Question 1

Refer to the scenario below to answer the following questions.
Pilot is a manufacturer of ballpoint pens, pencils, and stationery. The firm's primary distribution strategy is to sell in large volumes to office supply stores and large discount chains. Iwao Takada, CEO of Pilot, had hoped to manufacture and sell in large enough quantities that prices could be held low. However, in the first several months, the firm experimented with the price portion of its marketing mix in an effort to cater to a number of markets.
-Why might Iwao Takada have avoided using market-skimming pricing at Pilot?

Accepted Answer

The scenario indicates that Pilot's primary distribution strategy is to sell in large volumes to office supply stores and large discount chains, implying that the market for the products may not be willing to pay a premium price. Additionally, the scenario states that the firm experimented with the price portion of its marketing mix in an effort to cater to a number of markets, suggesting that they were trying to find a pricing strategy that would work well across different market segments. Therefore, it is likely that Iwao Takada avoided using market-skimming pricing because the quality and image of the products would not have likely supported the high initial price.

Question 2

When an arts theatre charges different prices for seats in different areas,even though the costs are the same.This form of pricing is called ________.

Accepted Answer

Location-based pricing involves charging different prices for seats in different areas, even when the costs are the same. This is a common pricing strategy used by arts theaters, sports venues, and other entertainment venues. By charging more for seats in prime locations, such as the center of the theater or closer to the stage, these venues can maximize revenue while still offering affordable options for customers who are willing to sit further away. This pricing strategy takes advantage of the fact that some customers are willing to pay more for a better view or more comfortable seating, while others are more concerned with affordability.

Question 3

When a company charges shipping as if every part was shipped from its headquarters.The company practices ________.

Accepted Answer

Basing-point pricing is when a company charges shipping costs as if every part was shipped from a specific location, often the company's headquarters, regardless of the actual shipping origin.

Question 4

A manufacturer offers 3/10,net 30 terms to a wholesaler for a recent purchase.The wholesaler may deduct ________ percent if the bill is paid within ________ days.

Accepted Answer

The terms "3/10, net 30" mean a 3% discount is available if the bill is paid within 10 days.

Question 5

Refer to the scenario below to answer the following questions.
Pilot is a manufacturer of ballpoint pens, pencils, and stationery. The firm's primary distribution strategy is to sell in large volumes to office supply stores and large discount chains. Iwao Takada, CEO of Pilot, had hoped to manufacture and sell in large enough quantities that prices could be held low. However, in the first several months, the firm experimented with the price portion of its marketing mix in an effort to cater to a number of markets.
-By offering a set of pens packaged with stationery and matching envelopes,Pilot would be using ______________.

Accepted Answer

By offering pens packaged with stationery and matching envelopes, Pilot is using product bundle pricing, which involves marketing two or more products in a single package price.

Question 6

When product managers at Giant make decisions about which types of bicycle seats,handle bars,and saddlebags to offer customers on their bikes,they are engaged in ________.

Accepted Answer

Optional product pricing involves setting prices for optional or accessory products along with a main product, such as bicycle seats, handle bars, and saddlebags.

Question 7

If a company charges the same price for delivery of its product to any customer that is located within Southeast Asia,but a different price to customers outside of Southeast Asia,the company is using ________.

Accepted Answer

The company is using zone pricing, which is when different prices are charged based on geographic location or zones. In this case, Southeast Asia is one zone with a fixed price and customers outside of Southeast Asia are in a different zone with a different price for delivery.

Question 8

Golden Ville Cinemas has announced that seniors over 60 years of age can enter the theater for free prior to 4:00 p.m.when accompanied by a paying customer.This is an example of ________.

Accepted Answer

This is an example of promotional pricing as the cinema is offering a limited-time promotion to attract senior citizens to the theater.

Question 9

Sun Recycling has a history of problems with customers who do not pay their bills on time.It wants to improve its cash situation,reduce bad debts,and reduce credit-collection costs.The company might consider which of the following forms of pricing?

Accepted Answer

Offering discounts to customers who pay their bills on time can incentivize prompt payment and improve the company's cash flow. This can also potentially reduce bad debts by encouraging customers to make payments before their accounts become delinquent, and reduce credit-collection costs by simplifying the collection process for timely-paying customers.

