Question 1

IGA marked individual-sized snacks down to 25 cents a package for the first five individual packages purchased. This was below the store's cost. These snacks would be considered which of the following type of product?

Accepted Answer

The fact that the snacks were marked down below the store's cost and only for the purchase of the first five individual packages suggests that they were a loss leader, which is a product sold at a loss in order to attract customers and increase overall sales.

Question 2

What is a product pricing strategy of offering new products at low prices in the hope of achieving a large sales volume?

Accepted Answer

Penetration pricing strategy involves offering new products at low prices in order to attract customers and increase sales volume. This strategy is used to penetrate the market quickly and gain a competitive advantage. By offering lower prices, customers are more likely to try the new product and become loyal customers. This strategy is commonly used by companies when they introduce new products in the market or when they want to gain market share.

Question 3

What is the term used when goods and services are exchanged for one another?

Accepted Answer

Barter is the term used when goods and services are exchanged for one another without the use of money. Countertrade refers to a complex type of trade where goods and services are exchanged between countries using a combination of barter, currency, and other methods. Interchange is a term typically used in transportation to refer to the connection point between different modes of transport, and swapping is often used informally to refer to trading items without any formal agreement.

Question 4

Which of the following is the pricing strategy of marking products below normal markup or even below cost to attract customers to a store where they would not otherwise shop?

Accepted Answer

The pricing strategy described is known as a "loss leader" strategy, where a store marks down certain products below cost to attract customers who may then purchase other products at normal or higher prices. Therefore, the correct choice is B - leader.

Question 5

When Top-Flite introduced its Strata golf balls with a new dimple design and a more solid core for better flight with metal clubs, it charged three times the price of golf balls currently on the market. This high introductory pricing is an example of which of the following strategies?

Accepted Answer

Skimming is a pricing strategy where a company charges a high price for its product initially to target the early adopters of the product who are willing to pay a premium price. Top-Flite's Strata golf balls were priced three times higher than the existing golf balls in the market, targeting the early adopters of the product. Therefore, the best choice for this scenario is skimming.

Question 6

Which of the following is the production of a good or service for which the revenue from selling it exceeds the cost of producing it?

Accepted Answer

Profit maximization refers to producing goods or services where the revenue exceeds the cost of production. This is the goal of most businesses as it results in a profit being earned. Therefore, option C is the correct answer. Option A is not the correct choice as profit optimization refers to finding the optimal level of profit, which may not necessarily result in revenue exceeding cost. Option B is not relevant to the question, and option D refers to the point where revenue and cost are equal, and there is no profit earned.

Question 7

In which of the following stages of the product life cycle do most competitors enter the market?

Accepted Answer

In the growth stage, sales and consumer demand for the product is rapidly increasing. As a result, competitors are attracted to the market and begin to introduce their own versions of the product. This makes it a crowded and competitive space, with many players vying for market share.

Question 8

Which of the following is a strategy of charging a high introductory price for a new product that invites eventual competition?

Accepted Answer

Skimming is a pricing strategy that involves setting a high price for a new product during its introduction into the market. This is usually done to take advantage of early adopters who are willing to pay more for the latest product. Eventually, as competition enters the market, the company may reduce the price to remain competitive. Therefore, the high introductory price invites competition.

Question 9

Profit maximization is best described by which of the following?

Accepted Answer

Profit maximization is the process of obtaining the largest profit possible. It involves analyzing revenue and cost data to determine the output level that will generate the highest profit. This means finding the optimal price for the product, managing production costs, and identifying the most efficient allocation of resources to maximize revenue. While minimizing costs may be a component of profit maximization, it is not the only consideration. Similarly, while selling at the highest price possible may generate higher revenue, it may not always result in the highest profit.

Question 10

Price is best described by which of the following?

Accepted Answer

Price is based on the expected value you will receive from your purchase. While price is always expressed in a certain currency, and it is closely related to revenue, ultimately the price that a customer is willing to pay is based on the perceived value they will receive from the product or service.

Question 11

The Franklin Continental Hotel offers a package of room, breakfast, and parking for $125. What is this strategy?

Accepted Answer

This is an example of bundling, which is a strategy where two or more products or services are offered together as a package at a lower price than if they were purchased separately. In this case, the Franklin Continental Hotel is bundling a room, breakfast, and parking together at a discounted price of $125.

Question 12

What type of pricing strategy do most manufacturing companies use?

Accepted Answer

Most manufacturing companies use target return on investment pricing to ensure they achieve a specific return on their investments, balancing costs and profits effectively.

Question 13

Which of the following products would be correctly described as being in the decline stage of their product life cycle?

Accepted Answer

Manual typewriters are no longer in demand due to the widespread use of computers and digital technology, making them a product in decline stage.

Question 14

Which of the following is an example of a common pricing objective?

Accepted Answer

Target return on investment is a common pricing objective, where the company sets a specific ROI target and adjusts its pricing strategy to achieve that target. The other options mentioned are not pricing objectives but rather marketing strategies. Maximized targeting and target marketing refer to identifying and reaching a specific target market, while profit optimization is an approach that aims to maximize profits by finding the optimal combination of price, sales volume, and costs.

Question 15

Which of the following is a product pricing strategy of grouping two or more related products together and pricing them as a single product?

Accepted Answer

Bundling is the product pricing strategy of grouping two or more related products together and pricing them as a single product. Even pricing is the strategy of ending prices in even numbers to make them more attractive, while co-pricing refers to pricing two or more complementary products together. Penetration pricing involves setting low prices to gain market share.

Question 16

Which of the following is a common pricing objective in which the price of a product is set so as to give the company the desired profitability in terms of return on its money?

Accepted Answer

Target return on investment is a common pricing objective that involves setting the price of a product to achieve a specific return on investment. This pricing strategy considers the cost of production, marketing expenses, and desired profit margin to calculate the target price that would meet the company's ROI goal. The other options are not relevant to setting the price of a product.

Question 17

Which one of the following situations best demonstrates an advantage of price skimming?

Accepted Answer

Price skimming involves setting high initial prices and then gradually lowering them. When prices are eventually reduced, consumers may perceive they are getting a bargain, which can stimulate sales.

Question 18

When setting the price of a product or service, what must the price equal?

Accepted Answer

The price of a product or service should ideally equal the perceived value to the target customers, as this takes into consideration the customer's willingness to pay and the benefits they perceive from the product. Pricing based solely on competitors' prices, cost of production, or affordability of consumers may not accurately reflect the value of the product or service to the target market.

Question 19

Which of the following are the two main new-product pricing strategies?

Accepted Answer

The two main new-product pricing strategies are price skimming and penetration pricing. Price skimming involves setting a high price for a new product to maximize profit in the short term, while penetration pricing involves setting a low price for a new product to attract customers and gain market share. Value pricing and cost-plus pricing are not specific to new products, while targeted return pricing and profit maximization pricing are not commonly used as new-product pricing strategies. Psychological pricing and physiological pricing are not recognized pricing strategies.

Question 20

Which of the following is a pricing strategy in which the target market is offered a high-quality product at a fair price and with good service?

Accepted Answer

Value pricing is a strategy where a company offers a high-quality product at a fair price with good service. The focus is on providing value to the customer rather than solely competing on price or prestige. Variable costing and target marketing refer to different aspects of business strategy and are not directly related to pricing. Prestige pricing is the strategy of pricing a product higher than competitors to create a perception of higher quality or exclusivity.

Quiz 14: Creating Marketing Strategies