Deck 10: Managing Pricing Decisions

Question 1

A variable pricing strategy makes planning and forecasting infinitely easier than the alternative approach,one-price.

Answer 1

False

Question 2

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.

Answer 2

True

Question 3

Price skimming is used for market share maximization.

Answer 3

False

Question 4

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

Question 5

Marketers should over promise benefits instead of communicating and delivering a realistic level of benefits for a price.

Question 6

Pricing objectives are independent of other marketing-related objectives such as positioning and branding.

Question 7

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

Question 8

In price lining,the escalation of product prices up the product line no longer have to consider factors such as real cost differences among the various features offered,customer assessments of the value added by the increasing level of benefits,and prices competitors are charging for similar products.

Question 9

Customers always find it more agreeable when a firm raises a price than when it reduces a price.

Question 10

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

Question 11

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

Question 12

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

Question 13

Odd pricing can backfire if misapplied,specifically to service industries.

Question 14

Pricing decisions can be made by the accounting department and do not need to consider the whole of the firm's offering.

Question 15

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 16

In 1975,the Federal Consumer Goods Pricing Act repealed all state fair trade laws and minimum markup laws.

Question 17

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.

Question 18

Odd pricing means that the price is relatively higher than the competition.

Question 19

A competitor's price is one of the most visible elements of its marketing strategy,and you can often infer the pricing objective by carefully analyzing historical and current pricing patterns.

Question 20

Captive pricing is not common in the service sector.

Question 21

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 22

__________________ is (are)considered by the customer when making a purchase decision.

A) Time invested in the purchasing process
B) Costs incurred by the customer in acquiring that bundle of benefits
C) Opportunity costs of choosing one offering over another
D) A & C
E) A, B & C

Question 23

Mark runs a driving range in New York City.He has noticed that within a 15-minute walk you can get to three competitors.Mark decides to look at his competitors' pricing and then determine the best price based on all of the information.Mark is utilizing __________________.

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

Question 24

The measure of customers' price sensitivity,estimated by dividing relative changes in quantity sold by relative changes in price is known as __________________.

A) Price elasticity of demand
B) Stability pricing
C) Pricing tactics
D) Auction pricing
E) Reverse auction

Question 25

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 26

__________________ overtly attempts to consider the role of price as it reflects the bundle of benefits sought by the customer.

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

Question 27

In proposing ______________,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 28

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 29

When using _______________ a bottom line profit is established first and then pricing is set to achieve the target.

A) Penetration pricing
B) Price skimming
C) Target return on investment (ROI)
D) Competitor based pricing
E) Value pricing

Question 30

The ________ strategy is used for profit maximization.

A) Penetration pricing
B) Price skimming
C) Target return on investment (ROI)
D) Competitor based pricing
E) Value pricing

Question 31

________________is the percentage of total category sales accounted for by a firm.

A) Market share
B) Value Ratio
C) Cost
D) Value pricing
E) Product adoption

Question 32

Juan is researching new cars.He would like to buy a car that is both good quality and a good price.After much consideration,Juan purchases a car from a manufacturer where the initial price paid is high,but the cars are known to have much lower maintenance costs.The pricing strategy employed by the dealership where Juan bought his car is ____________________.

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

Question 33

Gaining a thorough understanding of competitors' marketing practices is a key element of successful marketing planning and execution and utilizing that information to determine your pricing is an example of __________________.

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

Question 34

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 35

________________ 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 36

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,so he sets it high.He knows that after this season,the price will lower.Jean Claude is using ______________.

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

Question 37

___________occurs when a seller offers different prices to different customers without a substantive basis,such that competition is reduced.

A) Price fixing
B) Price discrimination
C) Deceptive pricing
D) Bait & switch
E) Predatory pricing

Question 38

Amelie is the marketing manager at a café in Charleston,South Carolina.The chef/owner is about to introduce a new dish and Amelie is planning on pricing the dish low at the beginning,but slowly raising the price over time.Amelie is applying _____.

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

Question 39

One should be careful with a __________________ strategy.Because 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 40

When a company purposefully makes pricing decisions to undercut one or more competitors and gain sales and net market share they are demonstrating a(n)__________________.

A) Cost plus pricing strategy
B) Price war
C) Markup on sales price strategy
D) Average-cost pricing strategy
E) Target return pricing strategy

Question 41

Creating a perception about price merely from the image the numbers provide the customers is called as ________________.

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

Question 42

As in price bundling,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 ______________.

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

Operating with _______ price/______ benefits can be problematic.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, high
B) High, low
C) Low, high
D) Low, low
E) None of the above

Question 45

Geoff works at an Aspen 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 Geoff's shop.Since Geoff took a marketing class in college,he knows that the company is using _____________.

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

Question 46

Bella Luna is a specialty baby furniture store.Most of the items in the store are designer,and,therefore,tend to be more expensive than other baby furniture.Recently Bella Luna started to put the manufacturer's suggested retail price next to the price they charge in order to show the savings.Bella Luna is using __________________.

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

Question 47

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) Pricing tactics
D) Auction pricing
E) Reverse auction

Question 48

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

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

Question 49

As the sugar price has gone up,a good portion of the profit margin of a candy bar has been preserved by simply reducing the size of the bar.The candy manufacturers are utilizing the principle of ____________.

