Question 1

Creating a perception about price merely from the image the numbers provide the customers is called as ________________.

Accepted Answer

Psychological pricing is the practice of using pricing tactics to psychologically impact the consumers' perception of the product's price, making it more appealing or attractive. It involves presenting prices in a way that creates a certain perception in the consumer's mind. This perception is based purely on the way that the numbers are presented, without giving any other information about the product or its features. Therefore, creating a perception about price merely from the image the numbers provide the customers is called as psychological pricing. The other pricing strategies mentioned are not specific to creating a perception based on numbers alone.

Question 2

As in price bundling,it can be useful for customers to have some type of comparative price when considering a product purchase.Such a comparison is referred to as ______________.

Accepted Answer

Reference pricing is the term used for providing customers with a comparative price to help them make a purchase decision. This could be the price of the same product being offered by a different retailer or the price of a comparable product. Product line pricing refers to the practice of setting different prices for different products in a product line. Captive pricing involves setting a low price for the primary product and charging higher prices for related products. Price bundling involves offering multiple products or services together at a discounted price. Prestige pricing is a pricing strategy used to create an image of luxury around a product or service by setting a high price. None of these strategies provide a direct comparative pricing for customers.

Question 3

_________________ affords the marketing manager an opportunity to develop a rational pricing strategy across a complete line of related items.

Accepted Answer

Product line pricing allows for the marketing manager to develop a rational pricing strategy across a complete line of related items, ensuring that prices are consistent and competitive within the context of the product line. Captive pricing, price bundling, reference pricing, and prestige pricing all relate to different pricing strategies that may be used in conjunction with or in addition to product line pricing.

Question 4

Operating with _______ price/______ benefits can be problematic.Some firms use price skimming strategies,especially on product introductions,even when all the bugs have yet to be worked out of the product.

Accepted Answer

Operating with high prices and low benefits can create problems for firms because customers may not see the value in the product or service being offered. However, some firms use price skimming strategies where they set high prices for product introductions to recoup their initial investment quickly. This can be problematic if the product has not yet been fully tested and bugs have not been worked out, as customers may be dissatisfied with the product and it could damage the reputation of the firm. Therefore, option B (high prices, low benefits) is the best option.

Question 5

Geoff works at an Aspen ski shop.He has just gotten a shipment of new snowboards and realizes that the company has priced its snowboards higher than the rest of the boards in Geoff's shop.Since Geoff took a marketing class in college,he knows that the company is using _____________.

Accepted Answer

The company is using prestige pricing, which involves pricing a product higher than competitors in order to suggest superior quality or exclusivity.

Question 6

Bella Luna is a specialty baby furniture store.Most of the items in the store are designer,and,therefore,tend to be more expensive than other baby furniture.Recently Bella Luna started to put the manufacturer's suggested retail price next to the price they charge in order to show the savings.Bella Luna is using __________________.

Accepted Answer

Bella Luna is using reference pricing by displaying the manufacturer's suggested retail price. This provides customers with a point of reference to see the savings they receive by purchasing from Bella Luna.

Question 7

In markets where customers typically witness rapidly changing prices,________________ can provide a source of competitive advantage.

Accepted Answer

In markets where prices fluctuate rapidly, stability pricing can provide a source of competitive advantage by offering customers a predictable price and building brand loyalty. This approach involves setting a price that remains consistent over a certain period of time, rather than constantly adjusting prices in response to changes in supply and demand. This can be particularly effective in industries with high levels of price sensitivity, as customers may be more likely to switch to a competitor if they perceive that prices are constantly changing.

Question 8

With _________________,customers are allowed-even encouraged-to haggle about prices.

Accepted Answer

Variable pricing allows for negotiation of prices with customers.

Question 9

As the sugar price has gone up,a good portion of the profit margin of a candy bar has been preserved by simply reducing the size of the bar.The candy manufacturers are utilizing the principle of ____________.

Accepted Answer

The principle of Just Noticeable Difference (JND) refers to the minimal change in a stimulus that can just barely be detected by the consumer. By reducing the size of the candy bar slightly, manufacturers aim to keep the change below the threshold where consumers would notice, thus preserving profit margins without altering the perceived price.

Question 10

___________________ entails gaining a commitment from a customer to a basic product or system that requires continual purchase of peripherals to operate.

