Deck 13: Setting the Right Price

Question 1

The introductory price for the Nintendo Gamecube video game console was $100 lower than the list price of Xbox and Playstation 2, its only two competitors. Given this information, you can assume Nintendo used which type of policy for its Gamecube?

A)penetration pricing
B)flexible pricing
C)competitive skimming
D)price sensitive skimming

Answer 1

A

Question 2

What is the main reason for establishing pricing objectives?

A)to give direction for price movements over the product life cycle
B)to define the initial price
C)to establish a good understanding of the market and the needs of the consumer
D)to interact with the other elements of the marketing mix

Answer 2

C

Question 3

A penetration strategy tends to be effective in a price-sensitive market. What is one of the purposes of penetration pricing?

A)to recoup product development costs quickly
B)to discourage competitors from entering the market
C)to produce a large margin of profit per unit
D)to develop exclusive distribution

Answer 3

B

Question 4

The DCS Stainless Steel Gas Grill for outside cooking costs $3,995. The market for a grill that could easily replace a kitchen range is limited even though a lot of people have seen articles about this grill in cooking magazines and in the cooking section of newspapers. There is no potential competitor for this grill. Which strategy is probably best?

A)price skimming
B)penetration pricing
C)status quo
D)price-lining

Question 5

Which of the following is NOT one of the four steps in the pricing process?

A)establish objectives
B)determine what is value
C)estimate demand
D)fine-tune the base price

Question 6

Leupold & Stevens Inc. makes scopes for rifles and has introduced a new scope that has the quality and performance for which Leupold & Stevens is famous, at a price much lower than it has ever sold a rifle scope before. Which pricing strategy is Leupold & Stevens using to appeal to a larger market?

A)price skimming
B)status quo pricing
C)penetration pricing
D)demand skimming

Question 7

When does a penetration pricing strategy tend to be most effective?

A)when demand is relatively inelastic
B)in price-sensitive markets
C)when the company can perform only small production runs
D)if unit costs are high

Question 8

For which of the following situations would a price skimming strategy be most appropriate?

A)the addition of a new comic book series with an obviously gay hero
B)the introduction of a new brand of bottled water
C)the elimination of demand for low-wattage light bulbs
D)the introduction of a unique, roomy automobile model that has extremely low energy and fuel costs

Question 9

A shortage of blood for transfusions for injured animals has resulted in the introduction of a synthesized product called Oxyglobin, which can be used effectively as a blood replacement. The manufacturer of the product has put a high price on the product in order to recoup its research and development costs. Which type of policy is the manufacturer of Oxyglobin using?

A)penetration pricing
B)price-lining
C)bundling costs
D)price skimming

Question 10

Big Sky Brands have introduced Jones Carbonated Candy, a candy that delivers a blast of the most popular Jones soft drink flavours along with an oddly enjoyable tongue-tingling sensation. Which strategy would most likely be used with this product to convince consumers to try it and not buy some other brand?

A)price lining
B)price fixing
C)penetration pricing
D)price skimming

Question 11

After establishing pricing goals, managers should estimate total revenue at a variety of prices. Which of the following should they do next?

A)choose the ROI target
B)determine corresponding costs for each price
C)implement pricing segmentation
D)establish geographic pricing heuristics

Question 12

Pharmacies are a relatively new addition to Costco. Costco has a stated philosophy of marking up merchandise a maximum of 14 percent. When that philosophy is applied to prescription drugs, warehouse club prices can be dramatically lower than those of conventional drugstores. Which type of strategy is Costco using to convince consumers to use its pharmacies rather than its competitors?

A)penetration pricing
B)price-insensitive demand
C)price skimming
D)cost bundling

Question 13

When Apple introduced the iPhone 5c, it was at a relatively low price designed to capture a large share of the Chinese market. What type of pricing strategy was Apple pursuing?

A)penetration pricing
B)price-insensitive demand
C)price skimming
D)cost bundling

Question 14

Penetration pricing means charging a relatively low price for a product as a way to reach the mass market. The low price is designed to capture a large share of a substantial market. Thus, penetration pricing tends to do which of the following?

A)to be more effective in a less price-sensitive market
B)to tempt competitors to enter the market
C)to recoup product development costs quickly
D)to lower production costs

Question 15

The price skimming strategy is sometimes called a "market-plus" approach to pricing because it denotes a high price relative to the prices of competing products. When does this strategy work best?

A)when competition is abundant
B)when revenues are equal to expenses
C)when supply is greater than demand
D)when demand is greater than supply

Question 16

A 16-ounce bottle of Prairie Herb vinegar sells for $4.95, and a 16-ounce bottle of Heinz vinegar costs $1.05. Prairie Herb vinegar is new to the market, is perceived to be of higher quality, and provides a unique flavour to foods even though it is used in the same way as Heinz vinegar. Which type of policy is Prairie Herb vinegar most likely using?

