Question 1

What is a characteristic of the price-quality relationship, in the absence of other cues?

Accepted Answer

Price is often used by consumers as an indicator of product quality, especially when they have no other information about the product. This is because higher prices are frequently perceived to reflect higher quality materials, better craftsmanship, or additional features.

Question 2

A firm that manufactures TVs sells them at prices of $750, $1,000, and $1,250. The manufacturer will return $75, $100, or $125 by mail to those who purchase its brand of TV. What is this reduction in price an example of?

Accepted Answer

This reduction in price is an example of a rebate, where customers pay the full price upfront and then receive a partial refund after the purchase.

Question 3

In a recent special offer, any customer who brought in a toaster oven, working or not, was given a $50 credit toward the purchase of a new Amana microwave oven. What is this an example of?

Accepted Answer

This is an example of a trade-in, where customers can bring in an old item (in this case, a toaster oven) and receive a discount on a new purchase (an Amana microwave oven).

Question 4

How does unit pricing state its price?

Accepted Answer

Unit pricing states its price in terms of quantities of measure, such as per ounce, per pound, or per liter, allowing consumers to compare prices of different sizes of the same product or of different products more easily.

Question 5

A retailer wants to increase the number of customers shopping in her store. Which of the following has the greatest potential for success?

Accepted Answer

Promotional pricing can attract more customers by offering temporary discounts or deals, making it an effective strategy to increase foot traffic and encourage purchases.

Question 6

What type of pricing is the exact opposite of FOB origin pricing?

Accepted Answer

FOB origin pricing means the buyer pays for the shipping costs from the seller's location, whereas uniform-delivered pricing means the seller covers the shipping costs to the buyer's location, making it the opposite.

Question 7

What does pricing a product "Free of Board shipping point" or "Free on Board origin" mean?

Accepted Answer

"Free of Board shipping point" or "Free on Board origin" means that the buyer is responsible for all shipping charges from the manufacturer's dock. The title and responsibility of the goods pass from the seller to the buyer right when the goods leave the seller's premises.

Question 8

Based on marketing objectives, what is the general guideline called that is intended for use in specific pricing decisions?

Accepted Answer

A pricing policy is a set of guidelines that helps a company determine the appropriate prices for its products or services, taking into account factors like costs, market demand, competition, and overall marketing objectives.

Question 9

What term refers to the practice of marketing merchandise at a limited number of prices?

Accepted Answer

Product-line pricing refers to the practice of marketing merchandise at a limited number of prices, where different products within a line are priced at different levels.

Question 10

What is an attempt to integrate promotional strategies within the marketing channel called?

Accepted Answer

Promotional allowance is an attempt to integrate promotional strategies within the marketing channel, where manufacturers provide retailers or distributors with discounts or benefits for promoting their products.

Question 11

What is an important geographic consideration in setting and quoting prices?

Accepted Answer

The cost of transportation is a crucial geographic consideration in setting and quoting prices because it directly affects the final price of goods by adding to the overall cost, especially when goods need to be shipped over long distances.

Question 12

What is the process called in which buyers ask a number of potential suppliers to submit price quotes on a proposed purchase or contract, of which the lowest will be accepted?

Accepted Answer

Competitive bidding is the process where buyers invite multiple suppliers to submit bids for a contract or purchase, and typically, the lowest bid is accepted. This process ensures transparency and fairness in procurement, aiming to get the best value for the buyer.

Question 13

What type of pricing is used at a men's clothing store that sells suits at four price levels ($295, $455, $525, $650)?

Accepted Answer

Product-line pricing is used when a company sells products at several different price points. In this case, the men's clothing store offers suits at four distinct price levels, which is a classic example of product-line pricing. This strategy allows customers to choose a product that fits their budget while maximizing the company's reach across different market segments.

Question 14

Which of the following is an example of odd pricing?

Accepted Answer

Odd pricing refers to the strategy of setting prices just below a round number, as in the example of selling a microwave for $129.99 instead of $130. This approach is believed to make prices seem lower than they actually are, potentially increasing consumer demand.

Question 15

Which of the following is an example of a rebate?

Accepted Answer

A rebate is a partial refund to someone who has paid too much money for tax, rent, or a utility. The key characteristic of a rebate is that it is received after the purchase has been made, often requiring the buyer to submit a request for the rebate. Option D describes a scenario where the customer receives money back after making a purchase and submitting a request through mail, which aligns with the definition of a rebate.

Question 16

What type of price will a manufacturer be quoting when it quotes the same price for goods (including freight charges) to a buyer in Toronto, another in Calgary, and a third in Vancouver?

Accepted Answer

Uniform-delivered pricing involves a seller setting the same price for all buyers, including the freight charges, regardless of their location. This means that the cost of delivery to Toronto, Calgary, and Vancouver would be the same for each buyer under this pricing strategy.

Question 17

What type of pricing is "Buy three shock absorbers and get the fourth free," as advertised by an auto repair shop, an example of?

Accepted Answer

This is an example of promotional pricing, where a special offer or discount is used to increase sales of a product or service, in this case, offering a free shock absorber to encourage customers to buy three.

Question 18

What does pricing policy featuring variable pricing have?

Accepted Answer

The answer of What does pricing policy featuring variable pricing...

Question 19

What type of pricing is being used when the price of Cheerios cereal is displayed as 14.7 cents per gram?

Accepted Answer

This is an example of unit pricing, which means pricing an item per unit of measure (in this case, per gram) to allow consumers to compare prices in a standardized way.

Question 20

What pricing policy assumes that some prices are more appealing than others?

Accepted Answer

Psychological pricing is based on the idea that certain prices have a psychological impact. Retailers use this strategy to make items appear cheaper than they are, such as pricing something at $9.99 instead of $10, believing that customers perceive it as significantly cheaper.

Quiz 16: Pricing Concepts and Strategies