Question 1

Sellers using an EDLP pricing strategy often communicate their strategy through the creative use of a reference price.

Accepted Answer

EDLP (Everyday Low Pricing) strategy focuses on providing consistently low prices without frequent sales or discounts, thus reducing the emphasis on a reference price comparison.

Question 2

Rob is the marketing manager for a home goods store. His boss tells him the firm's primary goal is to increase its local market share from 10 to 20 percent. His firm is using a ________ orientation.
A)profit
B)sales
C)competitive
D)customer satisfaction
E)product development

Accepted Answer

The firm's goal is specifically focused on increasing market share, which aligns with a sales orientation that prioritizes increasing revenue and market share over other objectives.

Question 3

Consumers generally believe that ________ is one of the most important factors in their purchase decisions.
A)promotion
B)place
C)policy
D)perception
E)price

Accepted Answer

Price is often considered one of the most important factors in consumers' purchase decisions as it directly affects their budget and perceived value for money. While promotion, place, and policy may also be considered by some consumers, they are typically secondary to price. Perception, while important, is more subjective and could be influenced by factors such as brand image and product quality.

Question 4

Blaire tells her sales representatives the goal is to generate at least a 15 percent return on investment for all the computer desks they sell. Blaire is using a ________ pricing strategy.
A)sales orientation
B)target profit
C)target return
D)status quo
E)competitive parity

Accepted Answer

Blaire's pricing strategy is to generate a specific return on investment, indicating the use of a target return pricing strategy.

Question 5

Many years ago, Honda's Accord and Ford's Taurus were the two top-selling cars in the United States. As the year was coming to an end, Ford cut the price of the Taurus, hoping to outsell the Accord and allow Ford to claim that "Taurus is the best-selling car in America." Ford was using a ________ pricing strategy.
A)maximizing profits
B)target profit
C)sales orientation
D)status quo
E)target return

Accepted Answer

Ford was focusing on increasing sales volume and gaining a larger market share by cutting the price of the Taurus, indicating a sales orientation pricing strategy.

Question 6

Which of the five Cs of pricing demonstrates the different goals each company embraces?
A)customers
B)channel members
C)cost
D)collaboration
E)company objectives

Accepted Answer

The five Cs of pricing are Customers, Channel members, Cost, Competition, and Company objectives. Out of these, the factor that demonstrates the different goals each company embraces is Company objectives. This is because every company has its own unique objectives and goals that it aims to achieve through its pricing strategy. The other Cs, such as Customers or Cost, may vary to some extent between companies, but they are not as indicative of the company's overall goals as Company objectives.

Question 7

Jenna wants her firm's gourmet teas to be the leading brand in the U.S. market. When adopting a pricing strategy designed to gain market share, she should remember that
A)rarely is the lowest-price offering the dominant brand in a market.
B)prestige products need to be competitively priced.
C)companies can gain market share by offering low-quality products at a high price.
D)total value equals total cost minus variable costs leading to price escalation.
E)price wars are the way to become the dominant brand.

Accepted Answer

Rarely is the lowest-price offering the dominant brand in a market. Pricing strategy should focus on finding the optimal balance between value and price while differentiating the product from competitors. If the product is priced too low, it could be perceived as low quality or lacking in features, whereas if the product is priced too high, it could turn off potential buyers. Market research and analysis can help determine the right price point for gaining market share.

Question 8

Unlike product, promotion, or place, price is the only part of the marketing mix
A)that offers the opportunity for an oligopoly.
B)that is subject to gray market manipulation.
C)that leads to competition.
D)that generates revenue.
E)that is determined by the consumer.

Accepted Answer

Price is the only part of the marketing mix that directly generates revenue for the company. Product, promotion, and place all contribute to revenue indirectly, by increasing the perceived value of the product or making it more accessible to the target market. However, the price directly determines the amount of revenue that the company earns from each sale.

Question 9

Ana is the marketing manager for a shoe store chain. She uses a target return pricing strategy because her firm's primary objective is to
A)increase profits.
B)increase sales.
C)decrease competition.
D)build customer satisfaction.
E)broaden the product line.

Accepted Answer

The target return pricing strategy aims to set prices that will generate a specific return on investment for the firm. Therefore, the primary objective of this strategy is to increase profits.

Question 10

A high\low pricing strategy relies on the promotion of sales, during which prices are temporarily reduced to encourage purchases.

Accepted Answer

A high/low pricing strategy involves setting high initial prices but promoting sales or discounts to encourage purchases. These sales or discounts are temporary and intended to create a sense of urgency among consumers.

Question 11

When Delta increases its average fares, American Airlines and United often follow with similar increases. This is an example of
A)competitor orientation.
B)customer orientation.
C)status quo pricing.
D)adding value.
E)economy of scale.

Accepted Answer

This is an example of status quo pricing, where rivals follow the price set by the market leader (in this case, Delta). It is not indicative of competitor or customer orientation, adding value, or economy of scale.

Question 12

Midway Appliance Group has set very low prices for its products in an attempt to drive its competitor, Home Supply Corp., out of business. This is known as monopolistic pricing.

Accepted Answer

Monopolistic pricing refers to a situation where a single seller of a good or service is able to set prices at any level it desires because there are no close substitutes for that good or service. In the scenario described, Midway Appliance Group is engaging in predatory pricing, which involves setting prices below cost in the short term to drive competitors out of business and then raising prices once competition is eliminated.

Question 13

Frank was known for driving 30 miles just to save a dollar on the price of his favorite beverage. Frank perceived price as ________ for a good or service, while most consumers recognize price as the ________ made to acquire a good or service.
A)the money paid; overall sacrifice
B)a variable cost; fixed cost
C)a fixed cost; variable payment
D)the overall sacrifice; monetary payment
E)the break-even amount; total cost

Accepted Answer

Frank's behavior illustrates that he sees price primarily as the money he has to pay out (the money paid), whereas the general view of price is the total of all sacrifices made (time, effort, as well as money) to obtain a product or service (overall sacrifice).

Question 14

In developing marketing strategies, why is price often the most challenging of the four Ps to manage?
A)most managers feel it is the least important element of the marketing mix
B)it is the least understood element of the marketing mix
C)it has to be based on the promotion budget for the product
D)it is difficult to calculate markups for products
E)managers don't understand the relationship between benefits and costs

Accepted Answer

Price is often the most challenging of the four Ps to manage because it is the least understood element of the marketing mix. Setting the right price requires consideration of various factors, such as production costs, competition, perceived value, and consumer demand. It requires a thorough understanding of the market and the target audience's willingness to pay. Therefore, it can be difficult to determine the optimal price point that balances profitability and customer satisfaction.

Question 15

A new yoga studio might use a low introductory offer price to get people to join their new studio or to entice them away from their current studio. These low prices represent a ________ pricing strategy.
A)maximizing profits
B)target profit
C)target return
D)status quo
E)sales orientation

Accepted Answer

Using a low introductory offer to entice customers away from their current studio or to try out a new studio is a sales orientation pricing strategy. The goal is not to maximize profits or achieve a target profit or return, but to generate initial interest and build a customer base through promotional pricing.

Question 16

Andrew's firm has set corporate direction to become one of the leaders in each of its significant market segments. It is Andrew's job to examine the firm's pricing strategy to determine how to maximize market share, even at the expense of profits in the short run. What kind of company objective would guide his effort?
A)industry-oriented
B)sales-oriented
C)competitor-oriented
D)innovation-oriented
E)customer-oriented

Accepted Answer

A sales-oriented objective focuses on increasing market share, even if it means sacrificing short-term profits. This objective is aligned with Andrew's mission to maximize market share.

Question 17

Historically, prices were
A)the center of attention in almost all marketing strategies.
B)analyzed and changed constantly.
C)calculated to minimize contribution per unit.
D)allowed to vary seasonally as cross-shopping tendencies fluctuated.
E)rarely changed except in response to radical shifts in market conditions.

Accepted Answer

Historically, prices were rarely changed except in response to radical shifts in market conditions. Pricing strategies were not as important as they are today, and companies focused more on production and distribution rather than setting and changing prices.

Question 18

Fizzy Drinks Inc. decided to generate new sales by being the lowest price competitor in the soft drink market so as to attract customers away from higher-priced producers. What company objective does this reflect?
A)sales-oriented
B)profit-oriented
C)customer-oriented
D)production-oriented
E)competitor-oriented

Accepted Answer

The objective of being the lowest price competitor in the market reflects a sales-oriented approach, which prioritizes increasing sales revenue as the primary goal.

Question 19

Lindsay believes that her customers prefer to wait until the price of a product has gone down before buying it and are not worried about being the first to have a new product or innovation. It would benefit Lindsay to use the price skimming strategy.

Accepted Answer

The price skimming strategy involves setting a high price for a new product or innovation to attract early adopters who are willing to pay a premium price. This strategy is suitable for products with high demand, limited competition, and a high level of innovation. Since Lindsay's customers prefer to wait until the price goes down, using a price skimming strategy would not be beneficial for her business.

Question 20

A ________ strategy involves accurately measuring all the factors needed to predict sales and profits at various price levels, so that the price level that produces the highest return can be chosen.
A)sales orientation
B)target profit
C)target return
D)status quo
E)maximizing profits

Accepted Answer

This is referring to a maximizing profits pricing strategy, where all factors affecting sales and profits are taken into account to determine the price point that will result in the highest return.

Quiz 14: Pricing Concepts for Capturing Value

Sellers using an EDLP pricing strategy often communicate their strategy through the creative use of a reference price.

Rob is the marketing manager for a home goods store. His boss tells him the firm's primary goal is to increase its local market share from 10 to 20 percent. His firm is using a ________ orientation.

Consumers generally believe that ________ is one of the most important factors in their purchase decisions.

Blaire tells her sales representatives the goal is to generate at least a 15 percent return on investment for all the computer desks they sell. Blaire is using a ________ pricing strategy.

Which of the five Cs of pricing demonstrates the different goals each company embraces?

Jenna wants her firm's gourmet teas to be the leading brand in the U.S. market. When adopting a pricing strategy designed to gain market share, she should remember that

Unlike product, promotion, or place, price is the only part of the marketing mix

Ana is the marketing manager for a shoe store chain. She uses a target return pricing strategy because her firm's primary objective is to

A high\low pricing strategy relies on the promotion of sales, during which prices are temporarily reduced to encourage purchases.

When Delta increases its average fares, American Airlines and United often follow with similar increases. This is an example of

Midway Appliance Group has set very low prices for its products in an attempt to drive its competitor, Home Supply Corp., out of business. This is known as monopolistic pricing.

Frank was known for driving 30 miles just to save a dollar on the price of his favorite beverage. Frank perceived price as for a good or service, while most consumers recognize price as the made to acquire a good or service.

In developing marketing strategies, why is price often the most challenging of the four Ps to manage?

A new yoga studio might use a low introductory offer price to get people to join their new studio or to entice them away from their current studio. These low prices represent a ________ pricing strategy.

Historically, prices were

Fizzy Drinks Inc. decided to generate new sales by being the lowest price competitor in the soft drink market so as to attract customers away from higher-priced producers. What company objective does this reflect?

Lindsay believes that her customers prefer to wait until the price of a product has gone down before buying it and are not worried about being the first to have a new product or innovation. It would benefit Lindsay to use the price skimming strategy.

A ________ strategy involves accurately measuring all the factors needed to predict sales and profits at various price levels, so that the price level that produces the highest return can be chosen.