A)penetration pricing
B)status quo skimming
C)price skimming
D)bundling cost pricing

Question 17

When the Mosquito Magnet was introduced, it was designed to rid the immediate area of mosquitoes and other annoying insects. It is a patented grill-like apparatus that emits carbon dioxide to attract bugs to a fan that draws them into the device where they die. What type of pricing policy would you recommend the company use to introduce this product to the market?

A)penetration pricing
B)price skimming
C)flexible skimming
D)leader pricing

Question 18

The market for turkey products is large. If a major producer of turkeys were to introduce a boneless fresh turkey wrapped around spicy dressing, most of the large market for this new product would be aware of its existence. The market is price sensitive, and there is some potential competition. What would be the appropriate strategy?

A)price skimming
B)penetration pricing
C)status quo
D)price lining

Question 19

The marketing manager of icruise.com (a website targeted to consumers who want a luxury vacation) finds that the firm can gain market share and become the industry leader if it cuts prices by 50 percent during December. However, the vice-president of finance is committed to reporting a 25 percent return on investment at all times. What does this conflict illustrate?

A)a need to eliminate low-profit products
B)how pricing operates in a mature marketplace
C)the need for trade-offs in pricing objectives
D)how target markets can be ignored

Question 20

What is price?

A)what you pay
B)the combined financial value of all inputs
C)the image of value you receive when purchasing the product
D)revenue minus expenses

Question 21

After managers understand both the legal and the marketing consequences of price strategies, they should set the general level at which a company expects to sell a good or service. What is this type of price called?

A)zone
B)demand
C)leader
D)base

Question 22

Companies frequently offer a reduction from the base price to customers who pay immediately, or within a specified time period. What is this called?

A)a quantity discount
B)a base discount
C)a cash discount
D)a promotional discount

Question 23

Scenario 13-1
In 2006, the price of a single ticket in the infield box at a Toronto Blue Jays baseball game was $35.
Refer to the scenario. If you elected to buy a season pass for the same seat, the ticket price was reduced or discounted. This $35 is an example of which type of price?

A)base price
B)zone price
C)demand price
D)functional price

Question 24

Scenario 13-1
In 2006, the price of a single ticket in the infield box at a Toronto Blue Jays baseball game was $35.
Refer to the scenario. The effective value of a season pass for the same seat was $2,735, but the buyer was charged $2,241. What were season ticket buyers rewarded with?

A)promotional allowances
B)noncumulative quantity discounts
C)frequent buyer allowances
D)cumulative quantity discounts

Question 25

Why are quantity discounts most often used?

A)to reward the buyer who pays in cash
B)to encourage large orders
C)to increase supply for a specific raw material
D)to shift the storage function backward to the supplier

Question 26

What is the term for a price reduction that shifts the storage function forward to the purchaser and enables manufacturers to maintain steady production year-round?

A)functional allowance
B)promotional allowance
C)quantity discount
D)seasonal discount

Question 27

Nickel & Nickel launched a new brand of wine, which it sold at $125 a bottle. The wine is allowed to age three times as long as lower-priced wines, and the grapes used in the wine's production are handpicked. Wine lovers appreciate how both production techniques improve wine quality. What did Nickel & Nickel use to build market share?

A)value-based pricing
B)unbundling
C)price line bundling
D)status quo pricing

Question 28

A June sale on Cadbury Creme Eggs, an Easter staple for many people, is an example of which of the following pricing tactics?

A)quantity discount
B)seasonal discount
C)promotional allowance
D)functional allowance

Question 29

Sally used Refine Renovations to finish her basement. Since the organization was classed as a professional contractor, when they purchase paint and carpeting, Refine Renovations received large discounts from the base price. What is this discount called?

A)promotional allowance
B)cumulative or noncumulative quantity discount
C)functional (or trade) discount
D)rebate allowance

Question 30

Kenmore offered purchasers of any Kenmore brand major appliance a refund of $100 if they mailed Kenmore the receipt showing where and when they had purchased the appliance. What was Kenmore offering?

A)a cash discount
B)a reciprocal allowance
C)a cash discount
D)a trade promotion

Question 31

Super-Sav supermarket employees regularly shop at other local supermarkets in order to make certain that Super-Sav is charging prices comparable to the other supermarkets. What type of pricing strategy is Super-Sav using?

