Deck 6: Setting Prices and Implementing Revenue Management

Question 1

Customers often incur significant financial costs in searching for, purchasing, and using a service, above and beyond the purchase price paid to the supplier.

Answer 1

True

Question 2

The only function that brings operating revenues into the organization is ____________.

A) marketing
B) management
C) finance
D) accounting
E) information technology

Answer 2

A

Question 3

Business owners often fail to recognize the fixed costs that need to be recouped when providing service.

Answer 3

True

Question 4

Shopbots collect price and product information from multiple electronic vendors and provide it to consumers.

Question 5

Shopbots help consumers combat dynamic pricing online.

Question 6

____________, also known as customized or personalized pricing, refers to the practice of price discrimination.

A) Critical ratio pricing
B) Dynamic pricing
C) Collective pricing
D) Fixed pricing
E) Classical pricing

Question 7

Pricing is less complex in services than it is in manufacturing.

Question 8

Because quality is subjective, all customers have the expertise to assess the quality and value they receive.

Question 9

Psychological costs relate to unpleasant sensations affecting any of the five senses.

Question 10

Which of the following is an example of a physical cost?

A) Mental effort
B) Fatigue
C) Feelings of inadequacy
D) Social Embarrassment
E) Perceived Risk

Question 11

____________ is defined as the sum of all the perceived benefits minus the sum of all the perceived costs of service.

A) Net value
B) Consumer surplus
C) Gross value
D) Moderate value
E) Consumer demand

Question 12

Firms do not need to consider post-consumption costs, as they occur after the firm has already secured a purchase.

Question 13

Which of the following is NOT a broad expression of value?

A) Value is low price.
B) Value is whatever I want in a product.
C) Value is the quality I get for the price I pay.
D) Value is an expectation about a service outcome.
E) Value is what I get for what I give.

Question 14

____________ recognizes that virtually all activities taking place within a firm directly or indirectly support the production, marketing, and delivery of goods and services.

A) Break-even analysis
B) Variable cost
C) Fixed cost
D) Activity-based costing
E) Semi-fixed cost

Question 15

Customers will often pay more for services than they think they are worth.

Question 16

The difference between the price consumer's pay and the amount they would actually have been willing to pay to obtain the benefits is known as ____________.

A) net value
B) gross value
C) consumer surplus
D) moderate value
E) consumer demand

Question 17

Firms that are always reacting to competitors' price changes run the risk of pricing higher than might really be necessary.

Question 18

Which of the following intensifies price competition?

A) Non-price-related costs of using competing alternatives are high.
B) Wider distribution of competitor and or substitution offers.
C) Personal relationships have been established.
D) Switching costs are high.
E) Customer need for time and location specificity.

Question 19

____________ are services sold at less than full cost to attract customers, who will then be tempted to buy profitable service offerings from the same organization in the future.

A) Benign followers
B) Unit packages
C) Loss leaders
D) Cost providers
E) Contracts

Question 20

Which of the following reduces price competition?

A) Increasing the number of competitors.
B) Increasing the number of substituting offers.
C) Wider distribution of competitor and/or substitution offers.
D) High switching costs for consumers.
E) Increasing surplus capacity in the industry.

Question 21

What are the three foundations of the pricing "tripod"?

Question 22

Relate fairness perceptions to DVD rental late fees.

Question 23

Which company is an example of dynamic pricing in the Internet access business?

A) AOL
B) easyInternetcafe
C) Vox1
D) Earthlink
E) Barbados Internet Forums

Question 24

Discuss how service firms can minimize non-monetary purchase costs.

Question 25

Which of the following is the best example of a service firm that attracts customers with low base prices and then piles on additional fees.

A) Rental cars
B) Fast food
C) Education
D) Roofing
E) Consulting

Question 26

Which of the following is the best example of a service industry that utilizes price complexity?

A) Fast food
B) Education
C) Cellular phone
D) Moving/transportation
E) Roofing

Question 27

Draw a graph of the relationship between price per seat on an airline and demand for seats. Label each price bucket.

Question 28

Name two e-tailers that utilize traditional auction models.

Question 29

Airlines, hotels, and car rental firms are not very good at varying prices in response to the price sensitivity and needs of different market segments.

Question 30

Amazon.com is a good example of a firm that aggravated its customers with dynamic pricing.

Question 31

Give an example of a tradeoff between monetary and non-monetary costs associated with patronizing a dental clinic.

Question 32

Describe the concept of price elasticity and draw a graph comparing consumers with high and low elasticity.

Question 33

Which of the following is NOT listed in the chapter as a firm that uses online reverse auctions?

A) Priceline.com
B) Hotwire.com
C) eBay.com
D) Lowestfare.com
E) All of the above use online reverse auctions.

Question 34

What are the four distinct categories of non-monetary costs?

Question 35

Yield management computers can determine who is likely to not show up or take other flights.

Question 36

Discounting to win new business is one of the best strategies for firms wishing to develop a loyal customer base.

Question 37

What are two ways in which companies can improve customer perceptions and satisfaction regarding revenue management?

Question 38

What is price customization?

Question 39

What are two examples of situations that increase price competition?

Question 40

Tickets.com is a good example of a firm that successfully generated more revenue by implementing dynamic pricing.

Question 41

Discuss how a health club could strategically manage capacity via payment schedules.

Question 42

Describe how rate fences should be used in a hair salon service.

Question 43

Describe how airlines utilize revenue management to enhance profitability.

Question 44

Give an example of a service firm that uses service recovery to compensate for overbooking and discuss how the firm compensates.