Question 1

A(n) _____ is a broad plan of action by which an organization intends to reach its goal.
A) tactic
B) policy
C) objective
D) strategy
E) code of ethics

Accepted Answer

A strategy is a broad plan of action designed to achieve a goal, distinguishing it from tactics, policies, objectives, and codes of ethics, which have more specific applications or focus on different aspects of organizational behavior.

Question 2

Which of the following is a direct form of price competition?
A) The Hormel Food Corporation lengthens its channel of distribution for its nonperishable products.
B) The Kroger supermarket in Franklin prices Stouffer's Lean Cuisine 15 percent lower than Winn-Dixie, its leading competitor in that community.
C) Harper Paperbacks pays 50 percent of the advertising cost for a bookstore that features its book Far from Home.
D) Death on Demand bookstore introduces a book search service for its customers.
E) The manufacturer of the 1928 brand of gift accessories introduces a line of toiletries.

Accepted Answer

Option B directly involves setting a lower price for a product compared to a competitor, which is a direct form of price competition.

Question 3

Which of the following is a direct form of price competition?
A) Family Dollar Store carries the same Palmolive dishwashing detergent as Triangle Supermarket, but at a 15 percent lower price.
B) Piggly-Wiggly supermarkets pay double the face value of any coupons used in their stores.
C) A retailer closes its store and opens an Internet retailing site to reduce its fixed costs.
D) McRae's department store runs a 50-percent-off sale on its Healthtex toddler clothes.
E) Office Depot offers free software with every computer purchased.

Accepted Answer

A direct form of price competition involves directly lowering the price of a product to attract customers, as seen in Family Dollar Store offering the same product at a lower price than a competitor.

Question 4

_____ is a form of price competition aimed at improving the ratio of a product's benefits to its price and related costs.
A) Fair-trade pricing
B) Psychological pricing
C) Cost-plus pricing
D) Penetration pricing
E) Value pricing

Accepted Answer

Value pricing is focused on improving the product's benefits relative to its price and associated costs, aiming to offer consumers better value for their money.

Question 5

Both the Cedartown Grooming Gallery and the local veterinarian will wash, comb, and trim your dog. Even though their prices are about the same, the Cedartown Gallery is the better deal because the animals are kept in large kennels and given access to outside areas while they wait for their owners to pick them up. The vet's office has only a few small inside kennels. In comparison with the vet's office, Cedartown Grooming Gallery is using _____ pricing.
A) fair-trade
B) value
C) psychological
D) penetration
E) cost-plus

Accepted Answer

The Cedartown Grooming Gallery is using value pricing, as it emphasizes providing more benefits to customers (larger kennels and outside access) at a similar price point compared to the vet's office.

Question 6

The price of a haircut is $16 in all of the hair salons in the town of Fairview. All of the salons have equally good stylists, so you know that you will receive a good haircut. But, if you have your hair cut at Foxglove Salon, you will also get a ten-minute shoulder massage with your haircut. The price there is still only $16. Foxglove Salon is using _____ pricing.
A) fair-trade
B) value
C) psychological
D) penetration
E) cost-plus

Accepted Answer

Foxglove Salon is using value pricing by offering an additional service (a ten-minute shoulder massage) at the same price as other salons, thereby increasing the perceived value of their service without increasing the price.

Question 7

Wendy's fast-food restaurant chain has priced several of its more popular menu items at $.99. This pricing strategy is an example of _____ pricing because the chain is trying to improve the ratio of its products' benefits to its price and related costs.
A) fair-trade
B) value
C) psychological
D) penetration
E) cost-plus

Accepted Answer

This pricing strategy is an example of value pricing, where the focus is on providing customers with greater value by offering a balance of quality and cost, making the products more appealing by improving the benefit-to-cost ratio.

Question 8

The headline on the ad for Post cereal reads, "Breakfast is supposed to be the most important meal of the day. Not the most expensive." The subheading continued, "So we've lowered the price of all our cereals." Post cereal is apparently using _____ pricing.
A) fair-trade
B) value
C) psychological
D) penetration
E) cost-plus

Accepted Answer

Post cereal is using value pricing, which emphasizes providing value to the customer at a lower cost, as indicated by their focus on lowering the price of their cereals to make breakfast affordable.

