Question 1

A weakness associated with cost-based pricing methods is that they

Accepted Answer

Cost-based pricing methods only consider the cost of producing a product or service, without taking into account what consumers might be willing to pay or what competitors are charging for a similar product or service. This can lead to pricing that is not competitive in the marketplace and may result in lower sales and profits.

Question 2

The pricing method that considers what consumers may be willing to pay for a particular product based on the value received over the product's entire lifetime is the _______ pricing method.

Accepted Answer

The cost of ownership pricing method considers what consumers may be willing to pay for a particular product based on the value received over the product's entire lifetime, including costs of maintenance, repair, and eventual replacement. This pricing method takes into account the total cost of ownership for the consumer and is often used for durable goods or products with an extended lifespan.

Question 3

In determining the price of his company's new small-business accounting software,Richard is assessing how much better his company's software is as compared to alternative products available in the market.Richard is using _______ pricing.

Accepted Answer

Richard is basing the price of his company's new small-business accounting software on how much better it is compared to alternative products available in the market. This is improvement value pricing, where the price is determined based on how much the product offers in terms of improvement or added value to the customer.

Question 4

The improvement value method and the cost of ownership method are two approaches for setting prices that are _______ methods.

Accepted Answer

The improvement value method and the cost of ownership method both focus on the value that a product or service provides to the customer. Therefore, they are value-based methods. While cost-based, competitor-based, production-based, and market-based methods can also be used for pricing, they do not directly consider the value that the customer receives from the product or service.

Question 5

Firms using a(n)_______ pricing method set their prices relative to what other firms are charging.

Accepted Answer

Competition-based pricing method sets the prices of a firm's products or services in relation to what competitors are charging. This method requires comparative analysis of the competition's price and the firm's product quality. By examining what the competition is charging, a firm can adjust its prices to maintain a competitive edge. Therefore, competition-based pricing is the most appropriate choice.

Question 6

One of the difficulties associated with value-based pricing is that

Accepted Answer

Value-based pricing requires understanding how much value consumers place on a product, which necessitates extensive consumer research to determine. This approach focuses on the perceived value of the product to the customer rather than just the cost of production.

Question 7

Everyday low pricing (EDLP)provides value to consumers by

Accepted Answer

Everyday low pricing (EDLP) provides value to consumers by reducing their search costs. This means that consumers don't have to spend time and effort searching for sales or discounts because the prices are consistently low. This can be a significant benefit to consumers who value their time and prefer the convenience of knowing they are getting a good price every time they shop.

Question 8

Cost-based pricing assumes that costs

Accepted Answer

Cost-based pricing assumes that costs will not vary much with different levels of production. This approach is based on the idea that a product's price should cover the cost of producing it, along with a profit margin. Therefore, the price is typically set based on the variable costs associated with the product, such as materials and labor, plus a markup to cover overhead and profit.

Question 9

Value-based pricing methods include approaches to setting prices that focus on the overall value of the product offering

Accepted Answer

Value-based pricing methods focus on the perceived value of the product offering by the consumer. It is not based on what competitors are charging, production costs, fixed or variable costs, or bundling charges. Instead, it takes into account the benefits and perceived value that the customer receives from the product, which allows the company to set prices accordingly.

Question 10

Milton owns a lawncare business.From experience,Milton has found that John Deere equipment lasts almost twice as long as competitors' machines.For John Deere,Milton's perception about its products makes _______ pricing a logical choice.

Accepted Answer

Cost of ownership pricing is logical because Milton perceives John Deere equipment as having a longer lifespan, which implies lower costs over time despite potentially higher initial prices.

Question 11

Compared with other methods used to set prices,_______ pricing is relatively simple.

Accepted Answer

Cost-based pricing involves calculating the costs of producing and delivering a product or service, and then adding a markup to cover overhead and profit. This method is relatively straightforward and easy to implement compared to other pricing methods such as value-based or cost of ownership pricing which require more complex calculations and analysis.

Question 12

When Walmart communicates to consumers that,for any given group of often-purchased items,its prices will tend to be lower than that of any other competitor,Walmart is exhibiting what type of pricing strategy?

Accepted Answer

Walmart is exhibiting the Everyday Low Pricing (EDLP) strategy, where the company offers consistently low prices on most items instead of relying on frequent sales or discounts.

Question 13

Each generation of cell phones has provided greater clarity,range,security,and multifunctionality.If marketers of cell phones use these features as a basis for pricing,they would be using _______ pricing.

Accepted Answer

Improvement value pricing is based on pricing the product based on the improvement it provides over the previous generation. In this case, the marketers are using the improvement in features such as clarity, range, security, and multifunctionality as a basis for pricing the new generation of cell phones.

Question 14

Value-based pricing can be difficult to implement because

Accepted Answer

Value-based pricing relies heavily on understanding consumer perception of value, which can be influenced by various factors such as changing market trends, competitor actions, and changes in consumer preferences. As a result, it can be difficult to gauge and adjust pricing strategies accordingly.

Question 15

In determining the price for his company's new photo printer,Raymond is assessing the total cost of owning his printer as compared to alternative products available in the market.Raymond is using _______ pricing.

Accepted Answer

Raymond is using cost of ownership pricing, which is a pricing strategy that takes into account the total cost of owning a product, including maintenance, repair, and operating costs, over its entire lifetime. This approach is becoming increasingly popular, particularly for high-value items such as electronics, where consumers are more concerned with the long-term cost than the initial purchase price.

Question 16

An everyday low pricing strategy stresses the continuity of retail prices

Accepted Answer

Everyday low pricing strategy aims to set prices consistently between the regular price and the deep-discount sale prices offered by competitors. This strategy seeks to improve customer loyalty as it offers a reliable and consistent price for products rather than frequent discounts or fluctuations in pricing.

Question 17

Because market and operating conditions are different in each target market

Accepted Answer

Because market and operating conditions are different in each target market, the choice of a pricing strategy should be specific to the target market. This ensures that the pricing strategy is relevant and effective in each individual market.

Question 18

Dan is especially price sensitive.He has been known to line up on "Black Friday" (the day after Thanksgiving)at 4 a.m.to be among the first to buy sale items.Dan would likely respond to a _______ pricing strategy.

Accepted Answer

A high/low pricing strategy involves offering frequent sales and discounts, which is exactly what Dan is looking for when he lines up on Black Friday. This type of pricing strategy appeals to price sensitive customers who are willing to wait for deals and discounts.

Question 19

When Greenbelt Construction Company began building houses in a large subdivision with many other builders,the company priced its homes slightly higher than its competitors and promoted the added quality features found in Greenbelt's homes.Greenbelt was using a(n)_______ pricing strategy.

Accepted Answer

The answer of When Greenbelt Construction Company began building houses...

Question 20

Yvonne estimates the average cost of her floral arrangements is $14 regardless of whether she is making 5 or 20 arrangements that day.She adds a standard markup to the $14 estimate to determine her price.Yvonne is using a(n)_______ pricing method.

Accepted Answer

Yvonne is using a cost-based pricing method as she is basing her price on the cost of producing the floral arrangements rather than the perceived value or competition. The fact that her cost is consistent regardless of the number of arrangements she makes means she can set a consistent markup percentage. Improvement value and value-based pricing methods would consider factors beyond just cost, such as the perceived value of the arrangements to the customer or the competitive landscape. EDLP and reference-based pricing methods are not relevant to this scenario.

Quiz 15: Supply Chain and Channel Management