A)leader pricing
B)pre-emptive pricing
C)status quo pricing
D)flexible pricing

Question 32

When the salesperson from R.W. Hunt & Sons, a distributor of rifles, calls on retail sporting goods stores, she is authorized to offer the retailers a 15 percent discount from the list price in recognition of activities retailers perform for the distributor. What is this 15 percent reduction called?

A)bulk discount
B)promotional allowance
C)trade discount
D)channel allowance

Question 33

What is the term for cash refunds given for the purchase of a product during a specific period?

A)cash discount
B)loss leaders
C)reciprocal allowances
D)promotional allowances

Question 34

When a buyer pays a lower price for buying in multiple units or above a specified dollar amount, what is the buyer receiving?

A)a functional discount
B)a cash discount
C)a promotional discount
D)a quantity discount

Question 35

When a customer of the Majestic Sign Company chooses to pay immediately on delivery rather than wait to be billed in 30 days, the buyer receives a 5 percent discount. What is this discount an example of?

A)a quantity discount
B)a cash discount
C)a functional discount
D)a promotional discount

Question 36

Pam was informed by an employee at Altimos Hairdressers that after her ninth haircut, she would receive her tenth for free to show their appreciation. What type of discount was this?

A)cumulative quantity
B)noncumulative quantitative
C)functional
D)cash

Question 37

The Second Cup coffee house prices it products quite close to those offered by its main competitor, Starbucks. Which strategy is Second Cup using?

A)differentiation pricing
B)penetration pricing
C)status quo pricing
D)leader pricing

Question 38

An Internet picture frame manufacturer offers retailers reduced prices on any combination of size or style frames purchased. The discount is shown as they shop and adjusted as the quantity of frames purchased increases. What common form of purchase discount is the frame manufacturer using?

A)rebate allowance
B)quantity discount
C)promotional allowance
D)functional discount

Question 39

When a firm is customer driven and seeks to understand the attributes customers want in the goods and services they buy and the value of those attributes to customers, the price of the product is set at a level that seems to the customer to be a good price compared with the prices of other options. What is this strategy called?

A)value-based pricing
B)noncumulative pricing
C)promotional bundling
D)price bundling

Question 40

Razer-Edge makes machines for sharpening the blades used by butchers to slice meat. When Razer-Edge priced its Primary Sharpener, its salespeople were told that it would be sold for $1,700, but that there would be room for discounts and flexibility. What type of price is the $1,700 price for the Primary Sharpener?

A)base
B)zone
C)demand
D)functional

Question 41

If the book sellerChapters decides to divides its market area into segments or regions and charge a flat rate for freight to all customers in a given region, which type of pricing is the company using?

A)zone
B)uniform delivered
C)FOB origin
D)basing point

Question 42

What does uniform delivered pricing enable a firm to do?

A)to charge each customer the actual cost of shipping its products
B)to stir up price competition between buyers
C)to maintain a nationally advertised price
D)to charge each customer its fair share of the cost of shipping

Question 43

Ray and Wes are brothers. They both decided to purchase identical bowling shoes. The brothers live on opposite ends of Canada. However upon purchase, the online retailer charged them a flat freight charge. When does this usually occur?

A)when using uniform delivered pricing
B)when using zone pricing
C)when using FOB origin pricing
D)when using freight absorption pricing

Question 44

If your favourite mail-order catalogue lists freight charges according to the dollar amount of merchandise purchased, which type of pricing is it using?

A)quantity discount
B)freight absorption
C)uniform delivered
D)FOB origin

Question 45

The Dollar Store is a chain of retail stores where all of the merchandise is priced at $1. The Dollar Store uses which of the following?

A)a single-price tactic
B)flexible pricing
C)price lining
D)price bundling

Question 46

This tactic allows different customers to pay different prices for essentially the same merchandise bought in equal quantities. It is often found in the sale of shopping goods, specialty merchandise, and most industrial goods except supply items. What is this tactic called?

A)zoning (or basing) pricing
B)price maintenance
C)psychological (or odd-even) pricing
D)flexible (or variable) pricing

Question 47

What is FOB an acronym for?

A)free on board
B)fee on buyer
C)first buyer
D)freight on board

Question 48

Donegal Sweaters, a company that manufactures farm style wool sweaters, has designated a shipping point from which to calculate all freight charges. It then charges its customers the freight costs from that point (even if the goods were shipped from another location). Which type of pricing is Donegal Sweaters using?

A)freight absorption
B)uniform delivered
C)zone
D)basing-point

Question 49

What is uniform delivered pricing also known as?

A)one pricing
B)postage stamp pricing
C)calculated pricing
D)regional pricing

Question 50

In a catalogue targeted to people who like to bake, customers can buy a single yeast bread mix designed specifically to be baked in bread machines for $3.95 each or 12 different mixes for $37.50. What is this an example of?

A)price bundling
B)psychological pricing
C)penetration pricing
D)basing-point bundling

Question 51

A national manufacturer of car parts has six warehouses and has a pricing policy of charging freight from the closest warehouse to the customer, regardless of where parts are shipped from. Which pricing does the manufacturer use?

A)FOB origin
B)uniform delivered
C)basing-point
D)freight absorption

Question 52

Manjeet was interested in purchasing a Barbour jacket from J.Crew in the United States. However, once Manjeet was informed that she would be required to absorb the freight costs from the shipping point, she changed her mind. What is this price tactic called?

A)zone pricing
B)uniform delivered pricing
C)freight absorption pricing
D)FOB origin pricing

Question 53

An Ontario-based catalogue retailer sells fireplace equipment. Its customers in Ontario are charged one shipping rate, and customers west of the Rockies are charged a different rate. Customers in the Maritime provinces are charged yet another rate. What kind of geographic pricing is the catalogue retailer using?

A)FOB origin pricing
B)zone pricing
C)freight absorption pricing
D)uniform delivered pricing

Question 54

If the seller pays all or part of the actual freight charges and does not pass them on to the buyer, which type of pricing is the seller using?

A)freight absorption
B)uniform delivered
C)zone
D)basing point

Question 55

Shipping fresh-cut flowers to international buyers can be risky because of price changes during the time required for shipment, expense incurred over long distances, and quality of product delivered. To minimize risks and costs, what would a seller likely employ?

A)freight absorption pricing
B)zone pricing
C)basing-point pricing
D)FOB origin pricing

Question 56

Landover Arms Inc. currently markets its rifles designed for competitive shooting in the Ontario market. It would like to expand into the western market, but the competition there is intense. Which geographic pricing tactic should the firearms manufacturer use?

A)zone pricing
B)freight absorption pricing
C)basing-point pricing
D)multiple unit pricing

Question 57

What is the basic assumption behind value-based pricing?

A)The firm is sales driven.
B)The firm is both customer driven and competitor driven.
C)Increased profitability for wholesalers will increase the number of services they are willing to perform.
D)Consumers are more concerned about price than quality.

Question 58

Quart jars of Dancing Pig Barbecue Sauce, produced in British Columbia, are sold through the mail. The company uses two different shipping prices. All customers west of the Fraser River pay $3.99 shipping and handling costs per order, while all east of the Fraser River pay $4.99. Which type of pricing is being used?

A)penetration
B)skimming
C)zone
D)freight absorption

Question 59

Green Earth Marketing sells containers for temporary storage of recyclables nationally through its catalogue. The company wants to simplify pricing and reduce its risk. Green Earth also desires some type of difference in price due to distance. Which type of pricing should the company use?

A)uniform delivered
B)freight absorption
C)flexible
D)zone

Question 60

If an item purchased under FOB origin terms is damaged in truck transit, against whom can the purchaser file its damage claim?

A)against the manufacturer
B)against the common carrier
C)against all of the supply chain members
D)against the driver

Question 61

The owner of a neighbourhood hardware store has decided to sell a set of three padlocks for $5. He hopes the below-cost price for the locks will attract current and new customers who will also buy regularly priced items. The owner is encouraging store patronage through which of the following?

A)variable maintenance
B)psychological pricing
C)price maintenance
D)loss leader pricing

Question 62

Which of the following best describes single-price selling?

A)removes price comparisons from the buyer's decision-making process
B)does not benefit the retailer
C)is most effective when used during an inflationary period
D)encourages clerical errors

Question 63

Which of the following phrases accurately describes psychological pricing?

A)It is banned in most jurisdictions.
B)It is equally effective on all types of products.
C)It is also called odd-even pricing.
D)It is essentially the same as price shading.

Question 64

Pauline LaMour works as a personal organizer. If she were hired to come to your home and organize your closets, she would charge $500-whether the job took her 15 minutes or the entire day. She feels her fee is justified because of her 20 years of experience. Which pricing policy is LaMour using?

A)professional services pricing
B)price maintenance
C)psychological pricing
D)flexible (or variable) pricing

Question 65

For just $59.00, a customer can buy the Grand Slam Ticket Pack, giving them access to four Toronto Blue Jays baseball games, four hotdogs, four Coca-Colas, four Jays bucket caps, and one game program. This price is significantly lower than if the items could be purchased individually. What are the Jays using?

A)price lining
B)two-part pricing
C)price maintenance
D)price bundling

Question 66

If the grocery chain Safeway were to sell its bread at near or below cost in the hopes of inducing store patronage, what type of pricing would they be using?

