Deck 15: Supply Chain and Channel Management

Question 1

Cost-based methods do not recognize the role that consumers' or competitors' prices play in the marketplace.

Answer 1

True

Question 2

When a retail store rarely sells deeply discounted or sale products,it is known as "everyday low pricing."

Answer 2

True

Question 3

Proving that a company has engaged in the deceptive bait-and-switch practice is easy.

Answer 3

False

Question 4

The Robinson-Patman Act does not apply to end consumers,at which point many forms of price discrimination occur.

Question 5

The expression "3/10,n/30" means that a business must pay 3 percent of the total invoice amount in 10 days,with the remainder due in 30 days.

Question 6

Coupons may annoy,alienate,and confuse consumers and therefore do little to increase store loyalty.

Question 7

Kristina sells sports equipment and wants to get customers into her store.She knows from past experience that sales generate customer traffic,particularly when she puts children's baseball equipment on sale.Kristina may consider a leader pricing strategy.

Question 8

Firm A has set very low prices for its products in an attempt to drive its competitor,Firm B,out of business.This is known as monopolistic pricing.

Question 9

The three different methods that can help develop pricing strategies are cost based,competitor based,and profit based.

Question 10

A noncumulative quantity discount usually involves several transactions.

Question 11

A high/low pricing strategy relies on the promotion of sales,during which prices are temporarily reduced to encourage purchases.

Question 12

Cheryl wants to quickly establish a dominant market share for her new line of ergonomic pens.To do this,she will likely use a market penetration pricing strategy.

Question 13

When Sony released its PlayStation 4 game console,it charged a high price,attracting the most avid game players.This was a market penetration pricing strategy.

Question 14

It is best if firms choose one pricing strategy to use for all its products rather than use different methods for pricing.

Question 15

Price lining is setting a price floor and a price ceiling for a line of products and then setting price points in between to represent differences in quality.

Question 16

A pricing strategy and a pricing tactic are essentially the same thing.

Question 17

For market penetration pricing to work,the product or service must be perceived as breaking new ground in some way.

Question 18

Slotting allowances are used to get retailers to feature a manufacturer's product in their advertising and promotional efforts.

Question 19

Sellers using an EDLP pricing strategy often communicate their strategy through the creative use of a reference price.

Question 20

The improvement value method and the cost of ownership method are both cost-based pricing methods.

Question 21

A weakness associated with cost-based pricing methods is that they

A) are too difficult to calculate.
B) do not consider profit when calculating.
C) do not recognize the role consumers or competitors' prices play in the marketplace.
D) do not consider fixed or variable costs.
E) are structurally inflexible and ignore vertical price-fixing alternatives.

Question 22

The pricing method that considers what consumers may be willing to pay for a particular product based on the value received over the product's entire lifetime is the _______ pricing method.

A) cost-based
B) cost of ownership
C) reference-based
D) improvement value
E) market-based

Question 23

In determining the price of his company's new small-business accounting software,Richard is assessing how much better his company's software is as compared to alternative products available in the market.Richard is using _______ pricing.

A) cost-based
B) improvement value
C) reference-based
D) cost of ownership
E) market-based

Question 24

The improvement value method and the cost of ownership method are two approaches for setting prices that are _______ methods.

A) cost-based
B) competitor-based
C) production-based
D) value-based
E) market-based

Question 25

Firms using a(n)_______ pricing method set their prices relative to what other firms are charging.

A) improvement value
B) value-based
C) cost-based
D) competition-based
E) reference-based

Question 26

One of the difficulties associated with value-based pricing is that

A) costs used in this method are difficult to compute.
B) only the creator of a new product can fully understand its value to consumers.
C) value depends on variable costs and not fixed costs.
D) everyday low pricing has neutralized the impact of price on consumers' purchase decisions.
E) it necessitates a great deal of consumer research to be implemented successfully.

Question 27

Everyday low pricing (EDLP)provides value to consumers by

A) continually offering items on sale.
B) minimizing the number of options a consumer can evaluate.
C) offering noncumulative quantity discounts.
D) reducing their search costs.
E) creative use of reference pricing.

Question 28

Cost-based pricing assumes that costs

A) will vary with the level of prices.
B) are used to estimate value.
C) are calculated based on historical consumer perceptions of what things should cost.
D) will continue to decrease as production increases.
E) will not vary much for different levels of production.

Question 29

Value-based pricing methods include approaches to setting prices that focus on the overall value of the product offering

A) as recognized by competitors.
B) as perceived by the consumer.
C) relative to production costs.
D) in relationship to fixed and variable costs.
E) in order to minimize bundling charges.

Question 30

Milton owns a lawncare business.From experience,Milton has found that John Deere equipment lasts almost twice as long as competitors' machines.For John Deere,Milton's perception about its products makes _______ pricing a logical choice.

