Question 1

Which of the following is a potential problem with a high-low pricing strategy?
A) It confuses and frustrates customers.
B) It places too much emphasis on non-price competition.
C) It teaches customers to wait for sales,and therefore reduces profits.
D) It is difficult to implement.

Accepted Answer

A high-low pricing strategy teaches customers to wait for sales, which reduces profits in the long run. Customers become accustomed to the lower "sale" price and may be less willing to pay the regular price, resulting in lower overall revenue for the company.

Question 2

One of the reasons marketers emphasize non-price differences in their competitive strategies is because:
A) consumers aren't concerned about prices.
B) these methods have no impact on the cost of production.
C) non-price differences are tax deductible.
D) relatively similar products can be enhanceD.

Accepted Answer

Relatively similar products can be enhanced through non-price differences, giving companies a way to differentiate themselves from their competitors without having to compete solely on price. This can lead to increased customer loyalty and a stronger brand image.

Question 3

The strategy of charging prices based on consumer demand rather than cost or a predetermined profit margin represents:
A) competition-based pricing.
B) cost-based pricing.
C) target orientation.
D) demand-oriented pricing.

Accepted Answer

Demand-oriented pricing is the strategy of setting prices according to the level of demand for the product or service. This approach focuses on what customers are willing to pay, rather than the cost of production or a predetermined profit margin. By utilizing demand-oriented pricing, businesses can maximize their revenue and profits.

Question 4

Phar-out Pharmacy will advertise a price of an over-the-counter drug at or below their cost.The intended goal of this loss leader strategy is to:
A) achieve a target profit.
B) reduce the break-even quantity.
C) build traffic and increase the customer base.
D) create an upscale image.

Accepted Answer

The loss leader strategy is used to attract customers by advertising a low price on a particular item, with the hope that they will come into the store and purchase other items as well. The goal is not to achieve a target profit or break-even quantity, but rather to build traffic and increase the customer base. This can lead to long-term profitability for the company. Creating an upscale image is not the intended goal of a loss leader strategy.

Question 5

One way a small firm can succeed against larger competitors is to:
A) determine their break-even point price.
B) add value to their product offering.
C) eliminate the fringe benefits offered to frequent customers.
D) use break-even segmentation.

Accepted Answer

Adding value to their product offering can help a small firm differentiate themselves from larger competitors and provide a unique selling point that can attract customers. This can include offering personalized service, unique features, or specialized knowledge/expertise. The other options may not necessarily give the small firm a competitive advantage.

Question 6

American Building Products is the largest cement company in the Midwest.When the firm raised its prices by 8 percent,all of its competitors soon announced they too were raising their prices by 8 percent.It appears this industry is influenced by a ________ strategy.
A) price skimming
B) price leadership
C) market pricing
D) price discrimination

Accepted Answer

The fact that all competitors followed suit in raising their prices by the same percentage suggests that American Building Products is employing a price leadership strategy, in which the largest firm in an industry sets the pricing standard for all other firms.

Question 7

Many products are promoted by emphasizing their key benefits,rather than setting the price lower than that of competitive goods.This emphasis on the product's benefits illustrates a(n)_______ strategy.
A) penetration
B) non-price competition
C) industry leader
D) bundled package

Accepted Answer

Non-price competition is a marketing strategy where a company differentiates its product from similar products in the market through non-price means, such as advertising the key benefits or unique features of the product. This allows the company to charge a higher price for their product without losing market share to cheaper options. In contrast, a penetration strategy typically involves setting a lower price to gain market share, and a bundled package strategy involves offering multiple products for a discounted price. Industry leader is a term used for a dominant company in a particular industry, but it is not a specific marketing strategy.

Question 8

The Internet allows customers to compare prices of many goods and services.This technology will likely:
A) cause businesses to increase their focus on non-price aspects of their promotional message.
B) bring about more emphasis on demand-oriented pricing.
C) diminish in importance as quickly as other fads.
D) focus government attention on the collusive pricing practices of firms in specific industries.

Accepted Answer

The ability for customers to easily compare prices online will likely put pressure on businesses to differentiate themselves beyond just price. This may lead to an increased focus on non-price aspects of their promotional messages, such as quality, customer service, or unique features.

Question 9

The formula for break-even analysis includes which of the following components?
A) depreciation
B) forecasted sales
C) forecasted cash requirements
D) variable cost per unit of output

Accepted Answer

The answer of The formula for break-even analysis includes which...

Question 10

Phil asks you to calculate the break-even point for his firm.You respond that you will need the following information:
A) the values for all assets and liabilities.
B) total fixed costs,selling price per unit,and variable costs per unit.
C) forecasted sales volume,operating expenses,and asset values.
D) sales revenue and total liabilities.

Accepted Answer

To calculate the break-even point, we need information about fixed costs, selling price per unit, and variable costs per unit. The values for assets and liabilities, forecasted sales volume, operating expenses, and asset values are not directly relevant to calculating the break-even point. Sales revenue and total liabilities may be useful for other financial calculations, but not for calculating the break-even point.