Question 9

When a seller attempts to shift the consumer demand curve for its product to the right, it uses product differentiation, promotional activities, or other similar techniques. The sellers are using:
A) price competition.
B) economic diversification.
C) market control.
D) nonprice competition.
E) price fixing.

Accepted Answer

Nonprice competition involves strategies that focus on factors other than price, such as product differentiation and promotional activities, to attract customers and increase market share.

Question 10

There are many marinades and barbecue sauces currently on the market. To differentiate Stroh Ranch Marinade from all of the others on the market and to increase demand for the product, Jeanette Stroh includes a recipe booklet with each bottle of marinade she sells. This is an example of:
A) price competition.
B) economic diversification.
C) market control.
D) nonprice competition.
E) price fixing.

Accepted Answer

This is an example of nonprice competition, where a company seeks to differentiate its product or service from competitors through means other than price, such as adding value with additional features or bonuses, in this case, a recipe booklet.

Question 11

While the prices for most wine brands were falling, and restaurants were canceling wine orders for bottles that cost over $25 apiece, Nickel & Nickel launched a new wine brand selling at $125 per bottle. There were already many less expensive wines on the market. Nickel & Nickel invited the sales staff of one of the largest wine distributors in the U.S. to attend a pre-release testing. This would be an example of:
A) price competition.
B) economic diversification.
C) market control.
D) nonprice competition.
E) price fixing.

Accepted Answer

This is an example of nonprice competition because Nickel & Nickel is differentiating its product through means other than price, such as quality or branding, especially in a context where other wines are competing on price by lowering it.

Question 12

All of the following strategies are examples of nonprice competition EXCEPT:
A) offering charge accounts and free deliveries.
B) charging less during an end-of-year sale.
C) keeping your store open nights and Sundays.
D) product differentiation.
E) heavy advertising.

Accepted Answer

Nonprice competition involves strategies that companies use to attract customers that do not involve lowering prices. Examples include offering unique services (like charge accounts and free deliveries), extending operating hours, differentiating products, and advertising. Charging less during an end-of-year sale directly involves lowering the price, which is not a form of nonprice competition.

Question 13

Which of the following is an example of how a weight-loss clinic could use nonprice competition?
A) It could offer free classes on how to monitor fat in your diet.
B) It could give quantity discounts to family members who participate in the clinic's program with you.
C) It could stage a two-for-one sale.
D) It could charge less for diet pills and diet food purchased during December.
E) It could feature the lowest prices in the community on diet supplements.

Accepted Answer

Offering free classes on how to monitor fat in your diet is an example of nonprice competition because it focuses on adding value through additional services rather than altering prices to attract customers.

Question 14

Which of the following is an example of how a jewelry store could use nonprice competition?
A) It could provide free cleaning for all rings it sells.
B) It could offer a 50-percent off sale on all costume jewelry.
C) It could advertise that its price on Mexican silver jewelry is the lowest in town.
D) It could hire salespeople to work on commission and reduce prices by ten percent.
E) It could give a quantity discounts to customers who purchased more than two gold necklaces.

Accepted Answer

Nonprice competition involves strategies other than lowering prices to attract customers, such as offering free services (like cleaning for rings) to add value to the purchase.

Question 15

Many marketing executives prefer nonprice competition rather than price competition because:
A) a seller has more potential selling features with which to hold customer loyalty.
B) a seller can move up or down on the same demand curve rather than worrying about a shift in demand.
C) price wars are more prevalent in nonprice competition.
D) price competition is usually illegal.
E) there is more price flexibility in nonprice competition.

Accepted Answer

Nonprice competition focuses on factors other than price, such as product quality, service, and brand loyalty, allowing companies to differentiate themselves and build customer loyalty without engaging in price wars.

Question 16

_____ pricing involves setting a price that is high in the range of expected prices.
A) Market-penetration
B) Market-absorption
C) Cost-plus
D) Market-skimming
E) Marginal-cost

Accepted Answer

Market-skimming pricing involves setting high prices initially to "skim" revenue layers from the market. This strategy is often used for new products or services with unique advantages, aiming to maximize profits from less price-sensitive customers before adjusting prices lower to attract a broader market.