A)odd-even pricing
B)loss leader pricing
C)price skimming
D)base skimming

Question 67

The advent of the Internet and electronic commerce has greatly affected the way businesses price their goods and services and has allowed for the use of more of which of the following?

A)zoning (or basing) pricing
B)two-part pricing
C)psychological (or odd-even)
D)flexible (or variable) pricing

Question 68

Often a seller will establish a series of prices for a family of merchandise items. There may be several different models at specific price points but no prices in between. What is this policy called?

A)price lining
B)family bundling
C)variable lining
D)price bundling

Question 69

The retail nursery is selling potting soil at a below-market price to lure customers into the store in hopes that while they are in the store to buy potting soil, they will also buy other gardening items that have a much higher markup. What is the retail nursery using?

A)price lowballing
B)price maintenance
C)price lining
D)loss leader pricing

Question 70

Ahmad Jing operates a wedding consultant service. He will often provide essentially the same service to different customers at distinctly different prices depending on how much he likes the customer and how much he thinks the customer needs his services. What does Jing use?

A)two-part pricing
B)flexible pricing
C)bait-and-switch practices
D)zoning (or basing) pricing

Question 71

The Toronto Convention and Visitors Association offers tourists a promotion in which they can buy one night in a Toronto hotel, and two tickets to a theatrical production for a single price (a lower price than if the components were purchased separately). Which pricing technique is the Toronto Convention and Visitors Association using?

A)price lining
B)psychological pricing
C)price bundling
D)bait pricing

Question 72

Tickets to the combined amusement park and water slide were $49 for the day. Then the company gave customers the option to purchase tickets for either the amusement park or the water slide for $18. To help keep costs in line, the park management also began charging its customers a small parking fee. Initially, the cost of parking was figured into the $49 price. What is the amusement park using?

A)price bundling
B)potential (or base) pricing
C)unbundling
D)professional services pricing

Question 73

Being a frugal shopper, Tersea decided to buy both shampoo and conditioner in a single package for one price. What is this known as?

A)price bundling
B)two-part bundling
C)psychological pricing
D)family pricing

Question 74

Why do retailers use loss leader pricing?

A)to attract customers to a store so they can be persuaded to buy a more expensive product instead
B)to attract customers to the store so they will buy other products in addition to the leader product
C)to price products at odd-numbered amounts to stimulate demand
D)to maintain a status quo pricing strategy

Question 75

Merck & Co., the manufacturer of the AIDS drug Crixidan, distributes exclusively to one distributor, Stadtlanders Pharmacy. The pharmacy has been criticized for charging too high a price for the drug and exploiting inelastic demand. Stadtlanders claims the charges are ethical because of high staffing costs and associated discounts with various health plans. This situation describes issues associated with which of the following?

A)price bundling
B)flexible pricing
C)professional services pricing
D)uniform delivered bundling

Question 76

Eustis Lee is a lawyer who handles only drinking and driving cases. No matter how quickly he resolves the case, he charges each customer $5,000. Lee justifies the fee because of his lengthy education and the years he has spent learning how the judicial system operates. Which pricing policy is the lawyer using?

A)professional services pricing
B)potential (or base) pricing
C)price maintenance
D)flexible (or variable) pricing

Question 77

At the Greenville Florist, there are four different prices for funeral bouquets. The smallest bouquet sells for $30; there is also a $40 version and a $75 version. For those who want to express their grief through the purchase of a dramatic floral arrangement, the florist also offers a $150 value. Why has the owner of the florist shop chosen price lining?

A)It will enable the shop to carry a larger total inventory.
B)It will maintain all of the product line at the same stage in the product life cycle.
C)It will confuse customers and allow salespeople to sell more of the expensive models.
D)It will reach several different target market segments.

Question 78

If a marketer decides to price goods at odd-numbered dollar amounts to denote bargains, and at even-numbered amounts to denote quality, what is he or she using?

A)two-part pricing
B)deal pricing
C)decoy pricing
D)psychological pricing

Question 79

Why is price lining a valuable tactic for marketing managers?

A)Price lining results in a greater inventory carrying charge.
B)A company that uses price lining is able to carry a smaller total inventory and reduce confusion for its customers.
C)A company that uses price lining has more price markdowns and greater markup.
D)The price lining strategy allows the company to gain brand loyalty from its targeted segments.

Question 80

According to your text, what is an advantage associated with a flexible pricing policy?

A)It causes inconsistent profit margins.
B)It enables a seller to close a sale with a price-conscious customer.
C)It enables salespeople to automatically lower the price to make a sale.
D)It can spark a price war with competitors.