Question 1

A deduction from the price of an item is called a _____.
A) discount
B) variable reduction
C) trade-in
D) line
E) concession remittance

Accepted Answer

A deduction from the price of an item is commonly referred to as a discount.

Question 2

The strategy of setting a low price for a new product to gain a large market share for the product quickly is called _____.
A) penetration pricing
B) price skimming
C) sample pricing
D) introductory pricing
E) odd pricing

Accepted Answer

Penetration pricing is the strategy of setting a low price for a new product to quickly gain a large market share. This strategy aims to attract price-sensitive customers away from competitors and establish the new product in the market.

Question 3

Price leaders
A) are sold at the highest possible price.
B) maximize profits.
C) lead to increased revenue or lower costs when prices are increased or decreased.
D) are sometimes sold at less than cost in hopes that sales of other products will increase.
E) lead the industry in sales.

Accepted Answer

Price leaders are products that are sold at a very low price to attract customers to the store or website, with the hope that customers will purchase additional products at higher prices, resulting in increased revenue. In some cases, these price leader products may even be sold at a loss, as long as the overall strategy generates profits.

Question 4

If the manager at Best Buy puts a sign up next to a Pioneer stereo that reads, "Only $199.99! $58.01 less than Circuit City," this is an example of what type of pricing strategy?
A) random discounting
B) periodic discounting
C) comparison discounting
D) penetration discounting
E) everyday low prices

Accepted Answer

The sign next to the Pioneer stereo is comparing the price to Circuit City, which is a form of comparison discounting.

Question 5

A discount from the list, or price offered to intermediaries is a(n) ____ discount.
A) quantity
B) FOB price
C) cash
D) trade
E) cumulative

Accepted Answer

A trade discount is a discount offered to intermediaries in the distribution channel as a reward for their services in promoting and selling the product. It is based on the agreement between the manufacturer and the intermediaries and is not usually disclosed to the end customer.

Question 6

If a manager designs the shoe department in a manner that one of its private label pairs of shoes, priced at $39.99, is positioned next to a well-known national brand of shoes priced at $69.99, what strategy is the manager attempting to accomplish?
A) everyday low price
B) odd-even pricing
C) prestige pricing
D) special-event pricing
E) reference pricing

Accepted Answer

The manager is attempting to use reference pricing by positioning the private label shoes next to a well-known national brand that is priced higher. This creates a reference point for customers and makes the private label shoes, priced at $39.99, seem like a better deal.

Question 7

A pricing strategy in which a manufacturer pays for the shipping cost of its merchandise to the wholesaler is called ____ pricing.
A) geographic
B) FOB origin
C) trade discount
D) FOB destination
E) postage-stamp

Accepted Answer

FOB stands for "free on board." FOB destination means that the manufacturer takes responsibility for the cost of shipping the product to the wholesaler. This is advantageous for the wholesaler because they do not have to pay for shipping costs, which can be significant. Therefore, if the manufacturer offers FOB destination pricing, it could be a good choice for both parties.

Question 8

The temporary reduction of prices on a patterned or systemic basis is called _____.
A) random discounting
B) negotiated pricing
C) periodic discounting
D) secondary-market discounting
E) comparison discounting

Accepted Answer

Periodic discounting is the temporary reduction of prices on a patterned or systemic basis, such as seasonal sales or promotional events. Random discounting may refer to sporadic or unpredictable price reductions, whereas negotiated pricing typically involves an agreed-upon price based on specific circumstances. Secondary-market discounting may refer to reduced prices for products sold outside of their primary market, and comparison discounting involves offering lower prices for customers who find the same product for less from a competitor.

Question 9

When Polaroid comes out with a new model in a series, it sets an initial price, which is very high and then gradually lowers the price.Polaroid is initially using which pricing strategy?
A) penetration pricing
B) prestige pricing
C) price lining
D) premium pricing
E) price skimming

Accepted Answer

Polaroid is using price skimming, which involves setting a high initial price for a new product and then gradually lowering it over time. This strategy is often used for products that are innovative or have limited competition, allowing the company to capture early adopters willing to pay a premium price before lowering the price to attract a wider audience.