Question 17

While the prices for most wine brands were falling, and restaurants were canceling wine orders for bottles that cost over $25 apiece, Nickel & Nickel launched a new wine brand selling at $125 per bottle. The goal of this high price was to denote quality and to appeal to people who perceive themselves as wine connoisseurs. Nickel & Nickel used a _____ strategy for its new wine.
A) cost-plus
B) marketing-skimming
C) market-absorption
D) marginal-cost
E) market-penetration

Accepted Answer

Nickel & Nickel employed a market-skimming strategy by setting a high price for their new wine brand to denote quality and target a specific segment of the market that perceives themselves as connoisseurs, rather than trying to capture a large market share with lower prices.

Question 18

The expected price for sunscreen is in the $3 to $6 price range. The introductory price for Shade UVA Guard by Schering-Plough was $5.99 to recover its research and development costs. Schering-Plough was using a _____ strategy.
A) cost-plus
B) marketing-skimming
C) market-absorption
D) marginal-cost
E) market-penetration

Accepted Answer

The introductory price of Shade UVA Guard by Schering-Plough was set at the high end of the expected price range to recover its research and development costs, indicating a market-skimming strategy. This approach involves setting high initial prices to "skim" revenue layers from the market.

Question 19

When Warren Peace learned of the difficulty of capturing a near-perfect round for ballistics matching to weapons used in crimes, he decided to develop a system for testing bullets and firearms. After much trial-and-error and several costly prototypes that were ineffective, he developed a ballistic testing unit. He priced each individual unit at $12,000, and very few law enforcement agencies can afford to spend that much. Peace is using a _____ strategy.
A) cost-plus
B) marketing-skimming
C) market-absorption
D) marginal-cost
E) market-penetration

Accepted Answer

Warren Peace is using a market-skimming strategy by setting a high price for a new and innovative product, targeting those willing to pay more at the initial stage, before possibly lowering prices later as the market expands or competition increases.

Question 20

The strategy of market-skimming pricing is especially suited for new products because:
A) markets cannot be effectively segmented on an income basis.
B) price competition is typically most important in the introductory stage of the product life cycle.
C) high initial prices can keep demand from exceeding supply.
D) profits are more important than recouping costs.
E) all of the above are True.

Accepted Answer

High initial prices can help manage demand levels to match supply, especially when a new product is introduced and the company might not be able to meet high demand due to limited production capacity or desire to maintain exclusivity.

Quiz 13: Pricing Strategies

A(n) _____ is a broad plan of action by which an organization intends to reach its goal.

Which of the following is a direct form of price competition?

Which of the following is a direct form of price competition?

_____ is a form of price competition aimed at improving the ratio of a product's benefits to its price and related costs.

Wendy's fast-food restaurant chain has priced several of its more popular menu items at $.99. This pricing strategy is an example of _____ pricing because the chain is trying to improve the ratio of its products' benefits to its price and related costs.

The headline on the ad for Post cereal reads, "Breakfast is supposed to be the most important meal of the day. Not the most expensive." The subheading continued, "So we've lowered the price of all our cereals." Post cereal is apparently using _____ pricing.

When a seller attempts to shift the consumer demand curve for its product to the right, it uses product differentiation, promotional activities, or other similar techniques. The sellers are using:

There are many marinades and barbecue sauces currently on the market. To differentiate Stroh Ranch Marinade from all of the others on the market and to increase demand for the product, Jeanette Stroh includes a recipe booklet with each bottle of marinade she sells. This is an example of:

All of the following strategies are examples of nonprice competition EXCEPT:

Which of the following is an example of how a weight-loss clinic could use nonprice competition?

Which of the following is an example of how a jewelry store could use nonprice competition?

Many marketing executives prefer nonprice competition rather than price competition because:

_____ pricing involves setting a price that is high in the range of expected prices.

The expected price for sunscreen is in the $3 to $6 price range. The introductory price for Shade UVA Guard by Schering-Plough was $5.99 to recover its research and development costs. Schering-Plough was using a _____ strategy.

The strategy of market-skimming pricing is especially suited for new products because: