Question 1

In response to price cuts from competitors, a cereal company with several more expensive and higher quality cereals introduced a lower-priced option to its product line. This is an example of which of the following responses to a competitor's price cut?
A) raising the perceived value of a product
B) improving product quality
C) accepting a reduced market share
D) launching a "fighter brand"
E) using high-low pricing

Accepted Answer

By introducing a lower-priced option to its product line, the company is launching a "fighter brand" to compete with its competitors' price cuts. This allows the company to maintain its higher-priced and higher quality options while also providing an option for price-sensitive consumers.

Question 2

Casual Comfort sells its catalog items using FOB-origin pricing. Who pays the freight charges?

Accepted Answer

The answer of Casual Comfort sells its catalog items using...

Question 3

Launching a fighter brand is an effective way to deal with a situation in which the market segment being lost is price sensitive and will not respond to arguments of higher quality.

Accepted Answer

Launching a fighter brand, which is a lower-priced brand under the main brand, can be an effective strategy to retain price-sensitive customers who may not respond to arguments of higher quality. This approach can help the company protect its market share and prevent customers from switching to competitors offering lower prices. So, the statement is true.

Question 4

Questions a company should consider if a competitor initiates a price change include all of the following EXCEPT ________.
A) "Are other competitors going to respond?"
B) "What will happen to the company's market share if it does not respond?"
C) "Is the price change temporary or permanent?"
D) "Why did the competitor change the price?"
E) "How can we improve our product?"

Accepted Answer

While improving the product may be a relevant consideration, it is not directly related to how the company should respond to a competitor's price change. All of the other options directly address the impact of the price change and potential responses.

Question 5

Explain the factors involved in setting international pricing.

Accepted Answer

The answer of Explain the factors involved in setting international...

Question 6

Which of the following would most likely lead to a company initiating a price increase?
A) weakened economy
B) possession of outdated merchandise
C) excess capacity
D) over-demand
E) possession of defective merchandise

Accepted Answer

Over-demand would most likely lead to a company initiating a price increase as they have the ability to charge more due to high demand for their product or service. This can be seen as a way to capitalize on their popularity and generate more revenue.

Question 7

Which of the following factors would most likely lead to a company initiating a price cut?
A) over-demand
B) weakened economy
C) poor competition
D) cost inflation
E) weak price competition

Accepted Answer

In a weakened economy, consumer demand may decrease, prompting companies to cut prices to stimulate sales and maintain market share.

Question 8

Ways to avoid accusations of price gouging include ________.
A) bundling products together
B) matching competitors' pricing
C) communications to customers explaining why prices are being increased
D) passing along increased costs
E) increase quality of the product

Accepted Answer

The answer of Ways to avoid accusations of price gouging...

Question 9

When a competitor cuts its price, a company should ________ if it believes it will not lose much market share or would lose too much profit by cutting its own prices.
A) reduce its production costs
B) reduce its marketing costs
C) maintain its current prices and profit margin
D) increase its marketing budget to raise the perceived value of the product
E) increase its production costs to improve the quality of the product

Accepted Answer

If a company believes that it will not lose much market share or would lose too much profit by cutting its own prices, it should maintain its current prices and profit margin. This is because reducing production costs or marketing costs may not be enough to match the competitor's price, and increasing marketing budget or production costs may not be feasible or necessary. Instead, the company should focus on providing value to its customers through factors such as quality, service, and brand reputation. By maintaining its prices and profit margin, the company can also signal to its customers and competitors that it is confident in the value of its product and its ability to compete.

Question 10

Explain the psychology behind a price of $9.99 instead of $10.00.

Accepted Answer

The answer of Explain the psychology behind a price of...

Question 11

The "bottom of the pyramid" refers to ________.
A) the world's poorest consumers
B) the middle classes of Brazil, Russia, India, and China
C) a market with little or no purchasing power
D) people with easy access to luxury goods
E) the middle class of high-income countries

Accepted Answer

The term "bottom of the pyramid" refers to the world's poorest consumers. These consumers are typically located in developing countries and have little purchasing power. The concept of serving this market has gained attention in recent years as a way to promote economic development and social change.

Question 12

When faced with a competitor who has cut its product's price, which of the following is the most cost-effective way for a company to maintain its own price but raise the perceived value of its offer?
A) by improving the quality of the product
B) by introducing a higher-priced premium brand
C) by altering the company's marketing communications
D) by bundling the offer with add-ons
E) by distributing the product through less costly channels

Accepted Answer

Altering the company's marketing communications can effectively raise the perceived value of the offer without incurring significant costs.

Question 13

List four types of discounts.

Accepted Answer

The answer of List four types of discounts....

Question 14

List four types of segmented pricing.

Accepted Answer

The answer of List four types of segmented pricing....

Question 15

Which of the following is true of price changes?
A) Over-demand leads to companies initiating price cuts.
B) Changes in price do not affect a brand's image.
C) Customer reaction to price changes is not as important as competitor reaction.
D) A drop in price can adversely affect how consumers view the brand.
E) Excess capacity is a factor that causes increases in price.

Accepted Answer

Dropping the price of a product may give the impression to customers that the product is of lower quality, which can harm the brand's image.

Question 16

Which of the following is used in an attempt to dominate the market through a pricing strategy?
A) price increase
B) match competitors' pricing
C) price cuts
D) quantity discounts
E) custom prices

Accepted Answer

Price cuts are often used as a strategy to dominate the market by making products more attractive to consumers, potentially driving competitors out of the market.

Question 17

Excess capacity leads to companies initiating an increase in price.

Accepted Answer

Excess capacity indicates that a company is producing goods or services beyond the demand, which typically leads to a decrease in price to encourage customers to purchase the excess inventory. Therefore, companies would not initiate an increase in price in response to excess capacity.

Question 18

Reasons for a price increase include all of the following EXCEPT ________.
A) a desire to improve profits
B) cost inflation
C) when the alternative is rationing of the product
D) decreasing gross margins
E) increasing supply of product

Accepted Answer

Increasing the supply of a product would typically lead to a decrease in price, not an increase. Therefore, this option is not a reason for a price increase.

Question 19

Companies need to respond to a competitor's price change if its own market share and profits will decrease because of the change.

Accepted Answer

If a competitor reduces prices, it may attract customers who might have otherwise chosen the company. If the company does not respond, it may lose market share and revenue. Therefore, it is necessary for the company to respond with a competitive price change to maintain its position in the market.

Question 20

Competitors are most likely to react to a price change when ________.
A) a large number of competitors are involved
B) the product is uniform
C) the buyers are not well informed about product features
D) buyers are not well informed about price differences
E) the products are not uniform

Accepted Answer

Competitors are more likely to react to a price change when the product is uniform because it makes price a more significant factor in the purchasing decision, leading to increased price competition.

Quiz 11: Pricing Strategies: Additional Considerations

In response to price cuts from competitors, a cereal company with several more expensive and higher quality cereals introduced a lower-priced option to its product line. This is an example of which of the following responses to a competitor's price cut?

Casual Comfort sells its catalog items using FOB-origin pricing. Who pays the freight charges?

Launching a fighter brand is an effective way to deal with a situation in which the market segment being lost is price sensitive and will not respond to arguments of higher quality.

Questions a company should consider if a competitor initiates a price change include all of the following EXCEPT ________.

Explain the factors involved in setting international pricing.

Which of the following would most likely lead to a company initiating a price increase?

Which of the following factors would most likely lead to a company initiating a price cut?

Ways to avoid accusations of price gouging include ________.

When a competitor cuts its price, a company should ________ if it believes it will not lose much market share or would lose too much profit by cutting its own prices.

Explain the psychology behind a price of $9.99 instead of $10.00.

The "bottom of the pyramid" refers to ________.

When faced with a competitor who has cut its product's price, which of the following is the most cost-effective way for a company to maintain its own price but raise the perceived value of its offer?

List four types of discounts.

List four types of segmented pricing.

Which of the following is true of price changes?

Which of the following is used in an attempt to dominate the market through a pricing strategy?

Excess capacity leads to companies initiating an increase in price.

Reasons for a price increase include all of the following EXCEPT ________.

Companies need to respond to a competitor's price change if its own market share and profits will decrease because of the change.

Competitors are most likely to react to a price change when ________.