Question 1

A men's clothing store sells ties only at $20 and $35. This type of pricing strategy is known as price lining.

Accepted Answer

Price lining is a pricing strategy where products are placed into specific price ranges to make the decision-making process easier for customers. In this case, the tie store is using a price lining strategy by offering ties at either $20 or $35.

Question 2

Innovations are much less common than imitations and adaptations.

Accepted Answer

Innovations require a significant amount of creativity, research, and resources, making them less common than imitations and adaptations, which involve replicating or adjusting existing ideas or products.

Question 3

Costs that depend on the number of units produced are called variable costs.

Accepted Answer

Variable costs are costs that vary with the level of production or sales, such as direct materials, hourly labor wages, or shipping costs.

Question 4

Seasonal discounts provide price incentives to customers during peak selling seasons.

Accepted Answer

The answer of Seasonal discounts provide price incentives to customers...

Question 5

The three levels of brand loyalty are preference, recognition, and insistence.

Accepted Answer

This is a true statement. The three levels of brand loyalty are indeed preference, recognition, and insistence. Preference refers to consumers preferring a particular brand over others in the same category, recognition means consumers can identify the brand and differentiate it from others, and insistence is the highest level of brand loyalty where consumers are unwilling to accept substitutes and will actively seek out and only purchase their preferred brand.

Question 6

Brand equity refers to making all of a company's brands approximately equal with respect to brand loyalty.

Accepted Answer

Brand equity refers to the value and strength of a brand in the marketplace. It is about building a strong association between the brand and its target audience, creating positive brand perceptions, and establishing brand loyalty. It does not necessarily mean making all of a company's brands approximately equal with respect to brand loyalty.

Question 7

Competition-based pricing is important if competing products are similar and the organization is serving markets in which price is the crucial variable of the marketing strategy.

Accepted Answer

Competition-based pricing is based on the price of similar products in the market. It is effective in markets where price is the most important factor for consumers when choosing between similar products. By setting a price in line with or slightly below the competition, the organization can attract price-sensitive consumers and remain competitive.

Question 8

Because markup pricing is difficult to use, few retailers and wholesalers use it.

Accepted Answer

This statement is incorrect. Markup pricing is actually one of the most commonly used pricing methods in retail and wholesale industries.

Question 9

Some pricing objectives include surviving, maximizing profit, obtaining market-share goals, and maintaining status quo.

Accepted Answer

These are all common pricing objectives for businesses.

Question 10

Packages have marketing value but no functional value.

Accepted Answer

Packages serve both marketing and functional purposes, such as protecting the product, providing information, and facilitating storage and transportation.

Question 11

Even if a grocery item is a generic product, a consumer can tell who produced it by examining the package carefully.

Accepted Answer

Generic products typically do not disclose the manufacturer's name on the packaging, as they are marketed under the store's brand or a no-name brand to offer a cost-effective alternative to national brands.

Question 12

The sum of the fixed costs and the variable costs attributed to the units produced is the selling price.

Accepted Answer

The selling price is typically calculated using a markup on the total cost of producing the units, which includes both fixed and variable costs. It is not simply the sum of fixed and variable costs.

Question 13

Once it becomes effective, a product mix for a given product remains effective for a long time.

Accepted Answer

A product mix may become ineffective over time due to changes in the market, consumer preferences, and competition. It is important for companies to regularly evaluate and adjust their product mix to ensure continued success.

Question 14

Price competition occurs when a seller makes its product stand out from the competition by distinctive product quality and customer service.

Accepted Answer

Price competition occurs when sellers try to attract customers by offering lower prices than their competitors, rather than focusing on distinctive product quality and customer service.

Question 15

Management must set pricing objectives based on the primary objective of making a profit.

Accepted Answer

Management can set pricing objectives based on various goals, such as market penetration, competition matching, product quality positioning, or customer satisfaction, not just profit maximization.

Question 16

In the decline life-cycle stage of a product, less profitable versions of the product are sold at reduced rates to cut losses.

Accepted Answer

The answer of In the decline life-cycle stage of a...

Question 17

New products are often immediate successes.

Accepted Answer

It is rare for new products to be immediate successes, as they often require time for consumers to become aware of and interested in them. Many new products also require adjustments and improvements based on customer feedback before they can achieve significant success in the market.

Question 18

Psychological pricing strategies encourage purchases to be based on economically rational responses rather than on emotional responses.

Accepted Answer

Psychological pricing strategies are designed to appeal to emotions and subconscious cues, such as using odd prices ($9.99 instead of $10) to make a product appear more affordable or using "sale" signs to create a sense of urgency and encourage impulse buying. These strategies are often based on the assumption that consumers do not always make economically rational decisions.

Question 19

The strategy of charging the highest possible price for a product during the introduction stage of its life-cycle is called price skimming.

Accepted Answer

This statement is true. Price skimming is a pricing strategy where a company sets a high price for a new product during its introduction or launch phase. The company aims to capture the market's most willing customers who are willing to pay a premium price for the new product. As the product lifecycle progresses, the price is gradually lowered to appeal to a broader customer base.

Question 20

During the decline stage of the product life-cycle, the sales volume decreases sharply because of an increase in the number of competing firms.

Accepted Answer

During the decline stage of the product life-cycle, sales volume decreases primarily due to market saturation, changes in consumer preferences, or technological advancements, not necessarily because of an increase in the number of competing firms.

Quiz 12: Creating and Pricing Products That Satisfy Customers