Deck 14: Small Business Marketing: Price and Promotion

Question 1

Expenses like rent, property taxes, and utilities are variable costs.

Answer 1

False

Question 2

The closer the proximity of the competition, the more influence the competition will have on the price of the small business owner's product.

Answer 2

True

Question 3

Restaurants and personal computers tend to be price inelastic.

Answer 3

False

Question 4

Home electronics are often introduced using a skimming pricing strategy.

Question 5

Setting prices higher than expected in order to recover developmental costs is known as penetration pricing.

Question 6

When considering a product, consumers typically look for the cheapest product available.

Question 7

The trend today is toward consumers carrying more cash and using credit and debit cards less frequently.

Question 8

Sales commissions, materials, and labor tend to be fixed costs.

Question 9

Jewelry, perfume, beer, and law firm services all use prestige pricing as a pricing strategy.

Question 10

Most businesses base markup on selling price.

Question 11

The usefulness of breakeven analysis depends on the quality of data used in the calculations.

Question 12

Necessary and luxury goods both tend to be price inelastic.

Question 13

The right price is a range of possible prices.

Question 14

The breakeven point is that point where total revenues are greater than total costs.

Question 15

Another name for markup pricing is target-return pricing.

Question 16

To survive in an industry dominated by giants, a small business should compete by offering lower prices.

Question 17

Psychological pricing tactics include prestige pricing, odd pricing, and reference pricing.

Question 18

On a break-even point graph, the fixed-costs line runs vertically.

Question 19

Product is one of the most flexible components of the marketing mix.

Question 20

Establishing the right price for a good or service at an appropriate level of production is a critical component of the marketing mix.

Question 21

Time is the biggest drawback to personal selling.

Question 22

Developed by brothers Reid and J.C. Smoot, Zoobie Pets are children's toys that combine all of the following except

A) Sippy cups
B) Stuffed animals
C) Pillows
D) Blankets

Question 23

Publicity consists of any messages concerning a company that are communicated through mass media and are paid for by the company.

Question 24

The use of credit and debit cards is decreasing while the usage of cash and checks is increasing.

Question 25

The value of a product depends on the benefits received compared to the ________.

A) Quality of the product
B) Quantity purchased of the product
C) Monetary cost
D) Raw materials used to produce the product

Question 26

When combining advertising, personal selling, and sales promotion, the end result can be a ratchet-effect on sales.

Question 27

A limitation of magazine advertising is that there is a great deal of uncertainty of the number and types of people reached.

Question 28

The last step in the personal selling process is closing the deal.

Question 29

Which of the following is one of the most flexible components of the marketing mix?

A) Product
B) Promotion
C) Place
D) Price

Question 30

Many new businesses can take advantage of trade credit even when no other form of financing is available.

Question 31

Public relations involves promotional activities designed to build and sustain goodwill between a business and its customers, employees, suppliers, investors, government agencies, and the general public.

Question 32

The longer a credit account goes uncollected, the less likely the small business owner will receive the money owed to him/her.

Question 33

T F Limitations of television advertising are that it comes at a high cost, there is short exposure time, and there is a high volume of competitive ads that increase clutter and decrease impact.

Question 34

Personal selling involves a personal presentation by the salesperson for the purpose of making sales and building relationships with customers.

Question 35

Customers, not businesses, have to pay a percentage of each sale to the credit card company handling the sale.

Question 36

_______ represents what the consumer considers a product to be worth.

A) Price
B) Value
C) Supply
D) Demand

Question 37

Open charge accounts can hinder the cash flow of a business and eventually cause the business to fail.

Question 38

Spending large amounts of money automatically results in better advertising.

Question 39

In the Creating Competitive Advantage box titled "Guppy in a Shark Tank," you only have about 45 seconds to draw a person into your trade show booth.

Question 40

To measure the effectiveness of advertising, companies may choose to code two different ads to see which produces a greater response, a technique that is referred to as split advertising.

Question 41

If the price of a product increases by 10 percent and sales volume falls by 1 percent, demand for the product is

A) Price elastic
B) Price inelastic
C) Price volatile
D) Price subjective

Question 42

Which of the following is not a recommendation for small business owners trying to compete with major retail chains?

A) Compete directly
B) Emphasize customer service
C) Advertise more
D) Extend the hours the business is open

Question 43

The effect that price changes have on sales is known as

A) The demand curve
B) The supply curve
C) The price elasticity
D) The price curve

Question 44

Establishing the ______________ for goods and services at appropriate levels of production is a critical component of the marketing mix.

A) Right advertising angle
B) Correct sales force
C) Best management team
D) Right price

Question 45

Restaurants, personal computers, and airline travel all tend to have a demand that is

A) Price elastic
B) Price inelastic
C) Price volatile
D) Price subjective

Question 46

Small business owners can compete with large chains like Wal-Mart and K-mart by focusing on

A) Lower prices
B) Wider selection
C) Flexibility
D) Convenience

Question 47

Products for which customers are price sensitive are said to be

A) Price elastic
B) Price inelastic
C) Price volatile
D) Price subjective

Question 48

The "right" price, as determined by the small business owner, is a range between what the market will bear and what the product

A) Value is perceived to be
B) Costs
C) Is worth
D) Image is perceived to be

Question 49

Consumers typically do not want the cheapest product available, they want the

A) Best product for the highest price
B) Most reasonable product at the highest price
C) Most reasonable product at the lowest price
D) Best product for the most reasonable price

Question 50

The number of competitors and their proximity influences what a small business owner can charge because the competition represents

A) Substitute choices to the customer
B) A better product for the consumer
C) Better quality as perceived by the consumer
D) Less expensive products

