Question 1

________ pricing uses buyers' perceptions of value as the key to pricing.
A) Customer value-based
B) Cost-based
C) Time-based
D) Markup
E) Target return

Accepted Answer

Customer value-based pricing involves setting prices based on the perceived value to the customer. This approach focuses on understanding the customer's needs and preferences and pricing the product/service accordingly. This approach leads to a better understanding of the customer's willingness to pay and ensures that the price charged is fair and competitive in the market.

Question 2

Azure Air, an airline company, offers attractive prices to customers with tighter budgets. A no-frills airline, it charges for all other additional services, such as baggage handling and in-flight refreshments. Which of the following best describes Azure Air's pricing method?
A) target profit pricing
B) good-value pricing
C) cost-based pricing
D) break-even pricing
E) penetration pricing

Accepted Answer

B

Question 3

Effective ________ pricing involves understanding how much value consumers place on the benefits they receive from the product and setting a price that captures that value.
A) customer-oriented
B) cost-based
C) time-based
D) competition-oriented
E) marketer-oriented

Accepted Answer

Customer-oriented pricing involves focusing on the value that customers place on the benefits they receive from the product or service, rather than basing pricing solely on production costs or competitor pricing. It aims to set a price that captures the perceived value of the product from the customer's perspective.

Question 4

________ refers to the amount of money charged for a product or service.
A) Value
B) Cost
C) Price
D) Wage
E) Salary

Accepted Answer

Price refers to the amount of money charged for a product or service. Value refers to the worth of a product or service based on its benefits and utility to the customer. Cost refers to the expenses incurred in the production or acquisition of a product or service. Wage and salary refer to the compensation paid to employees.

Question 5

Bon Vivant offers an assortment of exclusive French wines at incredibly low prices. These prices are neither limited-time offers nor special discounts, but represent the daily prices of products sold by Bon Vivant. This reflects Bon Vivant's ________ strategy.
A) everyday low pricing
B) markup pricing
C) penetration pricing
D) break-even pricing
E) cost-based pricing

Accepted Answer

Bon Vivant's strategy is to offer low prices every day, indicating an everyday low pricing strategy.

Question 6

________ pricing refers to offering just the right combination of quality and gratifying service at a fair price.
A) Markup
B) Good-value
C) Cost-plus
D) Target profit
E) Break-even

Accepted Answer

Good-value pricing aims to provide customers with the right balance of quality and service at a fair price. This strategy is an effective way to attract and retain customers who are looking for a good deal without sacrificing quality. Markup pricing involves adding a predetermined markup to the cost of a product, while cost-plus pricing involves calculating the total cost of a product and adding a markup to cover overhead and profit. Target profit pricing involves setting a price to achieve a specific profit goal, and break-even pricing involves setting a price that covers the costs of producing and selling a product. None of these pricing strategies specifically aim to offer a good value to customers.

Question 7

________ involves charging higher prices on an everyday basis but running frequent promotions to lower prices temporarily on selected items.
A) High-low pricing
B) Everyday low pricing
C) Cost-plus pricing
D) Break-even pricing
E) Penetration pricing

Accepted Answer

High-low pricing involves charging higher prices on a regular basis but running frequent promotions to lower prices temporarily on selected items. This pricing strategy aims to entice customers with the lower prices while also generating profit from the higher regular prices.

Question 8

________ is the only element in the marketing mix that produces revenue.
A) Price
B) Product
C) Place
D) Fixed costs
E) Variable costs

Accepted Answer

Price is the only element in the marketing mix that generates revenue. Product, place, and promotion are all part of the marketing mix, but they do not directly bring in revenue. Fixed and variable costs are not elements of the marketing mix.

