Question 1

The manufacturer of a new kind of fat-free ice cream that has the consistency and taste of regular ice cream is thinking of using a penetration pricing strategy for its new product. Which of the following conditions would argue against using a penetration pricing strategy for the dessert?

Accepted Answer

The answer of The manufacturer of a new kind of...

Question 2

The latest in appliance technology allows your refrigerator to send messages to your smart phone and even photos of the interior to remind you of what you need to pick up at the store. Taking advantage of strong consumer demand for technology-enabled products, marketers set prices for these refrigerators at thousands above other models. These marketers are using a ________ pricing strategy.

Accepted Answer

The marketers are using a skimming pricing strategy, which involves setting high prices initially to target consumers willing to pay more for new and innovative products.

Question 3

Prestige pricing refers to

Accepted Answer

Prestige pricing is setting a high price so that quality- or status-conscious consumers will be attracted to the product and buy it. This is often used for luxury or premium products to create an image of exclusivity and high quality.

Question 4

A penetration pricing policy is most likely to be effective when which of these is true?

Accepted Answer

Penetration pricing is most effective when it discourages competitors from entering the market. This allows the company to establish a strong presence and loyal customer base before competing firms can establish themselves.

Question 5

Penetration pricing is intended to appeal to which market?

Accepted Answer

Penetration pricing is a strategy used to attract and capture a larger segment of the mass market by setting a low price for a product initially. This is done to encourage trial usage, gain market share, and increase brand awareness. The goal is to eventually increase prices once the product gains traction and becomes more established in the market. Therefore, the intended market for penetration pricing is the mass market.

Question 6

Which of the following statements about penetration pricing is most accurate?

Accepted Answer

Penetration pricing is a strategy used to attract customers to a new product or service by offering a low price initially. It is particularly effective in price-sensitive markets where consumers are more likely to respond to lower prices.

Question 7

Penetration pricing is considered to be a ________ approach to pricing.

Accepted Answer

Penetration pricing focuses on setting prices based on the demand for the product, rather than the cost or profit margin. It aims to attract customers to try the product at a lower price point, with the hopes of increasing market share and revenue in the long term.

Question 8

When Amazon introduced the latest Kindle Fire tablet at $49.99 and the average price of competitive models was $323, Amazon was using a ________ pricing strategy.

Accepted Answer

Amazon was using a penetration pricing strategy by introducing the Kindle Fire tablet at a significantly lower price than its competitors to gain a larger market share.

Question 9

Setting a high price so that quality- or status-conscious consumers will be attracted to the product and buy it is referred to as

Accepted Answer

Setting a high price to attract status-conscious consumers is called prestige pricing. This pricing strategy appeals to consumers who are willing to pay more for products that are perceived as high quality or exclusive.

Question 10

Penetration pricing refers to

Accepted Answer

Penetration pricing refers to setting a low initial price on a new product to appeal immediately to the mass market. This strategy is often used to gain market share quickly or to enter a new market where the competition is already established. The goal is to attract customers with a lower price than the competitors and create brand loyalty.

Question 11

A manufacturer of a portable digital HD camera is considering a skimming pricing strategy for its new product. Which of the following conditions would argue against using a skimming pricing strategy for the camera?

Accepted Answer

If increasing the volume sold reduces production costs substantially, a skimming pricing strategy may not be ideal because the manufacturer could benefit more from economies of scale by setting a lower price to increase sales volume.

Question 12

The pricing strategy that is almost the exact opposite of skimming pricing is

Accepted Answer

Penetration pricing is the pricing strategy that involves setting a low initial price for a product with the goal of attracting a large number of customers quickly and gaining a significant market share. This is almost the opposite of skimming pricing, where the initial price is set high to skim off the most profit from early adopters of a new product or service.

Question 13

When Hallmark cards introduced a line of 99-cent cards (about half the price of the previously least expensive cards it sold), the greeting card company was trying to appeal to a mass market that was price-sensitive. Hallmark was using a(n) ________ pricing strategy.

Accepted Answer

Hallmark's introduction of a line of 99-cent cards indicates a penetration pricing strategy, as the company is trying to enter a mass market by offering lower prices to attract price-sensitive customers. Penetration pricing involves setting lower prices to gain market share and facilitate faster adoption of the product.

Question 14

Prestige pricing is a ________ approach to pricing.

Accepted Answer

Prestige pricing is a demand-oriented approach because it involves setting a high price to create an image of quality and exclusivity, appealing to consumers' perceptions and demand for luxury.

Question 15

Several factors indicate that a penetration pricing policy would most likely be effective when introducing a new product, including situations in which

Accepted Answer

Penetration pricing is effective when many segments of the market are price-sensitive, as it involves setting a low initial price to attract a large number of customers and gain market share quickly.

Question 16

In some cases, penetration pricing may follow ________ after price insensitive customers have already purchased.

Accepted Answer

Penetration pricing is often followed by skimming, where prices are initially set high to target price-insensitive customers and then lowered to attract more price-sensitive customers.

Question 17

In response to Duracell's introduction of the Duracell Ultra battery, Energizer introduced an Advanced Formula battery. But unlike Duracell, Energizer priced its batteries at a low initial price, believing that consumers were too price-sensitive to pay more in this category. In this case, Energizer used

Accepted Answer

Energizer used penetration pricing by setting a low initial price for its Advanced Formula battery in order to quickly capture a large share of the market and compete with Duracell's Ultra battery.

Question 18

The first Apple iPhone was introduced in 2007 at an initial price of $600. People waited in line overnight so they could be one of the first to own this unique smartphone. Which pricing strategy did Apple use to help recoup its costs for developing the smartphone?

Accepted Answer

Apple used skimming pricing strategy to recoup its costs for developing the smartphone, which involves setting a high price for a new product to maximize profits before eventually lowering the price to attract a wider audience. The initial price of $600 was lowered over time as newer versions of the iPhone were released and the market became more competitive.

Question 19

Wrigley introduced a new flavor of Orbit brand sugar-free chewing gum, mint mojito, and its introductory price was low so that it quickly created loyal customers for the flavor. In this example, Wrigley used

Accepted Answer

Penetration pricing involves setting a low initial price to attract customers and gain market share quickly, which is what Wrigley did with the mint mojito flavor.

Question 20

In some cases, penetration pricing may follow skimming pricing. The skimming pricing would help ________ and the penetration pricing would help ________.

Accepted Answer

The answer of In some cases, penetration pricing may follow...

Quiz 11: Pricing Products and Services