Deck 11: Manage Pricing Decisions

Question 1

A competitor's price is one of the most visible elements of its marketing strategy; analyzing historical and current pricing patterns may allow firms to determine the competitor's pricing objective.

Answer 1

TRUE

Question 2

A promotional allowance offers retailers the opportunity to receive some compensation from product marketers for the costs of successful product promotions.

Answer 2

TRUE

Question 3

Firms and brands that continually attempt to operate in the high-price/low-benefits environment do not survive over the long run as customer trust is damaged.

Answer 3

TRUE

Question 4

Price objectives are the desired or expected result associated with a pricing strategy and must be consistent with other marketing-related objectives, such as positioning or branding.

Question 5

Regardless of whether the setting is B2C or B2B, most costs are associated with the purchase price.

Question 6

With prestige pricing, some of the traditional price/demand curves cannot properly predict sales or market response because it violates the common assumption that increasing price decreases volume.

Question 7

Odd pricing can backfire if misapplied, especially with respect to service industries.

Question 8

Firms that have an objective of utilizing pricing to communicate positioning use a stability pricing strategy.

Question 9

Due to its use of an everyday low pricing tactic, Walmart has historically needed to make heavy investment in promotional activities.

Question 10

For the marketing manager, pricing is merely an economic break-even point or a cost-plus accounting calculation.

Question 11

Firms frequently rely on combinations of pricing tactics in the marketplace rather than putting all their eggs in one basket.

Question 12

A variable pricing strategy makes planning and forecasting much easier than a one-price strategy.

Question 13

Effectively communicating a product's differential advantages is at the heart of positioning strategy, and exposure to these elements spurs the customer to develop perceptions of value and a subsequent understanding of the value proposition.

Question 14

Average-cost pricing is a method for determining the price of an offering by adding a standardized markup on top of the costs for the offering.

Question 15

In product line pricing, the escalation of product prices up the product line does not depend on prices competitors are charging for similar products.

Question 16

Zone, uniform delivered, and free on board are examples of geographically-driven pricing options that can be implemented within a distribution channel.

Question 17

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

Question 18

To set an exact price for goods or service, marketing managers should consider more than one method of calculation to arrive at the optimal price.

Question 19

Among the marketing mix variables, price is the easiest and quickest to alter, so sometimes firms overuse price changes to stimulate additional sales or gain market share.

Question 20

Since a product's price tends to be invisible, customers rarely have trouble moving past price to consider other critical benefits the product affords.

Question 21

When a firm's objective is to gain as much market share as possible, a likely pricing strategy is ________, sometimes also referred to as pricing for maximum marketing share.

A) penetration pricing
B) price skimming
C) target ROI
D) competitor-based pricing
E) value pricing

Question 22

Amelia is the marketing manager at a cafe in Charleston, and is responsible for deciding the price of dishes included on the cafe's menu. The chef of the cafe introduced a new dish, which was initially priced at $20 by Amelia, but she increased its price slowly over a period of 6 months. In this scenario, Amelia utilized a ________ strategy.

A) penetration pricing
B) price skimming
C) target ROI
D) competitor-based pricing
E) value pricing

Question 23

Jean Claude has just completed a new line of designer handbags. He wants the price to communicate to the customer that the handbags are high quality and exclusive, so he sets the price high. He knows that after this season, the price may need to decrease as the market evolves. Jean Claude is using a ________ strategy.

A) penetration pricing
B) price skimming
C) target ROI
D) competitor-based pricing
E) value pricing

Question 24

Deceptive pricing refers to the collusion among companies to set mutually beneficial high prices and limit competition.

Question 25

Michael Porter has consistently advocated that firms that are able to compete based on some extraordinary efficiency in one or more internal processes bring to the market a competitive advantage based on ________.

A) price perception
B) cost leadership
C) value ratio
D) service
E) quality

Question 26

________ is a critical component that plays into a customer's assessment of the value afforded by a firm and its offerings.

A) Price
B) Cost
C) ROI
D) Markup
E) Skimming

Question 27

A strategy of ________ addresses the objective of entering a market at a relatively high price point.