Question 9

A pharmaceutical company in Utah recently released a new and expensive anti-ulcer drug in the market. The company justifies the high price of the drug by claiming that it is highly effective for treating all kinds of ulcers. The company also claims that the new drug will help bring down the need for invasive surgeries, an additional benefit for patients. Which of the following pricing strategies is the pharmaceutical company most likely using in this instance?
A) target pricing
B) markup pricing
C) cost-based pricing
D) value-based pricing
E) break-even pricing

Accepted Answer

The pharmaceutical company is most likely using value-based pricing because they are justifying the high price of the drug by claiming that it is highly effective and brings additional benefits to patients. Value-based pricing considers the value that a product or service provides to the customer and prices it accordingly.

Question 10

Which of the following is true of value-based pricing?
A) The targeted value and price drive decisions about what costs can be incurred and the resulting product design.
B) Value-based pricing is mostly product driven.
C) Value-based pricing involves setting prices based on the costs of producing, distributing, and selling the product plus a fair rate of return for its effort and risk.
D) The marketer usually designs a product and marketing program and then sets the price.
E) A company using value-based pricing designs what it considers to be a good product, adds up the costs of making the product, and sets a price that covers costs plus a target profit.

Accepted Answer

Value-based pricing involves setting prices based on the perceived value to the customer, rather than solely on the costs of producing the product. The targeted value and price drive decisions about what costs can be incurred and the resulting product design.

Question 11

Retailers such as Costco and Walmart charge a constant, daily low price with few or no temporary price discounts. This is an example of ________.
A) competition-based pricing
B) everyday low pricing
C) cost-plus pricing
D) break-even pricing
E) penetration pricing

Accepted Answer

Everyday low pricing is a pricing strategy in which retailers offer a constant, low price for products and services with few or no temporary price discounts. This approach is typically used by retailers such as Walmart and Costco, who seek to differentiate themselves in the market by offering consistent, low prices to customers.

Question 12

Which of the following processes does value-based pricing reverse?
A) high-low pricing
B) everyday low pricing
C) cost-based pricing
D) good-value pricing
E) value-added pricing

Accepted Answer

Value-based pricing is focused on determining what the customer is willing to pay for a product or service based on the value it provides to them, which is often higher than the cost of producing the product. Cost-based pricing, on the other hand, involves determining the price based on the cost of producing the product, which value-based pricing reverses. High-low pricing involves regularly raising and lowering prices, while everyday low pricing involves offering consistently low prices. Good-value pricing involves offering a high-quality product at a fair price, while value-added pricing involves adding value to a product or service to justify a higher price. None of these pricing strategies are directly reversed by value-based pricing.

Question 13

Which of the following involves introducing less-expensive versions of established, brand-name products?
A) markup pricing
B) good-value pricing
C) time-based pricing
D) cost-based pricing
E) target profit pricing

Accepted Answer

Good-value pricing involves introducing less-expensive versions of established, brand-name products. The focus is on providing the best value to customers at a lower price compared to the original product.

Question 14

Which of the following is true with regard to price?
A) Historically, price has had the least perceptible impact on buyer choice.
B) Price is the least flexible element in the marketing mix.
C) Unike product features and channel commitments, prices cannot be changed quickly.
D) Price is the sum of all the values that customers give up to gain the benefits of having a product.
E) Prices only have an indirect impact on a firm's bottom line.

Accepted Answer

Price is the sum of all the values that customers give up to gain the benefits of having a product. This statement accurately defines the concept of price.

Question 15

The perceived value of different product offers can be reasonably assessed by ________.
A) conducting a SWOT analysis
B) conducting a break-even analysis
C) conducting surveys and experiments
D) collecting data about competitors' offers
E) setting a benchmark for product quality

Accepted Answer

Conducting surveys and experiments allows for direct feedback from potential customers and can provide valuable insights into how the market perceives different product offers. This information can be used to adjust and optimize product features, pricing, and marketing strategies to increase perceived value and drive sales. SWOT analysis, break-even analysis, collecting data about competitors' offers, and setting a benchmark for product quality are useful strategies but may not provide as direct or relevant insights into perceived value as customer feedback.