Question 10

Bose prices its most expensive noise reduction earphones at $399.95,which is a full $100.00 more than its next most expensive earphones.It costs Bose only a few dollars more to make the most expensive earphones.Bose is using ________ pricing.

Accepted Answer

Bose is using product-form pricing, which involves pricing products based on their level of features, quality, and performance. The most expensive earphones offer superior noise reduction technology compared to the next most expensive earphones, justifying the higher price. This strategy aims to capture value-conscious customers who are willing to pay a premium for high-quality products.

Question 11

Brown Baby Tanning Salon offers weekly tanning sessions for $15 and 6 month passes with unlimited tanning for $150.Brown Baby Tanning Salon is offering ________ pricing.

Accepted Answer

The pricing strategy being used by Brown Baby Tanning Salon is a discount pricing strategy, as they are offering a discounted price for both their weekly tanning sessions and their 6 month passes.

Question 12

Market-skimming pricing would likely be most effective in selling ________.

Accepted Answer

Market-skimming pricing is effective for products that have a unique selling proposition and have high research and development costs. This pricing strategy allows the company to recoup its investment quickly and allows the company to cater to early adopters who are willing to pay a premium for the product.

Question 13

A car maker's strategy of advertising a basic vehicle model with few conveniences and comforts at a low price to entice buyers and then convincing customers to buy higher-priced models with more amenities is an example of which of the following?

Accepted Answer

This pricing strategy is called optional product pricing, where a basic model is advertised at a low price, and then customers are enticed to buy higher-priced models with more amenities. The additional amenities are optional and come with an additional cost, hence the name optional product pricing. This strategy is often used in the automobile industry.

Question 14

A number of top fashion-modeling agencies would most likely be charged with ________ for jointly determining what commissions they would charge for models.

Accepted Answer

Price fixing occurs when competing firms in a market agree to set prices at a certain level. In this scenario, the modeling agencies are jointly determining what commissions they would charge for models, which would be considered price fixing and is illegal under antitrust laws.

Question 15

Savings for You,a discount retail chain,is highly competitive.When entering a new market,Savings for You often cuts prices so deeply that it sells below costs,effectively pushing smaller companies with less purchasing power out of the market.Savings for You is most at risk of being accused of ________.

Accepted Answer

Predatory pricing occurs when a dominant player in the market lowers prices so low that it drives competitors out of business, making it difficult for new businesses to enter the market. This is an anti-competitive practice and can be considered illegal. In this scenario, Savings for You is selling below costs to push smaller companies out, which is an example of predatory pricing.

Question 16

In response to price cuts from competitors,a cereal company with several more expensive and higher quality cereals introduced a lower-priced option to its product line.This is an example of which of the following responses to a competitor's price cut?

Accepted Answer

Launching a "fighting brand" is a strategy where a company introduces a lower-priced and lower-quality product to compete with other brands that have lower prices. In this case, the cereal company introduced a new lower-priced option to compete with its competitors who had already lowered their prices.

Question 17

When Calms Gift Shop offers a price reduction to customers who buy Christmas cards the week after Christmas,Calms is giving a(n)________ discount.

Accepted Answer

Calms Gift Shop is offering a discount based on the timing of the purchase after Christmas, which is a seasonal discount.

Question 18

Among the following,a market-penetration strategy will likely be most effective with ________.

Accepted Answer

Market-penetration strategy is most effective for products that have a high potential for growth and when there is stiff competition in the market. Convenience items usually have a large target market, and there are several brands competing for market share, making a market-penetration strategy most effective.

Question 19

Big Mike's Health Food Store sells nutritional energy-producing foods.The price of the products sold varies according to individual customer accounts and situations.For example,long-time customers receive discounts.This strategy is an example of ________.

Accepted Answer

Big Mike's Health Food Store uses dynamic pricing because the price of the products varies according to individual customer accounts and situations.

Question 20

Secret Sneaker will give anyone $10 for an old pair of sneakers,regardless of condition,when that person purchases a new pair of sneakers.The end result is essentially reducing the price of the new sneakers by $10.What is this type of price adjustment called?

Accepted Answer

This is called a trade-in allowance, where customers are given a discount for trading in their old product (in this case, sneakers) in exchange for a new product (also sneakers).

Quiz 11: Pricing Products: Pricing Strategies