of Which of the following is an external...

Question 13

Define total costs.

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Question 14

What is good-value pricing?

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Question 15

What is competition-based pricing?

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Question 16

A break-even chart shows the total cost and total revenue expected at various sales volume levels.

Accepted Answer

A break-even chart is a graphical representation of the break-even analysis, which shows the point at which total cost equals total revenue. The chart displays the fixed and variable costs as well as the sales volume needed to reach the break-even point.

Question 17

Explain the concept of the price floor.

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Question 18

PoolPak produces climate-control systems for large swimming pools. The company's customers are more concerned about service support for maintaining their systems than the initial price of the product. PoolPak specializes in and differentiates itself through both cutting-edge technologies used to build its high-value climate control systems as well as seamless quality service. PoolPak's prices are very high, but demand for its climate-control systems seems to be forever on the rise. This exemplifies ________.
A) target costing
B) a pure monopoly
C) cost-plus pricing
D) a nonprice position
E) break-even pricing

Accepted Answer

PoolPak's customers are more concerned about service support and maintenance, which indicates that the company has a nonprice position. They are able to charge high prices because their customers value their unique service and technology offerings.

Question 19

Explain the concept of the price ceiling.

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Question 20

Elmo Inc., a global conglomerate, designed the ElBrush, an electric toothbrush. Sensing market demand for the electric toothbrush, Elmo started with an ideal selling price of $3 based on customer value considerations and then targeted costs to ensure that the price was met. This exemplifies ________.
A) competition-based pricing
B) cost-plus pricing
C) target costing
D) everyday low pricing
E) high-low pricing

Accepted Answer

The scenario exemplifies target costing, where the company starts by considering customer value and sets a target cost based on that, instead of simply adding a markup to the costs like in cost-plus pricing or setting the price based on competitors like in competition-based pricing. It is also not an example of everyday low pricing or high-low pricing.

Quiz 10: Pricing: Understanding and Capturing Customer Value

Which of the following is an internal factor that affects pricing decisions in a company?