Question 51

People purchase premium products despite the higher costs because

A) They perceive greater benefits and increased quality
B) They perceive increased quality and fewer benefits
C) They perceive greater benefits with a decrease in quality
D) They perceive higher status and higher quality

Question 52

If the price of the product falls by five percent and the volume of sales increases by eight percent, the demand for the product is

A) Price elastic
B) Price inelastic
C) Price volatile
D) Price subjective

Question 53

Total costs fall into two general categories:

A) Tangible costs and intangible costs
B) Fixed costs and variable costs
C) Production costs and service costs
D) Singular costs and dual costs

Question 54

While shopping at the supermarket, Selina was dismayed to find that the price of orange juice was now 50% more than what she was used to paying. As a result, Selina purchased grapefruit juice, which was closer to what she usually pays. Based on this example, orange juice is

A) A necessity
B) A luxury good
C) Inelastic
D) Elastic

Question 55

The number of units of a product people would be willing to purchase at differing price levels is known as

A) The demand curve
B) The supply curve
C) The product curve
D) The price curve

Question 56

Health care, food products, and a Ferrari tend to have a demand which is

A) Price elastic
B) Price inelastic
C) Price volatile
D) Price subjective

Question 57

All but which of the following economic factors has an impact on the price that can be charged for a product?

A) Competition
B) Customer demand
C) Costs
D) Quality

Question 58

All but which of the following factors influence the price elasticity of demand?

A) Product substitutes
B) Product necessity
C) The amount of the purchase compared to the consumer's total income
D) Quality

Question 59

Products for which customers are not sensitive to price changes are said to be

A) Price elastic
B) Price inelastic
C) Price volatile
D) Price subjective

Question 60

The success of Wal-Mart is directly related to its

A) Prices
B) Advertising
C) High shrinkage
D) Economy of scale advantages

Question 61

How many units of a product would have to be sold if total fixed costs are $300, desired profit for the product is $2,000, the price at which the product is selling is $15, and the average variable cost is $8?

A) 329 units
B) 288 units
C) 243 units
D) 153 units

Question 62

In the Reality Check "What Price Is Too Low...or Too High?", how many of his 9,500 customers did Damon Risucci lose after he raised prices by 20 percent?

A) 7,500
B) 4,750
C) about 1,000
D) Zero

Question 63

To accomplish the goals of increasing sales, increasing store traffic, and discouraging competition, which of the following is an appropriate strategy?

A) Penetration pricing
B) Price skimming
C) Psychological pricing
D) Price lining

Question 64

Which of the following is not a consideration in establishing the "right" price for a product or service?

A) Competition
B) Consumer demand
C) Your gut
D) Costs

Question 65

The point at which total cost equals total revenue and the business is neither making or losing money is known as

A) The profit area
B) The loss area
C) The breakeven point
D) The profit point

Question 66

Home electronics such as personal computers, cellular phones, and VCRs are often introduced using which of the following strategies?

A) Penetration pricing
B) Price skimming
C) Psychological pricing
D) Price lining

Question 67

Costs that do not change with the number of sales made are called

A) Fixed costs
B) Variable costs
C) The breakeven point
D) Asset costs

Question 68

With an inelastic product, since there are not usually many substitutes, a(n) ________ strategy can be used, setting the prices higher.

A) Skimming
B) Penetration
C) Odd
D) Reference

Question 69

In the Reality Check "What Price Is Too Low...or Too High?," Damon Risucci learned what lesson about running his health club?

A) People are willing to pay more for quality
B) People respond to newspaper advertising
C) Don't extend credit in a service business
D) All health clubs are the same

Question 70

Costs that change in direct proportion to sales are known as

A) Fixed costs
B) Variable costs
C) The breakeven point
D) Asset costs

Question 71

What would be the breakeven point in dollars if total fixed costs were $300, the average variable costs were $9, and the price per unit was $18?

A) $16
B) $33
C) $400
D) $600

Question 72

To accomplish the goals of maximizing short- or long-run profits and to quickly recover development costs, which of the following is an appropriate strategy?

A) Penetration pricing
B) Price skimming
C) Psychological pricing
D) Price lining

Question 73

What the competition charges and what consumers are willing to pay sets the price _______ while costs of producing the product establish the price ________.

A) Ceiling, floor
B) Floor, ceiling
C) Demand curve, supply curve
D) Fixed costs, variable costs

Question 74

_________ pricing is common in retail goods for which consumers have an idea of what the price "should be" and have a "usual" price in mind for that item.

A) Price lining
B) Prestige pricing
C) Reference pricing
D) Odd pricing

Question 75

How many units of a product must be sold in order for the business to break even if total fixed costs are $500, the product is selling for $14, and the average variable cost is $8?

A) 100 units
B) 84 units
C) 63 units
D) 38 units

Question 76

Setting the price of a new product below what is expected in order to gain faster market share is known as

A) Penetration pricing
B) Price skimming
C) Psychological pricing
D) Price lining

Question 77

Costs like rent, property taxes, and utilities are generally

A) Fixed costs
B) Variable costs
C) The breakeven point
D) Asset costs

Question 78

At Sally's Sun Boutique, items are always priced at $4.98 or $8.99 rather than $5.00 or $9.00. This is an example of what type of pricing tactic?

A) Price lining
B) Prestige pricing
C) Reference pricing
D) Odd pricing

Question 79

Setting the price of a new product higher than expected in order to recover development costs is known as

A) Penetration pricing
B) Price skimming
C) Psychological pricing
D) Price lining

Question 80

Sales commissions, raw materials, and labor costs are generally

A) Fixed costs
B) Variable costs
C) A breakeven point
D) A demand curve