A) Price fixing
B) Price discrimination
C) Deceptive pricing
D) Just noticeable difference (JND)
E) Predatory pricing

Question 50

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

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

Question 51

Doug runs a hardware store.He puts prices on the products and scans them when they get to the register.The price that is marked is the price that will be charged,no exceptions.Doug uses __________________.

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

Question 52

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

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

Question 53

Lauren went to Leisure Travel to book a vacation to the Bahamas.The travel agent told her about multiple all-inclusive resorts where the price of the airfare,hotel,and food are all included.The resort is using a __________________ strategy.

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

Question 54

Carol Ann 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.Carol Ann is describing ___________________.

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

Question 55

Krista wants to buy a new foaming soap dispenser.Currently the store is offering the dispenser for free when she purchases the largest refill of soap.The pricing strategy being used for the dispenser and soap is ____________________.

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

Question 56

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 57

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

A) Market share
B) Quality
C) Value
D) A & B
E) A & C

Question 58

When customers are given the opportunity to purchase a package deal at a reduced price compared to what the individual components of the package would cost separately,the firm is using a __________________ strategy.

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

Question 59

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

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

Question 60

____________ is known for its every day low pricing strategy.

A) Walmart
B) J C Penney
C) Sears
D) Best Buy
E) Kmart

Question 61

Heather runs Cute Cakes,a gourmet cupcake bakery.In order to set prices for her cupcakes,Heather looks at the costs of making each cupcake and then adds an additional amount on top of that to arrive at her price.Heather is demonstrating ____________.

A) Cost plus pricing
B) Price war
C) Markup on sales price
D) Average-cost pricing
E) Target return pricing

Question 62

_____________ are incurred over time,regardless of volume.

A) Fixed costs
B) Variable costs
C) Total costs
D) Both A & B
E) Both B & C

Question 63

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

A) Fixed costs
B) Variable costs
C) Total costs
D) Discounts
E) Allowances

Question 64

To accommodate lengthy sales processes,firms offer _____________,which reward the purchaser for shifting part of the inventory storage function away from the manufacturer.

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

Question 65

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

A) Cost plus pricing
B) Price war
C) Markup on sales price
D) Markup on cost
E) Target return pricing

Question 66

Giovanni's Gems is a high quality Italian leather goods store in Manhattan.Giovanni runs an Internet site where people can buy his products and he will charge the same delivery fee to any location within the 48 contiguous states.Giovanni utilizes _____________.

A) FOB pricing
B) Uniform delivered pricing
C) Zone pricing
D) Geographically driven pricing
E) None of the above

Question 67

From a legal standpoint,it is essential that ________________ are offered to all customers on an equally proportionate basis so that small buyers as well as large buyers follow the same rules for qualification.

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

Question 68

To use target return pricing,the first step for one is to calculate ______________.

A) Fixed costs
B) Marketing costs
C) Total costs
D) Both A & B
E) Both B & C

Question 69

The Internet helped to create a market for ____________________ where sellers bid prices to capture a buyer's interest.

A) Price elasticity of demand
B) Stability pricing
C) Pricing tactics
D) Auction pricing
E) Reverse auction

Question 70

Solid Surface,a countertop store,will give customers a 10% 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) Cash discounts
B) Trade discounts
C) Quantity discounts
D) Seasonal discounts
E) Promotional allowances

Question 71

James is trying to determine the best price for his new fishing poles.He decided to divide all of his costs by the number of fishing poles he will be manufacturing,to come up with a price.James is using ________________.

A) Cost plus pricing
B) Price war
C) Markup on sales price
D) Average-cost pricing
E) Target return pricing

Question 72

_____________ remit monies to purchasers after the fact.

A) Fixed costs
B) Variable costs
C) Total costs
D) Discounts
E) Allowances

Question 73

Veggie Vitality will send retailers a check if they promote their vegetable-based smoothies in the retailer's promotional efforts.Veggie Vitality uses _____________.

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

Question 74

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

A) Cost plus pricing
B) Price war
C) Markup on sales price
D) Average-cost pricing
E) Target return pricing

Question 75

__________________ means that title transfer and freight paid on the goods being shipped are based on the free on board location.

A) FOB pricing
B) Uniform delivered pricing
C) Zone pricing
D) Geographically driven pricing
E) None of the above

Question 76

_______________ 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 77

________________ uses the sales price as a basis of calculating the markup percentage.

A) Cost plus pricing
B) Price war
C) Markup on sales price
D) Average-cost pricing
E) Target return pricing

Question 78

_____________ fluctuate with volume.

A) Fixed costs
B) Variable costs
C) Total costs
D) Both A & B
E) Both B & C

Question 79

Caution is warranted in employing ________________,as it is always possible that the quantity demanded will not match the marketing manager's forecast.

A) Cost plus pricing
B) Price war
C) Markup on sales price
D) Average-cost pricing
E) Target return pricing

Question 80

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

A) Price elasticity of demand
B) Stability pricing
C) Pricing tactics
D) Auction pricing
E) Reverse auction