A) penetration pricing
B) price skimming
C) target ROI
D) competitor-based pricing
E) value pricing

Question 28

When formulating a response to a competitor's price reduction, firms should consider their offering from the perspective of its overall value proposition to customers.

Question 29

In proposing a ________ strategy, the marketing manager usually is convinced that a strong price-quality relationship exists for the product.

A) penetration pricing
B) price skimming
C) target ROI
D) competitor-based pricing
E) value pricing

Question 30

________ can occur when a company purposefully makes pricing decisions to undercut one or more competitors and gain sales and net market share.

A) Cost leadership
B) A price war
C) Price skimming
D) Price discrimination
E) Price elasticity of demand

Question 31

________ could lead the marketing manager to decide to price at some market average price, or perhaps above or below it in the context of penetration or skimming objectives.

A) Penetration pricing
B) Price skimming
C) Target ROI
D) Competitor-based pricing
E) Value pricing

Question 32

Mark owns a driving range in New York City. He has taken notice of the three competitors who are located very close to his business. Mark decides to look at his competitors' pricing and then determine his best pricing strategy based on all of the information. In this scenario, Mark is utilizing ________.

A) penetration pricing
B) price skimming
C) target ROI
D) competitor-based pricing
E) value pricing

Question 33

In markets where customers are sensitive to price and where internal efficiencies lead to cost advantages allowing for acceptable margins even with aggressive pricing, a ________ strategy can create a powerful barrier to market entry for other firms.

A) penetration pricing
B) target ROI
C) price skimming
D) competitor-based pricing
E) value pricing

Question 34

Pricing objectives very frequently are designed to maximize profit, which necessitates a ________ pricing strategy.

A) penetration
B) price skimming
C) target return on investment (ROI)
D) price war
E) value

Question 35

Hector is opening an appliance store. He has estimated a monthly profit goal based on his anticipated expenses and earning goals and uses it to set product prices. Hector is implementing a ________ pricing strategy.

A) penetration
B) price skimming
C) target return on investment (ROI)
D) competitor-based
E) value

Question 36

A company's core cost advantages translate directly to an edge over its competitors based on much more flexibility in its ________ as well as its ability to translate some of the cost savings to the bottom line.

A) pricing strategies
B) cost leadership
C) value ratio
D) service
E) quality

Question 37

The just noticeable difference in a price is the amount of price increase that can be taken without affecting customer demand.

Question 38

Firms should be careful with a ________ strategy, as price is a cue for developing customer perceptions of product quality. The value proposition may be reduced if a low price belies the product's actual quality attributes.

A) penetration pricing
B) price skimming
C) target ROI
D) competitor-based pricing
E) value pricing

Question 39

The Robinson-Patman Act addressed price discrimination by prohibiting a seller's ability to offer different prices to different customers without a substantive basis.

Question 40

The internal processes at Southwest Airlines are highly efficient, giving it a competitive advantage over other airlines. Southwest has a very efficient maintenance process and also has a very simple process of booking passengers. Because of these efficiencies, the company is able to offer customers an appealing mileage-driven pricing structure while also increasing the airline's profit margin. In this scenario, Southwest's competitive advantage is based on ________.

A) price perception
B) cost leadership
C) value ratio
D) service
E) quality

Question 41

Firms that have an objective of utilizing pricing to communicate positioning use a ________ strategy.

A) penetration pricing
B) price skimming
C) target ROI
D) competitor-based pricing
E) value pricing

Question 42

Bright House wants Madhukar to buy the full gamut of entertainment products, and the more he buys-digital television, premium channels, downloadable movies, local and long-distance phone service, cellular service, high-speed Internet-the better the deal becomes compared to the total of the individual prices of each product. Bright House is using a ________ strategy.

A) product line pricing
B) captive pricing
C) price bundling
D) reference pricing
E) prestige pricing

Question 43

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

A) Product line pricing
B) Captive pricing
C) Price bundling
D) Reference pricing
E) Prestige pricing

Question 44

Marriott has branded its entire family of accommodations based on different value propositions, supported by clearly delineated pricing strategies. Its offerings include Ritz-Carlton and JW Marriott for the most discriminating patron, Marriott and Renaissance at the next level of full service, and an array of differentially positioned brands such Courtyard and Residence Inn. This is an example where ________ can occur at a level much broader in scope than individual products.

