Question 1

This approach is fairly standard for high-technology offerings or for those offerings that require substantial research and development cost input initially.&#10;A) Market penetration pricing.&#10;B) Customer-centric pricing.&#10;C) Price-skimming&#10;D) None of the options given above is correct.

Accepted Answer

Price-skimming is a strategy used for products that require a significant initial investment in research and development or high-technology offerings. It involves initially setting a high price for the product, which then gradually decreases over time as the product becomes more established in the market. This approach allows companies to recover their initial investment costs and maximize profits in the early stages of the product's life cycle, while also creating a perception of high value and exclusivity among early adopters.

Question 2

________ is an assumption that quality increases as price increases and that, in general, price reflects quality.&#10;A) Perceived quality&#10;B) Perceived value&#10;C) Perceived price&#10;D) Perceived risk

Accepted Answer

Perceived quality is the assumption that quality increases as price increases and that higher-priced products are of better quality. This perception can influence consumer behavior and lead them to purchase higher-priced products in the belief that they are of better quality.

Question 3

This is the price band against which customers judge the purchase price of offerings in their own minds.&#10;A) Sale prices.&#10;B) Reference prices.&#10;C) Luxury prices.&#10;D) Odd-number prices.

Accepted Answer

Reference prices are the price band or range that customers consider while evaluating the purchase price of a product or service. It is the price that customers have in their minds as the benchmark for the offering they are considering. It could be based on their previous experience, competitor prices, or advertising. Therefore, companies often try to establish a lower reference price to make their product look like a better deal or a higher reference price to make it seem more luxurious or exclusive.

Question 4

These act as cues, usually indicating to a potential customer that there is a bargain to be had. Consequently this entices the customer to purchase.&#10;A) Reference prices.&#10;B) Sale signs.&#10;C) Sales promotions.&#10;D) Odd-number pricing.

Accepted Answer

Sale signs are visual cues that suggest a product is on sale or being offered at a discounted price. This can create a sense of urgency and encourage customers to buy the product.

Question 5

Sunday newspapers (in Britain, France, Thailand, Sweden) often contain numerous supplements (e.g. fashion, entertainment, property) to make the newspaper appear greater value for money. These are called:

A) Pricing cues.
B) Price bundling.
C) Odd-number pricing.
D) Reference prices.

Accepted Answer

The supplements added to the Sunday newspapers are an example of price bundling, as multiple products are offered together as a package to enhance the perceived value for money for the consumer.

Question 6

There are four types of pricing approaches. Which of the following is not a pricing approach?&#10;A) Cost-oriented.&#10;B) Demand-oriented.&#10;C) Value-oriented.&#10;D) Luxury-oriented.

Accepted Answer

There are four pricing approaches: Cost-oriented, Demand-oriented, Value-oriented, and Luxury-oriented. Therefore, Luxury-oriented is not an additional pricing approach.

Question 7

This occurs in very large organizations where there is considerable internal dealing between different divisions of the company and across national boundaries.&#10;A) Transfer pricing.&#10;B) EVC pricing.&#10;C) Relationship pricing.&#10;D) Value-in-use pricing.

Accepted Answer

Transfer pricing refers to the practice of determining the value of goods or services as they are transferred between different divisions or entities within a company. This is especially important for multinational corporations that have subsidiaries operating in different countries with different tax rates and regulations. Transfer pricing can be used to minimize tax liability and to allocate costs and profits between different divisions or entities.

Question 8

Fixed costs are costs that vary according to the number of units of product made or service sold. For example, with the production of Burger King cheeseburger meals, when sales and demand decrease, fewer raw goods such as cheeseburger ingredients, product packaging, and novelty items such as toys are required.

Accepted Answer

Fixed costs are costs that do not vary with changes in the number of units produced or sold. Examples of fixed costs include rent, salaries, and insurance. Therefore, the statement in the question is incorrect as it describes variable costs instead of fixed costs.

Question 9

The general idea that price indicates quality assumes that the prices are objectively determined by market force. This is referred to as 'perceived value'.

Accepted Answer

The concept that price indicates quality is related to 'perceived value', but it does not assume prices are objectively determined by market forces. Instead, it suggests that consumers often equate higher prices with higher quality, regardless of the actual cost or market forces.

Question 10

Value is defined as 'the regard that something is held to deserve; importance, worth or usefulness of something; principles or standards of behaviour; one's judgement of what is important in life; the numerical amount denoted by an algebraic term; a magnitude, quantity, or number'.

Accepted Answer

The definition provided matches the definition of value.

Question 11

A cost-oriented approach is where prices are based on price sensitivity and levels of demand.

Accepted Answer

The answer of A cost-oriented approach is where prices are...

Question 12

The market penetration pricing approach is used for fast-moving consumer goods and consumer durables, where the new offering introduced is not demonstrably different from existing formulations.

Accepted Answer

The answer of The market penetration pricing approach is used...

Question 13

These are costs which vary according to the number of units of product made or service sold.&#10;A) Fixed costs.&#10;B) Variable costs.&#10;C) Less costs.&#10;D) Capital costs.

Accepted Answer

The answer of These are costs which vary according to...

Question 14

The pricing approach where prices are set based on costs is called:&#10;A) The cost-oriented approach.&#10;B) The demand-oriented approach.&#10;C) The competitor-oriented approach.&#10;D) The value-oriented approach.

Accepted Answer

The answer of The pricing approach where prices are set...

Question 15

The pricing approach where prices are set based on what customers believe to offer value is called:&#10;A) The cost-oriented approach.&#10;B) The competitor-oriented approach.&#10;C) The demand-oriented approach.&#10;D) The value-oriented approach.

Accepted Answer

The answer of The pricing approach where prices are set...

Deck 7: Pricing and Value Creation