Question 10

If Tiger Mart advertises a 2-liter bottle of Pepsi for 89 cents to generate store traffic that will increase the purchasing of other items at regular prices, the grocer is using _____.
A) reference pricing
B) a price leader
C) special-event pricing
D) comparison discounting
E) professional pricing

Accepted Answer

Tiger Mart is using a price leadership strategy by offering a low price on a popular item to attract customers who will also purchase other items at regular prices. This is a common tactic used by retailers to increase store traffic and overall sales. Reference pricing is when a store compares its price to a competitor's price, special-event pricing is used for specific occasions or holidays, comparison discounting is when a store explicitly compares its prices to a competitor's prices, and professional pricing is used by service providers to price their services based on their expertise or qualifications.

Question 11

Discounts given to customers who buy in large amounts are called ____ discounts.
A) trade
B) cash
C) quantity
D) wholesale
E) preferential

Accepted Answer

Quantity discounts are given to customers who purchase large amounts of products or goods. This is a common practice in both retail and wholesale businesses, and is used as an incentive for customers to buy more. Trade discounts are discounts given to customers who are in the same industry or trade as the seller, while cash discounts are discounts given to customers who pay for their purchases in cash. Wholesale discounts are discounts given to customers who purchase goods in large quantities, typically for resale. Preferential discounts are discounts given to preferred or loyal customers. Of all the choices, quantity best describes the situation.

Question 12

Ties 'R' Us sells a variety of ties at many different prices.Often customers are confused about the pricing and have a hard time making a buying decision.Ties 'R' Us should use what type of pricing strategy?
A) odd pricing
B) price lining
C) captive pricing
D) multiple-unit pricing
E) geographic pricing

Accepted Answer

Price lining strategy involves offering a limited number of prices for a particular group of products in order to simplify the buying decision for customers. This would help customers at Ties 'R' Us to easily navigate through the varied prices and make a choice among the different types of ties available.

Question 13

The strategy of setting prices at uneven amounts that are slightly below whole-dollar amount is called _____.
A) penetration pricing
B) price skimming
C) sample pricing
D) introductory pricing
E) odd-number pricing

Accepted Answer

This strategy is known as odd-number pricing and is used to make the price seem more specific and less arbitrary to the consumer, while also positioning the product as a better value.

Question 14

Lisa goes to a car dealership to purchase a new Honda Accord.She is not willing to pay the listed sticker price for the car, and she instead works with the salesperson and manager until a mutually satisfactory price is agreed upon.This is an example of ____ pricing.
A) differential
B) comprised
C) negotiated
D) reference
E) secondary

Accepted Answer

This scenario describes a negotiated pricing strategy, where the buyer and seller come to a mutually agreed price through a bargaining process.

Question 15

The fact that senior citizens are charged a lower price at movie theaters than are younger adults is an example of ____ pricing.
A) price-lining
B) promotional
C) professional
D) differential
E) psychological

Accepted Answer

Differential pricing refers to charging different prices to different groups of customers for the same product or service. In this case, senior citizens are being charged a lower price than younger adults.

Question 16

The maker of Oral-B toothbrushes is introducing a new electric plaque remover and expects considerable competition.What pricing strategy would be appropriate for this maker to choose?
A) price skimming
B) penetration pricing
C) odd-even pricing
D) prestige pricing
E) psychological pricing

Accepted Answer

Since the maker of Oral-B toothbrushes is facing considerable competition, the appropriate pricing strategy would be penetration pricing, which involves setting a low price to enter a highly competitive market. This will help the maker gain market share quickly and establish their new product as a viable option for consumers.