Accepted Answer

Captive pricing entails gaining a commitment from a customer to a basic product or system that requires continual purchase of peripherals to operate. This strategy is often used in the technology industry, where printers, gaming systems, and other devices require specialized cartridges, games, or other add-ons to function properly.

Question 11

Doug runs a hardware store.He puts prices on the products and scans them when they get to the register.The price that is marked is the price that will be charged,no exceptions.Doug uses __________________.

Accepted Answer

Doug's strategy is one price strategy, where the price marked on the product is the same price that is charged at the register. There are no exceptions or negotiations, which is the hallmark of this strategy. The other pricing strategies involve varying prices depending on factors such as demand, time of day, or discounts, which is not the case with Doug's hardware store.

Question 12

The fundamental philosophy behind __________________ is to reduce investment in promotion and transfer part of the savings to lower price.

Accepted Answer

The fundamental philosophy mentioned in the question is aligned with the Every day low pricing (EDLP) strategy, where the focus is on reducing promotion costs and offering lower prices consistently to customers. This strategy is adopted by retailers like Walmart and is based on the belief that it will attract more customers who are looking for everyday low prices, rather than occasional discounts or promotions.

Question 13

Lauren went to Leisure Travel to book a vacation to the Bahamas.The travel agent told her about multiple all-inclusive resorts where the price of the airfare,hotel,and food are all included.The resort is using a __________________ strategy.

Accepted Answer

Price bundling is the strategy of offering several products for sale as one combined product. In this case, the all-inclusive resort is bundling the price of airfare, hotel, and food into one package.

Question 14

Carol Ann is trying to explain to one of her ticket counter associates the differences in price associated with concert tickets.She explains that the lowest priced tickets are for the least desirable seats and the highest priced tickets are for the most desirable seats,with the rest of the ticket prices falling somewhere in-between.Carol Ann is describing ___________________.

Accepted Answer

Product line pricing involves setting different prices for different products within the same product line, based on features or desirability, which is what Carol Ann is describing with the concert tickets.

Question 15

Krista wants to buy a new foaming soap dispenser.Currently the store is offering the dispenser for free when she purchases the largest refill of soap.The pricing strategy being used for the dispenser and soap is ____________________.

Accepted Answer

The pricing strategy being used is captive pricing, as the dispenser is offered for free only when the customer purchases the largest refill of soap. This encourages customers not to switch to other brands of soap and creates brand loyalty.

Question 16

One rationale for establishing a price-skimming objective is that _______________ lends status to a product or brand by virtue of a price relatively higher than the competition.

Accepted Answer

Prestige pricing is a strategy that involves charging a higher price for a product to give it an image of exclusivity and higher quality. This can result in the product or brand gaining status among consumers who are willing to pay more for it. Therefore, the rationale for establishing a price-skimming objective can be to use prestige pricing to set a higher price than competitors and establish the product or brand as a status symbol.

Question 17

For most products,as long as the customer perceives the ratio of price and benefit to be at least at equilibrium,perceptions of __________ will likely be favorable.

Accepted Answer

If a customer perceives that the product offers value for the price paid, then their perception of the product is likely to be favorable. The perception of market share and quality may also impact a customer's perception of a product, but they are not as closely tied to the price and benefit ratio as the concept of value.

Question 18

When customers are given the opportunity to purchase a package deal at a reduced price compared to what the individual components of the package would cost separately,the firm is using a __________________ strategy.

Accepted Answer

Price bundling is a strategy where a company offers a package deal at a reduced price compared to what the individual components of the package would cost separately. This encourages customers to purchase more items, increasing the overall sales revenue for the company.

Question 19

______________ is used by firms that rely on periodic heavy promotional pricing that is primarily communicated through advertising and sales promotion,to build traffic and sales volume.

Accepted Answer

High/low pricing is a strategy used by firms that heavily rely on advertising and sales promotions. This strategy involves offering regular prices and occasional promotional prices to build traffic and boost sales volume. By using this strategy, firms try to create a sense of urgency among customers to take advantage of the promotional prices, which can ultimately lead to increased sales.

Question 20

____________ is known for its every day low pricing strategy.

Accepted Answer

Walmart is well-known for its every day low pricing strategy, which is a cornerstone of their business model. They strive to keep prices low on a consistent basis, rather than just offering occasional sales or discounts.

Quiz 10: Managing Pricing Decisions