Deck 6: Setting Prices and Implementing Revenue Management

Question 1

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

Answer 1

False

Question 2

Revenue management is the most effective when applied to firms characterized by all the following conditions EXCEPT ______________.

A) perishable inventory
B) relatively fixed capacity
C) varying customer price sensitivity
D) fixed inventory
E) variable demand

Answer 2

D

Question 3

____________ recognizes that resource expenses are linked to the variety and complexity of goods and services produced and not just on physical volume.

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

Answer 3

D

Question 4

Which of the following is NOT an example of a non-physical fence?

A) Time or duration of use.
B) Group membership.
C) Service level.
D) Flexibility of ticket usage.
E) Location of reservation.

Question 5

____________ 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)
E) Consumer demand

Question 6

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

Question 7

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

Question 8

Putting service pricing into practice includes thinking of all the following questions EXCEPT ____________.

A) What should be the specified basis for pricing?
B) How much to charge?
C) What kind of customers should be charged more?
D) Who should collect payment?
E) When should payment be made?

Question 9

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

Question 10

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 11

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

Question 12

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

Question 13

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

Question 14

Price elasticity is computed as ____________.

A) percentage change in demand / percentage change in price
B) percentage change in price / percentage change in demand
C) percentage change in supply / percentage change in price
D) percentage change in demand / percentage change in supply
E) percentage change in price / percentage change in supply

Question 15

Shopbots help consumers combat dynamic pricing online.

Question 16

____________, 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 17

Which of the following is NOT an objective for service pricing?

A) Build supply.
B) Build demand.
C) Seek profit.
D) Cover costs.
E) Build a user base.

Question 18

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

Question 19

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 20

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

Question 21

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 22

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

Question 23

How can firms have revenue management practices and yet still have customer satisfaction, trust and good will?

Question 24

What are rate fences? Provide examples to aid your explanation.

Question 25

Freight companies often use a combination of distance and weight or shape of parcel as a basis to price their services.

Question 26

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

Question 27

Relate fairness perceptions to DVD rental late fees.

Question 28

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

Question 29

What three components are considered in a pricing strategy?

Question 30

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 31

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

Question 32

Under what situations can price competitions be reduced?

Question 33

Name two e-tailers that utilize traditional auction models.

Question 34

Which of the following is NOT a firm that uses dynamic pricing?

A)
B) Yahoo.com
C) Tickets.com
D) Amazon.com
E) All of the above firms use dynamic pricing.

Question 35

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

Question 36

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

Question 37

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 38

The amount of seats reserved for each class of American Airlines passengers on a flight is referred to as a ____________.

A) field
B) row
C) column
D) bucket
E) gamble

Question 39

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 40

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

Question 41

Describe how airlines utilize revenue management to enhance profitability.

Question 42

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

Question 43

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

Question 44

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