Question 1

There are many reasons why a firm might consider cutting its price.All of the following are among them EXCEPT .

Accepted Answer

Option A, B, D, and E all involve a desire to increase sales, reduce costs, or gain a competitive advantage through lower prices. The only option that does not fit this pattern is C, a drive to reduce market share, which would not be a typical reason for a firm to cut its prices.

Question 2

A company would most likely consider launching a low- price "fighter brand" in response to a competitor reducing prices if .

Accepted Answer

A low-price "fighter brand" is typically launched as a response to a competitor's price reduction in order to win back price-sensitive customers. The company aims to offer a lower-priced alternative that can fulfill the same function as the competitor's product. If the market segment being lost is not price sensitive (A) or has shifted culturally (D), launching a low-price brand may not be effective. If the market segment no longer demands the product (E), then a new product launch may be necessary instead of just a low-price brand. So, C is the most appropriate answer.

Question 3

When Whallans Gift Card Shop offers a price reduction to customers who buy Christmas cards the week after Christmas,Whallans is giving a(n)discount.

Accepted Answer

The discount offered by Whallans is specifically related to the season (Christmas), thus making it a seasonal discount.

Question 4

Failure to enter the current price into a retailer's system may result in charges of .

Accepted Answer

Failure to enter the current price into a retailer's system may lead to scanner fraud, where customers are overcharged for a product that was not correctly scanned.

Question 5

Promotional pricing can have all of the following adverse effects EXCEPT .

Accepted Answer

Promotional pricing may have adverse effects like delaying long-term strategies, creating deal-prone customers, eroding brand value, and becoming addictive to both customers and businesses. However, giving pricing secrets away to competitors is not one of those adverse effects.

Question 6

Service Industries,Inc.plans to offer a price- adjustment strategy in the near future.It could consider each of the following EXCEPT .

Accepted Answer

Physiological pricing is not a recognized pricing strategy; it seems to be a typographical error or a misunderstanding. The other options are legitimate pricing strategies.

Question 7

Bose prices its most expensive noise reduction earphones at $399.95,which is a full $100.00 more than its next most expensive earphones.It costs Bose only a few dollars more to make the most expensive earphones.Bose is using pricing.

Accepted Answer

Bose is using product-form pricing, where different versions of the product are priced differently, even though the cost to produce them is not significantly different.

Question 8

What type of pricing is being used when a company temporarily prices its product below the list price or even below cost to create buying excitement and urgency?

Accepted Answer

This is an example of promotional pricing, where the company offers a temporary price reduction to create a sense of urgency and encourage customers to buy the product. This is commonly used during sales events or to clear out excess inventory.

Question 9

Which of the following is NOT a price adjustment strategy?

Accepted Answer

Free samples are not a price adjustment strategy, but rather a promotional tool that allows customers to try a product before making a purchase. The other options listed (seasonal pricing, promotional pricing, segmented pricing, and geographical pricing) all involve adjusting the price of a product in some way to meet specific objectives.

Question 10

Which of the following is a reason that a marketer would choose a penetration pricing strategy?

Accepted Answer

A penetration pricing strategy involves setting a lower price initially to gain market share and attract customers. This can discourage competitors from entering the market, as they may not be able to compete on price.

Question 11

Market- skimming pricing would likely be most effective in selling .

Accepted Answer

Market-skimming pricing is most effective when there is high demand for a product, little/no competition, and when the product represents a significant innovation. An electronic device requiring expensive research and development would fit these criteria, making it a good choice for market-skimming pricing.

Question 12

If a large retailer sold numerous items below cost with the intention of punishing small competitors and gaining higher long- run profits by putting those competitors out of business,the retailer would be guilty of .

Accepted Answer

Predatory pricing is the practice of selling goods or services at a price below their actual cost to drive competitors out of the market, and once the competition is eliminated, the company raises prices to gain higher long-run profits. This practice is illegal under antitrust laws because it harms competition in the market.

Question 13

A quantity discount is a price reduction to buyers who purchase .

Accepted Answer

A quantity discount is a price reduction given to buyers who purchase large volumes.

Question 14

Competitors are most likely to react to a price change when .

Accepted Answer

When the product is uniform, competitors are more likely to react to another competitor's price change because there are no significant differences between the products to justify differences in pricing. This means that a change in price by one competitor could result in lost sales for the others.

Question 15

A company sets not a single price,but rather a that covers different items in its line that change over time as products move through their life cycles.

Accepted Answer

A pricing structure involves setting different prices for various items in a product line, which can change over time as products progress through their life cycles.

Question 16

Which of the following is NOT a geographical pricing strategy?

Accepted Answer

Dynamic pricing is not a geographical pricing strategy, but rather a pricing strategy that adjusts prices in real time based on supply and demand, customer behavior, and other external factors. Geographical pricing strategies involve setting prices based on geographic location, such as FOB- origin pricing, uniform-delivered pricing, zone pricing, and basing-point pricing.

Question 17

Lancaster Recycling has a history of problems with customers who do not pay their bills on time. Lancaster Recycling wants to improve its cash situation,reduce bad debts,and reduce
Credit- collection costs.The company might consider which of the following forms of pricing?

Accepted Answer

Cash discounts can incentivize customers to pay their bills on time, improving Lancaster Recycling's cash situation and reducing bad debts. This can also help to reduce credit-collection costs, as the company may be able to avoid having to pursue late payments through collections agencies or other methods. Captive-product pricing would not be applicable in this situation, as Lancaster Recycling does not offer a product that is unique or necessary in its customers' operations. Inflation-adjusted pricing may be useful in some cases, but it would not directly address the company's issues with bad debt and cash flow. Penetration pricing focuses on offering low initial prices to attract new customers, which is not relevant to the issue at hand. By-product pricing involves selling secondary or incidental products created during the recycling process, which is not relevant to Lancaster Recycling's primary concerns.

Question 18

Comparison pricing claims are legal if they are truthful.However,sellers should not advertise a price reduction unless .

Accepted Answer

All the options listed are conditions that must be met for comparison pricing claims to be legal and truthful. Sellers must ensure that any advertised price reductions or comparisons are accurate and not misleading.

Question 19

Which of the following refers to the prices that a buyer carries in his or her mind and refers to when looking at a given product?

Accepted Answer

Reference prices refer to the prices that a buyer carries in his or her mind and refers to when looking at a given product. This can be influenced by past experiences, advertising, and competitor pricing.

Question 20

When Polaroid set the general price range of its cameras low and the markup on its film high,it was practicing .

Accepted Answer

Captive product pricing is a strategy where the company sets a low price for the main product and charges a higher price for associated items that the consumer needs to continue using the main product. In this case, Polaroid set a low price for their cameras, making them easily accessible to consumers, but charged a higher markup for the film needed to use the camera, thus following captive product pricing strategy.

Quiz 11: Additional Pricing Considerations