A) cost of ownership
B) cost-based
C) reference-based
D) improvement value
E) market-based

Question 31

Compared with other methods used to set prices,_______ pricing is relatively simple.

A) cost-based
B) value-based
C) improvement value
D) reference-based
E) cost of ownership

Question 32

When Walmart communicates to consumers that,for any given group of often-purchased items,its prices will tend to be lower than that of any other competitor,Walmart is exhibiting what type of pricing strategy?

A) high/low
B) EDLP
C) price skimming
D) uniform delivered pricing
E) bait and switch

Question 33

Each generation of cell phones has provided greater clarity,range,security,and multifunctionality.If marketers of cell phones use these features as a basis for pricing,they would be using _______ pricing.

A) cost-based
B) EDLP
C) reference-based
D) improvement value
E) market-based

Question 34

Value-based pricing can be difficult to implement because

A) the way consumers perceive value changes often.
B) this method requires all costs be identified and calculated on a per-unit basis.
C) value depends on variable costs and not fixed costs.
D) everyday low pricing has neutralized the impact of price on consumers' purchase decisions.
E) it is difficult to determine how competitors will price their products.

Question 35

In determining the price for his company's new photo printer,Raymond is assessing the total cost of owning his printer as compared to alternative products available in the market.Raymond is using _______ pricing.

A) improvement value
B) EDLP
C) reference-based
D) cost of ownership
E) premium

Question 36

An everyday low pricing strategy stresses the continuity of retail prices

A) at a level above regular retail prices.
B) at a level between the regular price and the deep-discount sale prices of competitors.
C) based on variable production costs.
D) at a price skimming level.
E) at a level below the deep-discount sales prices of competitors.

Question 37

Because market and operating conditions are different in each target market

A) all consumers will react similarly to the firm's pricing strategy.
B) the choice of a pricing strategy should be specific to the target market.
C) prices need to be held constant because everything else is changing.
D) only horizontal price fixing should be used.
E) external reference prices will always be the best strategy.

Question 38

Dan is especially price sensitive.He has been known to line up on "Black Friday" (the day after Thanksgiving)at 4 a.m.to be among the first to buy sale items.Dan would likely respond to a _______ pricing strategy.

A) high/low
B) premium
C) price skimming
D) slotting
E) uniform

Question 39

When Greenbelt Construction Company began building houses in a large subdivision with many other builders,the company priced its homes slightly higher than its competitors and promoted the added quality features found in Greenbelt's homes.Greenbelt was using a(n)_______ pricing strategy.

A) competition-based
B) value-based
C) improvement-based
D) premium
E) reference-based

Question 40

Yvonne estimates the average cost of her floral arrangements is $14 regardless of whether she is making 5 or 20 arrangements that day.She adds a standard markup to the $14 estimate to determine her price.Yvonne is using a(n)_______ pricing method.

A) improvement value
B) value-based
C) cost-based
D) EDLP
E) reference-based

Question 41

Developing pricing strategies for __________ is one of the most challenging tasks a manager can undertake.

A) cost-based pricing
B) seasonal rebate items
C) new products
D) zone pricing products
E) quantity discounts

Question 42

The major objectives associated with a market penetration pricing strategy are to

A) capture the high end of the market demand curve and lower introduction costs.
B) quickly build sales and market share.
C) minimize customer dissatisfaction and maximize reference price value.
D) provide an incentive to purchase a less desirable product to obtain a more desirable product.
E) match competitors' prices and communicate high quality.

Question 43

The __________ occurs when unit cost drops as the quantity sold increases.

A) slotting allowance benefit
B) price fixing return
C) improvement value effect
D) experience curve effect
E) cumulative bundling benefit

Question 44

With a __________ pricing strategy,marketers set a low initial price for the introduction of a new product or service.

A) market penetration
B) bundling
C) price fixing
D) reference
E) skimming

Question 45

One reason marketers of new,innovative products often start out with a price skimming strategy rather than a market penetration strategy is that

A) few consumers understand a penetration strategy.
B) a price skimming strategy lowers the value for consumers.
C) a price skimming strategy targets all product adopters equally.
D) it is easier to lower prices than to raise them.
E) price skimming is legal while price penetration is not.

Question 46

In determining the price for his company's new pocket digital camera,Matt determines what consumers consider the regular or original price for similar cameras available in the market.Matt is assessing the influence of __________ on pricing strategy.

A) improvement value
B) odd-even prices
C) everyday low pricing
D) reference prices
E) cost of ownership

Question 47

In a(n)_______ pricing strategy,marketers rely on the promotion of sales,during which prices are temporarily reduced to encourage purchases.