A) captive pricing
B) auction pricing
C) price lining
D) reference pricing
E) variable pricing

Question 45

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.

A) product line pricing
B) captive pricing
C) price bundling
D) reference pricing
E) prestige pricing

Question 46

A firm attempts to find a neutral set point for price that is neither low enough to raise the ire of competition nor high enough to put the value proposition at risk with customers. The firm is adopting a(n) ________ pricing strategy.

A) stability
B) target ROI
C) value
D) average-cost
E) product line

Question 47

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

A) psychological
B) captive
C) variable
D) odd/even
E) high/low

Question 48

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

A) price elasticity of demand
B) stability pricing
C) price bundling
D) auction pricing
E) variable pricing

Question 49

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

A) market share
B) quality
C) value
D) cost
E) brand image

Question 50

Yoko 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. Yoko is describing ________ pricing.

A) product line
B) captive
C) odd/even
D) reference
E) prestige

Question 51

Edvard works at a 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 his shop. Since Edvard took a marketing class in college, he knows that the company is most likely using ________.

A) product line pricing
B) captive pricing
C) price bundling
D) reference pricing
E) prestige pricing

Question 52

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 ________ pricing, which in the case of price bundling is the total price of the components of the bundle if purchased separately versus the bundled price.

A) product line
B) captive
C) odd/even
D) reference
E) prestige

Question 53

Bella is a discount furniture store. Most of the items in the store are overstock and hence tend to be more inexpensive than other furniture. Recently Bella started to display the manufacturers' suggested retail price next to the price it charges to show the savings. Bella is using a ________ strategy.

A) product line pricing
B) captive pricing
C) price bundling
D) reference pricing
E) prestige pricing

Question 54

Firms and brands that continually attempt to operate in the ________ quadrant do not survive over the long run as customer trust is damaged. Some firms use price skimming strategies, especially on product introductions, even when all the bugs have yet to be worked out of the product.

A) high price, high benefits
B) high price, low benefits
C) low price, high benefits
D) low price, low benefits
E) low price, no benefits

Question 55

Marco wants to buy a new car that is of good quality and available at an affordable price. After exploring the available options, Marco decides to purchase a car made by a popular car manufacturer, which has a high retail price but offers very low operating and maintenance costs. In this scenario, the pricing strategy employed by the car manufacturer is ________.

A) penetration pricing
B) price skimming
C) target ROI
D) competitor-based pricing
E) value pricing

Question 56

Dag runs a hardware store. He learned that customers process the price of $9.99 as significantly lower than the price of $10.00 because of the reduced digit count in the price point. Accordingly, he follows this rule to set up the prices for all products. Dag uses a ________ strategy.

A) psychological pricing
B) one-price strategy
C) variable pricing
D) everyday low pricing (EDLP)
E) high/low pricing

Question 57

Creating a perception about price merely from the image the numbers provide the customer demonstrates ________ pricing.

A) psychological
B) stability
C) variable
D) everyday low
E) high/low

Question 58

HP sells an inexpensive printer for an entry-level user, but the printer cartridges that need continual replacement are fairly expensive. This demonstrates the concept of ________.

A) product line pricing
B) captive pricing
C) price bundling
D) reference pricing
E) prestige pricing

Question 59

Krista goes to a store to buy a new liquid soap dispenser. When she purchases a new dispenser from the store she gets two liquid soap refill packets for free, as part of a promotional offer, but she will need to purchase refills later. In this scenario, the pricing strategy used for the soap dispenser is ________ pricing.

A) product line
B) captive
C) variable
D) reference
E) prestige

Question 60

When Claire purchased her new cell phone, she was offered an opportunity to purchase a car charger and a cover together at a reduced price. The cell phone provider was using a ________ strategy.

A) product line pricing
B) captive pricing
C) price bundling
D) reference pricing
E) prestige pricing

Question 61

Priceline.com is a firm that serves as a clearinghouse for extra capacity from airlines, hotels, and cruise lines. It is an example of a firm that uses a(n) ________ strategy.

