Question 1

Selling $20 gift cards for $10 is,essentially,a variation of a loss-leader promotion.

Accepted Answer

A loss-leader promotion is a pricing strategy in which a product is sold at a loss or a low price to attract customers, with the hope that they will also purchase other more profitable products. Selling gift cards at a discount is a common form of loss-leader promotion used by retailers to drive traffic to their stores or website. Therefore, the statement is true.

Question 2

What kind of pricing objective did LivingSocial have in selling something worth $20 for $10?

Accepted Answer

It is not unusual for a company to post a lost in order to achieve market share that pays for the "investment" of the immediate loss sometime in the future.

Question 3

Only Amazon profited-as it does in its standard credit card transactions-from the gift card.

Accepted Answer

Amazon had invested $175 million in LivingSocial before the gift card deal.So the purchase,in part,of the gift card,was bought with its own cash and its benefit,too,was very likely publicity.

Question 4

What is meant by the colorful term "land grabbing" when Groupon and its competitors offer attractive deals and promotions?

Accepted Answer

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Companies such as Groupon and LivingSocial are in a "land grabbing" stage-"the more members they sign up,the better deals they bring in."

Question 5

LivingSocial sold Amazon gift cards at a loss.Therefore,they are not a good or service on the basis of cost.

Accepted Answer

Selling a good or service at a loss means that the cost of producing or providing it is higher than the price it is sold for, which goes against the definition of a good or service being based on cost. Therefore, selling Amazon gift cards at a loss does not count as a good or service based on cost.

Question 6

As it is suggested in the case study,Amazon,a direct investor in in LivingSocial,may have helped the company.How could Amazon have made money if it sold the discount cards at well below face value?

Accepted Answer

Although markup is normally thought of as based on cost or selling price,it also factors the cost of advertisements and promotions,that is,what it costs Amazon to sell product.

Question 7

Let's say that Amazon ultimately made a profit--not from the sale of the $20 cards-but from sales of books,CDs,and the like that cost well over $20 a unit.What kind of elasticity would that demonstrate?

Accepted Answer

Unitary elasticity means that an increase in sales offsets a decrease in prices.

Question 8

Using Groupon coupons is first and foremost to generate a sale,any sale.

Accepted Answer

Yes, the primary goal of Groupon coupons is to encourage consumers to make purchases, ultimately driving sales for the businesses offering the deals.

Question 9

Market saturation in the online deal industry would certainly affect the prices of goods and services.This is because it would __________.

Accepted Answer

With more platforms offering more deals to shoppers,diners,and the like,subscriber businesses to these online deal services would have to compete more robustly and would be encouraged to do so by Groupon,LivingSocial,and the like as they compete against each other.

Question 10

The marketing event that took place between LivingSocial and Groupon is all of the following except __________.

Accepted Answer

Neither engaged in an actual price war,but rather a discount aimed at consumers who wanted clothes and consumers who wanted books,CDs,and like merchandise.

Quiz 38: Groupon vs.LivingSocial: Coupon Wars