A) high/low
B) EDLP
C) price skimming
D) uniform delivered
E) bait-and-switch

Question 48

What makes a high/low pricing strategy appealing to sellers?

A) It attracts two distinct market segments.
B) It allows the seller to market itself as an "everyday low price leader."
C) It doesn't require the seller to continually offer sales or deep discounts.
D) It allows sellers to capture the most profit from a new product or service.
E) It reduces the need for slotting and advertising allowances.

Question 49

Production of the DeLorean car,made famous in the film Back to the Future,never got above 25,000 units during its lifetime.Automobile industry analysts estimate that production of this car needed to reach around 300,000 units to achieve the __________,which refers to a decrease in unit cost as product volume increases.

A) slotting allowance benefit
B) price fixing return
C) improvement value effect
D) experience curve effect
E) cumulative bundling benefit

Question 50

For a price skimming strategy to work,the product or service must

A) be bundled with products or services already available on the market.
B) be similar to what consumers are already comfortable with.
C) have wide market appeal.
D) have low production costs.
E) offer consumers some new benefit currently unavailable in alternative products.

Question 51

When Burroughs Wellcome introduced the first anti-AIDS drugs,it initially set the price at $10,000 for a year's supply.Burroughs Wellcome was probably pursuing a(n)__________ pricing strategy.

A) skimming
B) introductory
C) slotting allowance
D) market penetration
E) cost-based

Question 52

Mario is the first retailer in town to sell games for Sony's latest version of its PlayStation gaming console.Mario wants to quickly capture as much of the market for the new games as possible.Mario will likely use a __________ pricing strategy.

A) penetration
B) bundling
C) price fixing
D) reference
E) skimming

Question 53

Charging a relatively high price for new and innovative products to those consumers most willing and able to pay the high price is called price

A) penetration.
B) bundling.
C) fixing.
D) referencing.
E) skimming.

Question 54

For marketers using a price skimming strategy,once the initial demand is met for new and innovative products,they will likely

A) leave the market.
B) discontinue the product and create a new one.
C) offer deep discounts to create a loss leader pricing strategy.
D) lower the price to capture the next most sensitive market segment.
E) use zone pricing to maximize differences.

Question 55

A reference price is

A) the total price including tax.
B) the price against which buyers compare the actual selling price.
C) the manufacturer's cost.
D) a cumulative quantity discount price.
E) the external horizontal fixed price.

Question 56

Pricing _______ products is especially challenging because little or nothing is known about consumers' perceptions of its value.

A) cost-based
B) seasonal
C) service-related
D) bundled
E) new-to-the-world

Question 57

When Apple introduced the iPhone-a combination phone,MP3 player,and Internet access device-in 2007,it was priced at $499,considerably higher than either the iPod or competing cell phones.Hoping to attract innovators and early adopters,Apple was most likely pursuing a __________ pricing strategy.

A) market penetration
B) slotting allowance
C) price fixing
D) reference price
E) price skimming

Question 58

Price skimming focuses on selling products to __________ and __________ in the consumer adoption process model.

A) innovators; early adopters
B) early adopters; the early majority
C) the early majority; the late majority
D) the late majority; laggards
E) laggards; innovators

Question 59

It is important to Joanne to get value for her money,but she does not want to spend time comparison shopping.Joanne will likely respond to _______ pricing,but not to _______ pricing.

A) high/low; EDLP
B) premium; high/low
C) high/low; premium
D) price skimming; high/low
E) EDLP; high/low

Question 60

What is one of the drawbacks of using a price skimming strategy?

A) It is difficult to lower prices on an introductory product.
B) Price skimming allows competitors to easily enter the market.
C) Firms must consider the high costs associated with producing a small volume of product.
D) Price skimming does not work well with new-to-the-market, innovative products.
E) Price skimming is often challenged as being illegal.

Question 61

When a new product is not being sold at the rate originally forecasted,the retailer may reduce the price in order to reduce the inventory of the product.This reduction is known as a

A) markdown.
B) rebate.
C) coupon.
D) cash discount.
E) quantity discount.

Question 62

A pricing strategy is

A) a long-term approach to setting prices in a companywide integrated effort.
B) the use of one-time seasonal discounts to reduce inventory.
C) the use of slotting allowances to gain access to distribution channels.
D) a short-term approach to setting prices.
E) associated with competitive threats in the marketplace.

Question 63

Price reductions offered on products and services to stimulate demand during off-peak seasons are referred to as

A) markdowns.
B) seasonal discounts.
C) price lining.
D) predatory pricing.
E) zone pricing.

Question 64

Retailers use _____ because they believe their use will induce customers to try new products,convert first-time users to regular users,increase purchases,and protect market share.

