Question 1

Skimming pricing refers to
A)setting the lowest initial price possible when introducing a new or innovative product in order to "skim" sales from competitors.
B)setting the highest initial price that customers really desiring the product are willing to pay when introducing a new or innovative product.
C)setting a low initial price on a new product to appeal immediately to the mass market.
D)the practice of replacing promotional allowances with higher manufacturer list prices.
E)setting a high price so that quality- or status-conscious consumers will be attracted to the product and buy it.

Accepted Answer

Skimming pricing refers to setting the highest initial price that customers really desiring the product are willing to pay when introducing a new or innovative product. This strategy is used to maximize profits in the short term by targeting the most price-insensitive customers first before gradually lowering the price to appeal to a broader market.

Question 2

A skimming pricing policy is likely to be most effective when: (1)lowering the price has only a minor effect on increasing sales volume and reducing unit costs; (2)when the high initial price does not attract competitors; (3)customers interpret high price as signifying high quality; and (4)__________.
A)enough customers are willing to buy immediately at the high initial price
B)consumers tend to be price sensitive
C)it will be easier to set measurable sales unit goals
D)a lower price will significantly reduce unit costs
E)consumers perceive your product to be similar to other products on the market

Accepted Answer

A skimming pricing policy is most effective when enough customers are willing to buy the product immediately at the high initial price. This allows the company to maximize profits before competitors enter the market and also signals to customers that the product is exclusive and high-quality. Lowering the price may not have a significant impact on increasing sales volume or reducing unit costs, so the initial high price is necessary to generate profits. Consumers may or may not be price-sensitive, but in the case of skimming pricing, the focus is on attracting customers who are willing to pay a premium price for a perceived premium product. If consumers perceive the product to be similar to other products on the market, skimming pricing may not be as effective.

Question 3

A skimming pricing policy is likely to be most effective when
A)consumers perceive your product to be similar to other products on the market.
B)a lower price will significantly lower fixed costs.
C)customers interpret high price as signifying high quality.
D)consumers tend to be price sensitive.
E)it will be easier to set measurable sales unit goals.

Accepted Answer

Skimming pricing policy is effective when customers interpret high price as signifying high quality. This is because skimming involves setting a high price initially and then gradually lowering it over time as the product becomes widely accepted. If customers perceive the product to be of high quality, they are more likely to be willing to pay a higher price for it.

Question 4

Skimming pricing is a strategy that introduces a new or innovative product by
A)following a price elastic strategy.
B)creating multiple price points.
C)setting a high initial price.
D)setting a low initial price.
E)setting the price at the average of competitors' prices.

Accepted Answer

Skimming pricing involves setting a high initial price for a new or innovative product, in order to generate maximum revenue from the early adopters who are willing to pay a premium price. This strategy aims to capitalize on the product's uniqueness and the initial hype surrounding it. Eventually, as the product becomes more widely available and competition increases, the price may be lowered to attract a broader market.

Question 5

Figure 11-2
-Figure 11-2 above represents the four approaches to selecting an appropriate price level."B" includes standard markup and cost-plus so it represents which approach?
A)demand-oriented approach
B)profit-oriented approach
C)competition-oriented approach
D)results-oriented approach
E)cost-oriented approach

Accepted Answer

The answer of  Figure 11-2
-Figure 11-2 above represents the...

Question 6

Setting the highest initial price that customers really desiring the product are willing to pay when introducing a new or innovative product is referred to as a
A)skimming strategy.
B)penetration strategy.
C)price-lining strategy.
D)experience-curve pricing strategy.
E)prestige pricing strategy.

Accepted Answer

The scenario described in the question matches the skimming strategy. This strategy involves setting high prices initially to capture the "early adopter" market segment who are willing to pay a premium price for the new or innovative product. As the market becomes saturated, the price is gradually lowered to reach a broader market segment.

Question 7

Figure 11-2
-Figure 11-2 above represents the four approaches to selecting an appropriate price level."D" includes customary and loss leader so it represents which approach?
A)competition-oriented approach
B)cost-oriented approach
C)profit-oriented approach
D)results-oriented approach
E)demand-oriented approach

Accepted Answer

The answer of  Figure 11-2
-Figure 11-2 above represents the...

