Question 1

Explain break-even pricing.

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Question 2

What is competition-based pricing?

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Question 3

Define total costs.

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Question 4

Which of the following is an external factor that affects pricing decisions in a company?
A) the company's overall marketing strategy
B) the nature of the market
C) the organizational objectives of the company
D) elements of the company's marketing mix
E) the annual advertising budget of rival firms

Accepted Answer

External factors affecting pricing decisions include the nature of the market, which is outside the company's control, unlike internal factors such as marketing strategy or organizational objectives.

Question 5

Which of the following is an internal factor that affects pricing decisions in a company?
A) the nature of the market
B) the degree of inflation in the economy
C) the overall marketing strategy of the company
D) the forces of demand and supply in the market
E) consumers' perception of value

Accepted Answer

The overall marketing strategy of the company is an internal factor that affects pricing decisions. This strategy includes the company's goals, positioning, target market, and product mix, all of which can impact the pricing decisions.

Question 6

Developing an effective integrated marketing mix program involves coordinating price decisions with product design, promotion, and ________ decisions.
A) distribution
B) production
C) assembly
D) warranty
E) competition

Accepted Answer

Price decisions should be coordinated with distribution decisions as they both relate to the delivery of the product to the customer. Product design, promotion, and warranty decisions also play a role in the overall marketing mix program, but they are not directly tied to the same logistical considerations as price and distribution.

Question 7

A marketer's fixed costs are $400,000. The variable cost is $16 per unit, and the price of the product is $24 per unit. If the company wants to make a profit, how many units must it sell and at what price?

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Question 8

Price setting is usually determined by ________ in large companies.
A) top managers
B) external stakeholders
C) product managers
D) non-executive employees
E) the sales department

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Question 9

In industrial markets, ________ typically has the final say in setting the pricing objectives and policies of a company.
A) the sales manager
B) top management
C) the production manager
D) the HR department
E) the sales staff

Accepted Answer

In industrial markets, top management typically has the final say in setting the pricing objectives and policies of a company. This is because pricing decisions have a significant impact on the overall profitability and long-term success of the company, and therefore require input from senior leaders who understand the strategic goals and financial constraints of the organization. While the sales manager and sales staff may provide input on pricing decisions, they do not have the final say in setting pricing objectives and policies. Similarly, the production manager and HR department are not typically involved in pricing decisions.

Question 10

Explain the significance of a downward-sloping experience curve.

Accepted Answer

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Question 11

Price setting is usually determined by ________ in small companies.
A) the top managers
B) the marketing department
C) the sales department
D) divisional managers
E) product managers

Accepted Answer

In small companies, the top managers often have a direct role in setting prices as they have a more hands-on approach in decision-making. They have a better understanding of the company's financial standings and have control over the pricing strategy. The marketing, sales, divisional, and product managers may provide input, but ultimately the final decision lies with the top managers.

Question 12

PoolPak produces climate-control systems for large swimming pools. The company's customers are more concerned about service support for maintaining their systems than the initial price of the product. PoolPak specializes in and differentiates itself through both cutting-edge technologies used to build its high-value climate control systems as well as seamless quality service. PoolPak's prices are very high, but demand for its climate-control systems seems to be forever on the rise. This exemplifies ________.
A) target costing
B) a pure monopoly
C) cost-plus pricing
D) a nonprice position
E) break-even pricing

Accepted Answer

PoolPak is differentiating itself based on non-price factors such as cutting-edge technology and quality service, and customers are more concerned about service support than the initial price. This suggests a nonprice position strategy, where the focus is on the unique value proposition of the product rather than competing on price.

Question 13

What is high-low pricing?

Accepted Answer

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Question 14

A decision to position the product on high-performance quality will mean that the ________.
A) seller must charge a higher price to cover higher costs
B) seller must charge a lower price to attract more customers
C) producer must step down production
D) marketer must boost derived demand in the market
E) break-even volume will be fairly low

Accepted Answer

When the decision is made to position the product on high-performance quality, it means that the product should have superior quality compared to the competition. Achieving such quality may come at an extra cost to the producer, and the seller must charge a higher price to cover these costs. Therefore, the best choice is A, which states that the seller must charge a higher price to cover higher costs.

Question 15

DivetheBlue, a company marketing deep-sea diving equipment, charges very high prices for its products. Despite the availability of many low-priced products in the market, customers seem to prefer DivetheBlue, which has earned a reputation for selling high-quality products. This exemplifies ________.
A) a pure monopoly
B) an oligopoly
C) a nonprice position
D) break-even pricing
E) target costing

Accepted Answer

This exemplifies a nonprice position, where DivetheBlue has differentiated itself on the basis of quality, rather than price, and has created a strong brand image and loyalty amongst customers.

Question 16

Elmo Inc., a global conglomerate, designed the ElBrush, an electric toothbrush. Sensing market demand for the electric toothbrush, Elmo started with an ideal selling price of $13 based on customer value considerations and then targeted costs to ensure that the price was met. This exemplifies ________.
A) competition-based pricing
B) cost-plus pricing
C) target costing
D) everyday low pricing
E) high-low pricing

Accepted Answer

This scenario exemplifies target costing, as Elmo Inc. started with an ideal selling price based on customer value considerations and targeted costs to ensure that the price was met. This is a common approach used by companies when introducing new products to the market.

Question 17

Distinguish between value-based pricing and cost-based pricing.

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Question 18

Companies using target costing ________.
A) first design a new product and then determine its cost
B) tailor their products to be in line with the marketing mix
C) routinely neglect customer value considerations
D) avoid determining an ideal selling price until analyzing test market results
E) start with an ideal selling price and then target costs that will ensure that the price is met

Accepted Answer

Companies using target costing start with an ideal selling price and then target costs that will ensure that the price is met. This approach involves considering customer value and designing the product to meet that value at a profitable price point.

Question 19

What is good-value pricing?

Accepted Answer

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Question 20

A marketer's fixed costs are $400,000, the variable cost is $16 per unit, and the price of the product is $24 per unit. What is the company's break-even point in dollar sales?

Accepted Answer

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Quiz 10: Pricing: Understanding and Capturing Customer Value

Explain break-even pricing.

What is competition-based pricing?

Define total costs.

Which of the following is an external factor that affects pricing decisions in a company?

Which of the following is an internal factor that affects pricing decisions in a company?

Developing an effective integrated marketing mix program involves coordinating price decisions with product design, promotion, and ________ decisions.

A marketer's fixed costs are $400,000. The variable cost is $16 per unit, and the price of the product is $24 per unit. If the company wants to make a profit, how many units must it sell and at what price?

Price setting is usually determined by ________ in large companies.

In industrial markets, ________ typically has the final say in setting the pricing objectives and policies of a company.

Explain the significance of a downward-sloping experience curve.

Price setting is usually determined by ________ in small companies.

What is high-low pricing?

A decision to position the product on high-performance quality will mean that the ________.

Distinguish between value-based pricing and cost-based pricing.

Companies using target costing ________.

What is good-value pricing?

A marketer's fixed costs are $400,000, the variable cost is $16 per unit, and the price of the product is $24 per unit. What is the company's break-even point in dollar sales?