Question 1

Julia wants her firm's gourmet snacks 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. Instead of lowering prices to gain market share, Julia should focus on creating perceived value for her gourmet snacks through quality, branding, and marketing efforts. Lowering prices may actually hurt the perceived value of the product and make it seem lower quality.

Question 2

Health clubs often use a low introductory offer price to get people to join their club. These low prices represent a ________ pricing strategy.
A) maximizing profits
B) target profit
C) target return
D) status quo
E) sales orientation

Accepted Answer

The use of a low introductory offer price is a tactic used in a sales-oriented pricing strategy, with the goal of attracting new customers to the health club. This strategy is focused on driving sales volume rather than maximizing profits or meeting specific target profit or return goals. Therefore, the correct answer is E.

Question 3

The price elasticity of demand for a specific brand of deodorant is 1. The market for this product is considered
A) inelastic.
B) elastic.
C) saturated.
D) dynamic.
E) a prestige market.

Accepted Answer

The answer of The price elasticity of demand for a...

Question 4

The price elasticity of demand for a teeth-whitening kit is −1. The market for this product is considered
A) inelastic.
B) elastic.
C) dynamic.
D) saturated.
E) a prestige market.

Accepted Answer

A price elasticity of demand of -1 indicates unitary elasticity, but in the context of elasticity, it is often considered elastic because the percentage change in quantity demanded is equal to the percentage change in price.

Question 5

Traditional demand curve economic theory is used by marketers to understand ________ in the five Cs of pricing.
A) competitors
B) channel members
C) cost
D) consumers
E) company objectives

Accepted Answer

Traditional demand curve economic theory is used to understand consumer behavior and how they respond to changes in price. Therefore, it is most relevant in the context of the "consumers" element of pricing in the five Cs of marketing.

Question 6

A demand curve is built on the assumption that
A) income is derived from demand.
B) price remains the same, and fixed costs change.
C) everything but price and demand remains the same.
D) fixed costs change with quantity demanded.
E) the firm does not advertise.

Accepted Answer

A demand curve is built assuming that everything else remains constant except for the price and the quantity demanded. This is known as the ceteris paribus assumption. This allows us to isolate the relationship between price and quantity demanded in order to analyze consumer behavior and make predictions about how consumers will respond to changes in price. Other factors such as income, advertising, and fixed costs can influence demand, but they are assumed to remain constant in constructing the demand curve.

Question 7

There is an old saying "If you have to ask the price of a yacht, you cannot afford it." Products like yachts are most likely to be associated with
A) cross-shopping.
B) competitive parity pricing.
C) target return value.
D) prestige pricing.
E) break-even point pricing.

Accepted Answer

Yachts are often associated with prestige, luxury and exclusivity. Therefore, they are priced high to reflect their high status and appeal to consumers who value and can afford luxury goods. This is known as prestige pricing.

Question 8

According to a typical demand curve, the higher the price,
A) the greater the income effect.
B) the lower the quantity consumers will buy.
C) the lower the output of producers.
D) the greater the production costs.
E) the lower the cross-price elasticity.

Accepted Answer

According to the law of demand, as the price of a good or service increases, the quantity demanded decreases. This relationship is represented by a downward sloping demand curve, where higher prices are associated with lower quantity demanded. Therefore, the correct choice is B - the lower the quantity consumers will buy.

Question 9

A strategy of setting prices based on how customers develop their perceptions of value can often be the most effective pricing strategy, especially if the strategy
A) leads the marketer to being the low-cost seller.
B) is supported by consistent advertising and distribution strategies.
C) challenges consumers to discard their perceptions of value.
D) is consistent with a competitive target return strategy.
E) is measured against the competition.

Accepted Answer

Setting prices based on customer perceptions of value requires a consistent advertising and distribution strategy to reinforce the value proposition. This helps to ensure that customers perceive the product as being worth the price.

Question 10

In many high-end resort markets, Westin hotels compete directly with Crown Plaza hotels. When it comes to pricing, Westin tends to charge its guests similar rates to what the Crown Plaza hotels charge. Westin is using a ________ pricing strategy.
A) maximizing profits
B) target profit
C) target return
D) competitive parity
E) sales oriented

Accepted Answer

Westin is using a competitive parity pricing strategy, where they align their prices with their competitors (Crown Plaza hotels). This strategy acknowledges that customers compare prices between similar products/brands, and therefore, Westin sets its prices at a similar level to Crown Plaza to remain competitive in the market.

Question 11

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 focused on maximizing sales volume and market share, rather than profits, and therefore using a sales orientation pricing strategy.

Question 12

A firm uses customer orientation when it sets its pricing strategy based on how it can add value to its products or services. A "no haggle" pricing policy is a type of ________ pricing strategy.
A) maximizing profits
B) sales orientation
C) target return
D) status quo
E) customer-oriented

Accepted Answer

A "no haggle" pricing policy is customer-oriented because it focuses on providing value and convenience to the customer by eliminating the need for negotiation, thus enhancing the customer experience.

Question 13

Sharon knew that her established customers liked her product much better than her competitor's. She was planning to expand into new markets, and she was considering pricing. She was leaning toward charging a higher price than competitors to help demonstrate that hers was a high-quality product. Sharon was considering
A) a top of market strategy.
B) the value of quality.
C) advantageous pricing.
D) premium pricing.
E) differential pricing.

Accepted Answer

Sharon is considering premium pricing, which involves pricing higher than competitors to showcase her product's high quality. This is a common strategy for companies that want to differentiate themselves on quality and target customers who are willing to pay more for a superior product.

Question 14

Customers must see value in a product or service before they are willing to exchange time or money to obtain it, but not all customers see the same value in a product. To analyze how many units will be sold at any given price point, marketers draw on
A) a demand curve.
B) the law of averages.
C) multiple regression analyses.
D) target return strategies.
E) a sales orientation.

Accepted Answer

Marketers use a demand curve to analyze how many units will be sold at any given price point. The demand curve shows the relationship between the price of a product and the quantity of the product that consumers are willing to buy. By analyzing the demand curve, marketers can determine the optimal price point for a product that will result in the most sales and revenue.

Question 15

When Ursula decides how to price new products in her gift store, she measures the value of her product offerings against those of the other stores in her area. Ursula uses a ________ pricing strategy.
A) maximizing profits
B) target profit
C) target return
D) competitor-oriented
E) sales oriented

Accepted Answer

Ursula is basing her pricing decisions on the prices set by her competitors, making her pricing strategy a competitor-oriented one.

Question 16

A customer orientation toward pricing implicitly invokes the concept of
A) knowing the dimensions of the target market.
B) positioning.
C) the income effect.
D) value.
E) profit.

Accepted Answer

A customer orientation toward pricing means determining the value that customers place on a product or service and setting prices accordingly. This emphasizes the importance of focusing on delivering value to customers rather than just maximizing profits.

Question 17

A demand curve shows the relationship between ________ during a specific period of time.
A) income and demand
B) price and costs
C) price and elasticity
D) profit and price
E) price and demand

Accepted Answer

A demand curve typically shows the inverse relationship between the price of a good or service and the quantity demanded by consumers during a specific period of time. As the price increases, quantity demanded tends to decrease, ceteris paribus.

Question 18

When firms set prices similar to those of competitors, they are following a strategy of
A) me-too pricing.
B) copycat pricing.
C) competitive parity.
D) market-broadening pricing.
E) industry-standard pricing.

Accepted Answer

Competitive parity refers to setting prices similar to those of competitors in order to maintain market share and avoid price wars.

Question 19

Ryan gave the manager of his convenience store a set of binoculars so she could see the gasoline prices charged by the other convenience store at that intersection. Ryan told the manager to always match the gasoline prices of the other store. Ryan is using a ________ pricing strategy.
A) maximizing profits
B) target profit
C) target return
D) status quo
E) sales

Accepted Answer

Ryan is using a status quo pricing strategy by telling the manager to always match the prices of the other store, indicating that they want to maintain their current market position and not engage in any price wars.

Question 20

Julia's is an upscale women's clothing store. Prices are based on customers' beliefs about the value of the clothing. The store focuses on a limited target market and provides excellent customer service. Julia's is using a ________ pricing strategy.
A) customer-oriented
B) target profit
C) target return
D) status quo
E) maximizing profits

Accepted Answer

Julia's is using a customer-oriented pricing strategy, which takes into account the perceived value of the clothing by customers and provides excellent customer service. It caters to a limited target market, which allows it to provide tailored customer service and maintain customer loyalty.

Quiz 14: Pricing Concepts for Establishing Value

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

Health clubs often use a low introductory offer price to get people to join their club. These low prices represent a ________ pricing strategy.

The price elasticity of demand for a specific brand of deodorant is 1. The market for this product is considered

The price elasticity of demand for a teeth-whitening kit is −1. The market for this product is considered

Traditional demand curve economic theory is used by marketers to understand ________ in the five Cs of pricing.

A demand curve is built on the assumption that

There is an old saying "If you have to ask the price of a yacht, you cannot afford it." Products like yachts are most likely to be associated with

According to a typical demand curve, the higher the price,

A strategy of setting prices based on how customers develop their perceptions of value can often be the most effective pricing strategy, especially if the strategy

In many high-end resort markets, Westin hotels compete directly with Crown Plaza hotels. When it comes to pricing, Westin tends to charge its guests similar rates to what the Crown Plaza hotels charge. Westin is using a ________ pricing strategy.

A firm uses customer orientation when it sets its pricing strategy based on how it can add value to its products or services. A "no haggle" pricing policy is a type of ________ pricing strategy.

Customers must see value in a product or service before they are willing to exchange time or money to obtain it, but not all customers see the same value in a product. To analyze how many units will be sold at any given price point, marketers draw on

When Ursula decides how to price new products in her gift store, she measures the value of her product offerings against those of the other stores in her area. Ursula uses a ________ pricing strategy.

A customer orientation toward pricing implicitly invokes the concept of

A demand curve shows the relationship between ________ during a specific period of time.

When firms set prices similar to those of competitors, they are following a strategy of

Ryan gave the manager of his convenience store a set of binoculars so she could see the gasoline prices charged by the other convenience store at that intersection. Ryan told the manager to always match the gasoline prices of the other store. Ryan is using a ________ pricing strategy.

Julia's is an upscale women's clothing store. Prices are based on customers' beliefs about the value of the clothing. The store focuses on a limited target market and provides excellent customer service. Julia's is using a ________ pricing strategy.