Question 8

A manufacturer of a digital video recorder (DVR)is thinking of using a skimming pricing strategy for its new product.Which of the following conditions would argue AGAINST using a skimming pricing strategy for the DVR?
A)large potential market,even at a high price
B)technological problems still exist for competitors
C)increasing volume reduces production costs substantially
D)consumers perceive a price-quality relationship
E)consumers are innovators

Accepted Answer

Skimming pricing strategy involves setting a high initial price for a new product to target early adopters and recover development costs quickly. This strategy works best when the market is small, the product is unique, and production costs are high. However, when there is a large potential market, as in option A, a high initial price may limit market penetration and lead to competitors entering the market with lower-priced alternatives. Option B suggests that competitors still face technological problems, which means the new product has an advantage and can command a premium price. Option D indicates that consumers are willing to pay more for higher-quality products; however, this argument supports a skimming pricing strategy. Option E suggests that consumers are innovators, which means they may be more willing to try new products and pay a premium price. Therefore, only option C argues against using a skimming pricing strategy as increasing volume reduces production costs substantially, and a high initial price may discourage potential customers from purchasing the product.

Question 9

Figure 11-2
-Figure 11-2 above represents the four approaches to selecting an appropriate price level."C" includes target profit and target return on sales so it represents which approach?
A)demand-oriented approach
B)profit-oriented approach
C)competition-oriented approach
D)cost-oriented approach
E)results-oriented approach

Accepted Answer

The answer of  Figure 11-2
-Figure 11-2 above represents the...

Question 10

When microwave ovens were in the introduction stage of their product life cycle,some consumers were willing to pay exorbitant prices for these innovative ovens.Taking advantage of this strong consumer desire,marketers set the price for microwave ovens at the highest initial price possible.Marketers of microwave ovens used a __________ pricing strategy.
A)skimming
B)penetration
C)prestige
D)price lining
E)bundle

Accepted Answer

The given scenario of setting high initial prices for an innovative product and taking advantage of strong consumer desire is a characteristic of the skimming pricing strategy. This strategy is commonly used during the introduction stage of the product life cycle.

Question 11

Which of the following statements about the price-setting process is most accurate?
A)When selecting a strategy for setting an initial price,it doesn't matter which one you use as long as you stick with it.
B)Sometimes pricing strategies overlap,and a seasoned marketer will consider several strategies when choosing an approximate price level.
C)Demand-oriented pricing approaches rely heavily on competitors' prices.
D)Skimming pricing is a competition-oriented pricing strategy.
E)Penetration pricing is the best pricing strategy for companies trying to meet the goals of a profit-oriented pricing approach.

Accepted Answer

Pricing strategies are not mutually exclusive, and a marketer may consider multiple options to arrive at an appropriate price point. This approach allows for greater flexibility and adaptability in a competitive market. The other options are incorrect: A is incorrect because adherence to a consistent strategy is important, while C is incorrect because demand-oriented pricing does not necessarily rely on competitor prices. D is incorrect because skimming pricing is a profit-oriented strategy, and E is incorrect because penetration pricing can be used for various pricing approaches.

Question 12

All of the following are demand-oriented approaches to selecting an approximate price level EXCEPT: A)odd-even. B)yield management. C)customary. D)bundle. E)prestige.

Accepted Answer

The answer of All of the following are demand-oriented approaches...

Question 13

Penetration pricing refers to
A)charging different prices to different buyers for goods of like grade and quality.
B)setting the highest initial price that customers really desiring the product are willing to pay.
C)setting a low initial price on a new product to appeal immediately to the mass market.
D)setting a market price for a product or product class based on a subjective feel for the competitors' prices or market price.
E)setting prices a few dollars or cents under an even number.

Accepted Answer

Penetration pricing refers to setting a low initial price on a new product to appeal immediately to the mass market. This strategy is often used when a company wants to quickly gain market share and is willing to accept lower profits initially. Once the product gains traction, the price may be gradually increased.

Question 14

Skimming pricing is considered to be a __________ approach to pricing.
A)demand-oriented
B)cost-oriented
C)profit-oriented
D)competition-oriented
E)service-oriented

Accepted Answer

Skimming pricing is a demand-oriented approach to pricing where a high price is placed on a new product to target early adopters who are willing to pay a premium price for the latest product or technology. This approach allows companies to maximize profits before competitors enter the market and drive down prices.

Question 15

A skimming pricing policy is likely to be most effective when
A)consumers tend to be price sensitive.
B)it will be easier to set measurable sales unit goals.
C)a lower price will significantly lower fixed costs.
D)consumers perceive your product to be similar to other products on the market.
E)lowering the price has only a minor effect on increasing sales volume and reducing unit costs.