A) seasonal discounts
B) coupons
C) rebates
D) cumulative quantity discounts
E) noncumulative quantity discounts

Question 65

Retailers use _______ to get rid of slow-moving or obsolete merchandise.

A) markdowns
B) slotting allowances
C) price lining
D) rebates
E) seasonal allowances

Question 66

One of the benefits of offering a size discount to consumers is they will purchase more of a marketer's product and

A) earn a cash discount.
B) capitalize on the experience curve effect.
C) will not fall prey to predatory pricing.
D) will be less likely to switch brands.
E) will be able to take advantage of zone pricing benefits.

Question 67

If a market penetration pricing strategy results in lower per-unit cost,competitors might be discouraged from entering the market because

A) selective consumer demand will increase gross profit margins.
B) a high/low cost-based pricing strategy will not work.
C) they would likely need to quickly produce a large volume in order to compete.
D) profits would increase too rapidly.
E) they would be able to advertise only to the same target market as the firm that introduced the original product.

Question 68

The most common form of a quantity discount for consumers is a

A) cash discount.
B) markdown.
C) size discount.
D) coupon.
E) rebate.

Question 69

Many stores now e-mail codes to their customers that can be used on their websites or printed and brought into the store to receive discounts for products purchased.In this instance,the customer is using a _______ to receive the discount.

A) size discount
B) rebate
C) coupon
D) markdown
E) seasonal discount

Question 70

What is the difference between a coupon and a rebate?

A) The retailer handles coupons while manufacturers handle most rebates.
B) Coupons are issued for products and rebates are issued for services.
C) Coupons are for "cents/dollars off" while rebates are for "percentages off" the listed price.
D) There is no difference between coupons and rebates.
E) The manufacturer handles coupons while retailers handle rebates.

Question 71

One important reason manufacturers like rebates is that

A) the transaction costs are the responsibility of the retailer.
B) their redemption rates are low.
C) rebates expire faster than coupons do.
D) there are fewer price discrimination issues.
E) they build strong brand recognition.

Question 72

Cosmetic manufacturers that sell shampoo and conditioner together as one package at a lower price rather than selling each item separately are using

A) price lining.
B) slotting allowances.
C) cumulative quantity discounts.
D) loss leaders.
E) price bundling.

Question 73

Yurgen is opening a financial consulting service for high-income retirees in his area.This target market is used to paying for quality and associates high quality with high prices.In this instance,Yurgen should probably not use a market penetration pricing strategy because

A) he might be missing out on customers who would only pay less for his products.
B) there are moderate barriers to competitive entry in the market.
C) a low price might signal low quality.
D) he would have to determine zone pricing discounts.
E) the experience curve effect would drop unit costs too rapidly.

Question 74

Generally,a _______ represents either a short-term response to a competitive threat or a broadly accepted method of calculating a final price for the customer that is short term in nature.

A) pricing strategy
B) reference price
C) high/low strategy
D) loss leader price
E) pricing tactic

Question 75

The saying "leaving money on the table" is associated with

A) a price skimming strategy that forces consumers to choose between products.
B) a market penetration strategy when there is an opportunity for price skimming.
C) vertical price fixing in markets where horizontal price fixing would be more appropriate.
D) a predatory pricing strategy that results in excessive seasonal discounts.
E) loss leader pricing that drives consumers to competitors' products.

Question 76

In which of the following tactics does a consumer pay a fee to purchase the right to use a product for a specific amount of time?

A) lay-away
B) bait and switch
C) lease
D) bundling
E) rebate

Question 77

Marlie designs and manufactures specialty furniture.She has a number of unique products but can only produce in limited quantities.Marlie will probably not use a market penetration strategy because

A) there are few barriers to competitive entry in the market.
B) she could not meet a rapid rise in demand.
C) a low price would indicate low quality.
D) she would have to determine zone pricing discounts.
E) the experience curve effect would drop unit costs too rapidly.

Question 78

A pricing tactic is

A) a long-term and broad-based approach to pricing.
B) an integrative pricing approach based on the five Cs.
C) an approach that can be used only with consumers.
D) a short-term approach that is often in response to a competitive threat.
E) an approach that can be used only in a business-to-business setting.

Question 79

Some consumers make it a point to go shopping the day after Christmas to stock up on discounted wrapping paper and bows for the following year.These consumers are

A) enjoying the benefits of size discounts.
B) taking advantage of everyday low pricing strategies.
C) avoiding bait-and-switch strategies.
D) taking advantage of zone pricing discounts.
E) taking advantage of seasonal discounts.

Question 80

Supermarkets often offer great deals on milk or eggs to get customers into their stores,knowing that many customers will also purchase items that have higher markups for the store.These supermarkets are using a _______ pricing tactic.

A) leader
B) bundling
C) price lining
D) cumulative quantity discount
E) slotting