Question 16

When McDonald's and other fast food restaurants offer "value menu" items at surprisingly low prices, they are most likely using ________.
A) break-even pricing
B) target profit pricing
C) good-value pricing
D) cost-plus pricing
E) target return pricing

Accepted Answer

McDonald's and other fast food restaurants offer "value menu" items at surprisingly low prices, they are most likely using good-value pricing. Good-value pricing offers the right combination of quality and good service at a fair price.

Question 17

Underpriced products ________.
A) produce less revenue than they would if they were priced at the level of perceived value
B) sell poorly in the global marketplace
C) produce more revenue than they would if they were priced at the level of perceived value
D) mostly offer higher value than those with a high markup price
E) are characterized by rapidly declining demand

Accepted Answer

Underpriced products are those that are priced lower than their perceived value, which means they are not generating as much revenue as they should. By pricing a product too low, a business misses out on potential profits that they could have made if the product was priced at its rightful value.

Question 18

What sets the floor for product prices?
A) consumer perceptions of the product's value
B) product costs
C) competitors' strategies
D) advertising budgets
E) market competition

Accepted Answer

Product costs set a lower limit for the price of a product, as companies must at least cover their production and distribution expenses to ensure profitability. While consumer perceptions, competitors' strategies, advertising, and market competition can influence a product's price, they do not set a definitive floor.

Question 19

Department stores such as Kohl's and Macy's practice high-low pricing by ________.
A) charging a constant, everyday low price
B) providing few or no temporary price discounts
C) increasing prices temporarily on select products
D) having frequent sale days for store credit-card holders
E) underpricing most consumer items

Accepted Answer

Department stores such as Kohl's and Macy's practice high-low pricing by having frequent sale days for store credit-card holders. This encourages consumers to sign up for their credit cards and come back to the stores on specific dates for discounts, while still maintaining the regular high prices on other days.

Question 20

What sets the ceiling for product prices?
A) product manufacturing costs
B) sellers' perceptions of the product's value
C) customer perceptions of the product's value
D) variable costs
E) break-even volume

Accepted Answer

The customer's perception of the product's value ultimately sets the ceiling for product prices. This is because customers are willing to pay a certain amount for a product based on how much they value it, and if the price exceeds that amount, they are unlikely to make the purchase. While product manufacturing costs, sellers' perceptions of the product's value, variable costs, and break-even volume all play a role in product pricing, they do not necessarily set a ceiling for prices.

Quiz 10: Pricing: Understanding and Capturing Customer Value

________ pricing uses buyers' perceptions of value as the key to pricing.

Azure Air, an airline company, offers attractive prices to customers with tighter budgets. A no-frills airline, it charges for all other additional services, such as baggage handling and in-flight refreshments. Which of the following best describes Azure Air's pricing method?

Effective ________ pricing involves understanding how much value consumers place on the benefits they receive from the product and setting a price that captures that value.

________ refers to the amount of money charged for a product or service.

Bon Vivant offers an assortment of exclusive French wines at incredibly low prices. These prices are neither limited-time offers nor special discounts, but represent the daily prices of products sold by Bon Vivant. This reflects Bon Vivant's ________ strategy.

________ pricing refers to offering just the right combination of quality and gratifying service at a fair price.

________ involves charging higher prices on an everyday basis but running frequent promotions to lower prices temporarily on selected items.

________ is the only element in the marketing mix that produces revenue.

Which of the following is true of value-based pricing?

Retailers such as Costco and Walmart charge a constant, daily low price with few or no temporary price discounts. This is an example of ________.

Which of the following processes does value-based pricing reverse?

Which of the following involves introducing less-expensive versions of established, brand-name products?

Which of the following is true with regard to price?

The perceived value of different product offers can be reasonably assessed by ________.

When McDonald's and other fast food restaurants offer "value menu" items at surprisingly low prices, they are most likely using ________.

Underpriced products ________.

What sets the floor for product prices?

Department stores such as Kohl's and Macy's practice high-low pricing by ________.

What sets the ceiling for product prices?