Accepted Answer

Skimming pricing policy involves initially setting a high price for a new product or service and gradually lowering it over time. This strategy is effective when lowering the price has only a minor effect on increasing sales volume and reducing unit costs. Therefore, option E is the most appropriate answer. The other options do not relate to the skimming pricing policy.

Question 16

The first Apple iPad was introduced in 2010 at an initial price of $650 for the 16 GB version.People waited in line overnight so they could be one of the first to own this unique tablet device.Which pricing strategy did Apple use to help recoup its research and development costs for the iPad?
A)price lining
B)penetration pricing
C)customary pricing
D)skimming pricing
E)target pricing

Accepted Answer

Apple used skimming pricing strategy to recoup its research and development costs for the iPad. This involves setting a high price initially to capture the market's early adopters and then gradually reducing the price over time as competition enters the market.

Question 17

Hallmark was the official supplier of flowers at the last Winter Olympics.Hallmark presented each Olympic winner with a special bouquet of roses designed to resemble the Olympic torch.Consumers were able to buy a smaller version of this same bouquet at the Hallmark website for $74.95.The Olympic bouquet that consumers could buy contained two dozen yellow roses,yet you could buy the same two dozen yellow roses for less than $35 at most supermarkets.If Hallmark is treating the Olympic bouquet as an innovative product,then it is using which demand-oriented pricing approach?
A)bundle pricing
B)yield management pricing
C)skimming pricing
D)target return-on-sales pricing
E)penetration pricing

Accepted Answer

Hallmark is using skimming pricing by pricing the Olympic bouquet at a much higher price than the same number of roses available at most supermarkets. They are taking advantage of the uniqueness of the bouquet and the association with the Olympic winner to charge a premium price.

Question 18

A skimming pricing policy is likely to be most effective when
A)consumers perceive one product to be similar to other products on the market.
B)a lower price will significantly lower fixed costs.
C)competitors will be attracted to the market due to the potential for high sales revenues.
D)consumers tend to be price sensitive.
E)the high initial price will not attract competitors.

Accepted Answer

Skimming pricing policy involves setting a high initial price to earn high profits before competitors enter the market. Therefore, it is most effective when the high initial price will not attract competitors.

Question 19

Demand-oriented approaches weigh factors that underlie expected __________ more heavily than such factors as cost,profit,and competition when selecting a price level.
A)total revenue
B)stakeholder concerns
C)prevailing prices
D)product substitutes
E)customer tastes

Accepted Answer

Demand-oriented approaches are focused on understanding and meeting the needs and preferences of customers. Thus, customer tastes are given more weight than other factors such as cost and competition.

Question 20

Penetration pricing is considered to be a __________ approach to pricing.
A)demand-oriented
B)cost-oriented
C)profit-oriented
D)competition-oriented
E)service-oriented

Accepted Answer

Penetration pricing is a demand-oriented pricing strategy where the price of a product or service is initially set low to attract customers and gain market share. It is focused on stimulating demand and increasing sales volume which can lead to long-term profitability.

Quiz 11: Pricing Products and Services

Skimming pricing refers to

A skimming pricing policy is likely to be most effective when

Skimming pricing is a strategy that introduces a new or innovative product by

Figure 11-2 -Figure 11-2 above represents the four approaches to selecting an appropriate price level."B" includes standard markup and cost-plus so it represents which approach?

Setting the highest initial price that customers really desiring the product are willing to pay when introducing a new or innovative product is referred to as a

Figure 11-2 -Figure 11-2 above represents the four approaches to selecting an appropriate price level."D" includes customary and loss leader so it represents which approach?

A manufacturer of a digital video recorder (DVR) is thinking of using a skimming pricing strategy for its new product.Which of the following conditions would argue AGAINST using a skimming pricing strategy for the DVR?

Figure 11-2 -Figure 11-2 above represents the four approaches to selecting an appropriate price level."C" includes target profit and target return on sales so it represents which approach?

Which of the following statements about the price-setting process is most accurate?

All of the following are demand-oriented approaches to selecting an approximate price level EXCEPT:

Penetration pricing refers to

Skimming pricing is considered to be a __________ approach to pricing.

A skimming pricing policy is likely to be most effective when

The first Apple iPad was introduced in 2010 at an initial price of $650 for the 16 GB version.People waited in line overnight so they could be one of the first to own this unique tablet device.Which pricing strategy did Apple use to help recoup its research and development costs for the iPad?

A skimming pricing policy is likely to be most effective when

Demand-oriented approaches weigh factors that underlie expected __________ more heavily than such factors as cost,profit,and competition when selecting a price level.

Penetration pricing is considered to be a __________ approach to pricing.