Question 17

Discounts from the list price offered to intermediaries are called ____ discounts.
A) trade
B) quantity
C) wholesale
D) cash
E) preferential

Accepted Answer

Trade discounts are offered to intermediaries such as wholesalers, distributors, and retailers as a percentage reduction from the list price. These discounts are negotiated between the manufacturer and the intermediary based on factors like the quantity purchased, payment terms, and the intermediary's role in the distribution chain.

Question 18

A manager at JCPenney discovers that Dillard's has reduced the price of its children's Levi's from $31.99 to $24.99, according to an advertisement in the Sunday newspaper.She immediately phones her store and instructs the salesperson on duty to put a sign up next to their children's Levi's that reads, "SALE: $24.99." This is an example of what pricing strategy?
A) secondary-market pricing
B) periodic discounting
C) reference pricing
D) random discounting
E) comparison discounting

Accepted Answer

The answer of A manager at JCPenney discovers that Dillard's...

Question 19

The strategy of charging the highest possible price for a product during the introduction stage of its life cycle is known as _____.
A) penetration pricing
B) price skimming
C) prestige pricing
D) sample pricing
E) odd pricing

Accepted Answer

Price skimming is the strategy of charging the highest possible price for a product during the introduction stage of its life cycle. This is done to maximize profits from early adopters who are willing to pay a premium price for the latest product. As the product becomes more widely adopted and new competitors enter the market, the price is gradually lowered.

Question 20

The strategy of setting a single price for two or more units is known as _____.
A) penetration pricing
B) price skimming
C) sample pricing
D) multiple-unit pricing
E) odd pricing

Accepted Answer

Multiple-unit pricing is the strategy of setting a single price for two or more units. This strategy is commonly used to encourage customers to buy in bulk and can help to increase sales volume and revenue.

Quiz 12: Creating and Pricing Products That Satisfy Customers

A deduction from the price of an item is called a _____.

The strategy of setting a low price for a new product to gain a large market share for the product quickly is called _____.

Price leaders

If the manager at Best Buy puts a sign up next to a Pioneer stereo that reads, "Only $199.99! $58.01 less than Circuit City," this is an example of what type of pricing strategy?

A discount from the list, or price offered to intermediaries is a(n) ____ discount.

If a manager designs the shoe department in a manner that one of its private label pairs of shoes, priced at $39.99, is positioned next to a well-known national brand of shoes priced at $69.99, what strategy is the manager attempting to accomplish?

A pricing strategy in which a manufacturer pays for the shipping cost of its merchandise to the wholesaler is called ____ pricing.

The temporary reduction of prices on a patterned or systemic basis is called _____.

When Polaroid comes out with a new model in a series, it sets an initial price, which is very high and then gradually lowers the price.Polaroid is initially using which pricing strategy?

If Tiger Mart advertises a 2-liter bottle of Pepsi for 89 cents to generate store traffic that will increase the purchasing of other items at regular prices, the grocer is using _____.

Discounts given to customers who buy in large amounts are called ____ discounts.

Ties 'R' Us sells a variety of ties at many different prices.Often customers are confused about the pricing and have a hard time making a buying decision.Ties 'R' Us should use what type of pricing strategy?

The strategy of setting prices at uneven amounts that are slightly below whole-dollar amount is called _____.

Lisa goes to a car dealership to purchase a new Honda Accord.She is not willing to pay the listed sticker price for the car, and she instead works with the salesperson and manager until a mutually satisfactory price is agreed upon.This is an example of ____ pricing.

The fact that senior citizens are charged a lower price at movie theaters than are younger adults is an example of ____ pricing.

The maker of Oral-B toothbrushes is introducing a new electric plaque remover and expects considerable competition.What pricing strategy would be appropriate for this maker to choose?

Discounts from the list price offered to intermediaries are called ____ discounts.

The strategy of charging the highest possible price for a product during the introduction stage of its life cycle is known as _____.

The strategy of setting a single price for two or more units is known as _____.