A) cost-plus pricing
B) price war
C) reverse auction
D) average-cost pricing
E) target return pricing

Question 62

________ costs are the sum of the fixed and variable costs.

A) Marginal
B) Total
C) Average
D) Minimum
E) Reduced

Question 63

________ are direct, immediate reductions in price provided to purchasers.

A) Allotments
B) Rebates
C) Offers
D) Discounts
E) Allowances

Question 64

________ are typically expressed as greatly extended invoice due dates.

A) Cash discounts
B) Trade discounts
C) Quantity discounts
D) Seasonal discounts
E) Promotional allowances

Question 65

________ remit monies to purchasers after the fact.

A) Allotments
B) Coupons
C) Offers
D) Discounts
E) Allowances

Question 66

The Internet created a rise in ________ as more and more people decided to meet online to sell products to the highest bidder.

A) price elasticity of demand
B) stability pricing
C) prestige pricing
D) auction pricing
E) trade discounts

Question 67

James is trying to determine the best price for his new fishing poles and thus uses the sales price as a basis of calculating the markup percentage. He is using a ________ approach.

A) markup on cost
B) value price
C) average-cost pricing
D) markup on sales price
E) cost-plus

Question 68

You should be careful when using ________ pricing, as it is always possible that the quantity demanded will not match the marketing manager's forecast.

A) cost-plus
B) psychological
C) value
D) average-cost
E) prestige

Question 69

Besides the standard auction approach where buyers bid for a seller's offering, it is now very common for sellers to utilize ________ to bid prices to capture a buyer's business.

A) price elasticity of demand
B) stability pricing
C) online promotion
D) channel discounts
E) reverse auctions

Question 70

________ costs are incurred over time, regardless of volume, whereas ________ costs fluctuate with volume.

A) Fixed; variable
B) Variable; fixed
C) Total; variable
D) Variable; total
E) Marginal; total

Question 71

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

A) Psychological pricing
B) One-price strategy
C) Variable pricing
D) Everyday low pricing (EDLP)
E) High/low pricing

Question 72

To use target return pricing, one must first calculate total ________ costs.

A) fixed
B) variable
C) marginal
D) minimum
E) average

Question 73

The rise of Walmart as one of the world's largest corporations has brought the concept of ________ to the forefront of global consumer consciousness.

A) reverse auctions
B) target return on investment pricing
C) price points
D) everyday low pricing
E) high/low pricing

Question 74

Veggie Vitality will send retailers a check if the retailer successfully includes its vegetable-based smoothies in promotional efforts. Veggie Vitality uses ________ to incentivize retailers.

A) cash discounts
B) trade discounts
C) quantity discounts
D) seasonal discounts
E) promotional allowances

Question 75

Dyani runs Cute Cakes, a gourmet cupcake bakery. To set prices for her cupcakes, Dyani looks at the cost of making each cupcake and then adds an additional amount on top of that to arrive at her price. Dyani is using ________.

A) cost-plus pricing
B) high/low pricing
C) markup on sales price
D) average-cost pricing
E) target return pricing

Question 76

To better take into account the differential impact of fixed and variable costs, marketing managers can use ________ pricing.

A) cost-plus
B) psychological
C) odd/even
D) average-cost
E) target return

Question 77

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

A) price bundling
B) target return on investment pricing
C) variable pricing
D) everyday low pricing
E) reverse auctions

Question 78

As with average-cost pricing, the effectiveness of ________ pricing is highly dependent on the accuracy of the forecast.

A) cost-plus
B) psychological
C) reference
D) average-cost
E) target return

Question 79

Solid Surface, a countertop store, will give customers a 10 percent discount if they pay their bills in full in 20 days; however, after 20 days they do not receive a discount. This is an example of a ________.

A) cash discount
B) trade discount
C) quantity discount
D) seasonal discount
E) promotional allowance

Question 80

________ provide an incentive to a channel member for performing some function in the channel that benefits the seller, such as stocking a product or performing a product service.

A) Cash discounts
B) Quantity discounts
C) Trade discounts
D) Seasonal discounts
E) Promotional allowances