Question 11

Virtual Electronics is considering a strategy to charge a very high introductory price for their automobile video theater.After identifying that their rival firms did not carry this new product,they chose this pricing strategy to achieve maximum profits.Virtual Electronics has chosen a ________ strategy.
A) high-low pricing
B) penetration
C) bundling
D) skimming

Accepted Answer

Virtual Electronics has chosen a skimming pricing strategy, which involves charging a high initial price for a new product to gain maximum revenue from the early adopters who are willing to pay more. This strategy is often used when the product has a unique feature or competitive advantage and when there is no or limited competition in the market.

Question 12

A competition-based pricing strategy in which all the competitors in an industry follow the pricing practices of one or more dominant firms is known as:
A) market fixing.
B) price penetration.
C) price leadership.
D) primary pricing.

Accepted Answer

Price leadership is a pricing strategy in which one or more dominant firms establish the price levels that all competitors in the industry follow. This can create a stable pricing environment and reduce pricing competition. Market fixing, which involves collusion among competitors to set prices, is illegal in most countries. Price penetration involves setting low prices to gain market share, and primary pricing is not a common industry term.

Question 13

Barker Brothers Pens utilizes a strategy of low priced pens to attract customers and discourage competition.This represents a _______ strategy.
A) high-low
B) bundling
C) skimming
D) penetration

Accepted Answer

Barker Brothers Pens is using a penetration pricing strategy by offering low prices to attract customers and gain market share. This is different from skimming, which involves setting high prices initially to target early adopters, and high-low pricing, which involves setting prices high initially but then discounting them periodically. Bundling refers to selling multiple products together as a package deal.

Question 14

Firms utilize ________ when they attempt to add value to their product by offering service after the sale,product demonstrations,or interactive customer Web sites.
A) nonprice competition
B) relationship branding
C) niche marketing
D) break-even segmentation

Accepted Answer

The answer of Firms utilize ________ when they attempt to...

Question 15

The strategy of first determining what the market is willing to pay,then subtracting a desired profit margin to determine a desired cost of production is called:
A) cost-based pricing.
B) target costing.
C) penetration pricing.
D) skimming pricing.

Accepted Answer

This strategy is called target costing, where the price is determined based on what the market is willing to pay minus the desired profit margin. Cost-based pricing, penetration pricing, and skimming pricing all have different approaches to determining the price of a product or service.

Question 16

The cost of raw materials used to produce a good or service represent the firm's ________ costs.
A) fixed
B) variable
C) mixed
D) uncontrollable

Accepted Answer

The cost of raw materials used to produce a good or service is directly proportional to the level of production, making it a variable cost. A fixed cost remains constant regardless of the volume of goods or services produced, mixed costs have both fixed and variable components, while uncontrollable costs cannot be influenced by the firm.

Question 17

Which of the following strategies establishes a price based on the actions of rival firms?
A) Competition-based pricing
B) Cost-based pricing
C) Demand collection system
D) Bundling

Accepted Answer

Competition-based pricing establishes a price based on the actions of rival firms.

Question 18

As firms develop their marketing mix,it is important to remember that:
A) prices must be linked directly to the cost of production.
B) instincts and past history are the best guides in determining price.
C) regardless of the strategy used,prices ultimately reflect the forces of supply and demand.
D) firms are often restricted in creating pricing strategies by relevant government rules and guidelines.

Accepted Answer

Prices are ultimately determined by the market forces of supply and demand. While costs play a role in setting prices, it is not the only factor. Instincts and past history may be helpful in developing a strategy, but they should not be the sole guide for determining prices. Finally, firms do have to consider government rules and guidelines when setting prices, but this doesn't necessarily limit their ability to develop pricing strategies.

Question 19

Which of the following statements about non-price competition is most accurate?
A) While still important,non-price competition is becoming less critical as a result of the Internet.
B) Marketers often rely on non-price differences in their competitive strategy to enhance a relatively homogeneous product.
C) Non-price competition is much more important to large firms than it is to small firms.
D) As microeconomic theory suggests,firms have found that non-price competition plays a secondary role that supplements the more important competition based on price.

Accepted Answer

Non-price competition is particularly important when a product is relatively homogeneous in nature. In such cases, marketers try to differentiate their product based on non-price factors such as quality, design, packaging, features, customer service, and brand image to make it more attractive to consumers. The Internet has not necessarily reduced the importance of non-price competition as consumers still value these factors when making purchase decisions. Non-price competition is relevant to both large and small firms alike. While price competition may be more dominant in certain industries, non-price competition always complements the former.

Question 20

The rent a firm pays each month for office space is an example of a(n):
A) fixed cost.
B) variable cost.
C) mixed cost.
D) uncontrollable cost.

Accepted Answer

Rent is a fixed cost because it does not vary with the level of output or sales. It remains constant regardless of the amount produced or sold.

Quiz 14: Developing and Pricing Goods and Services

Which of the following is a potential problem with a high-low pricing strategy?

One of the reasons marketers emphasize non-price differences in their competitive strategies is because:

The strategy of charging prices based on consumer demand rather than cost or a predetermined profit margin represents:

Phar-out Pharmacy will advertise a price of an over-the-counter drug at or below their cost.The intended goal of this loss leader strategy is to:

One way a small firm can succeed against larger competitors is to:

American Building Products is the largest cement company in the Midwest.When the firm raised its prices by 8 percent,all of its competitors soon announced they too were raising their prices by 8 percent.It appears this industry is influenced by a ________ strategy.

Many products are promoted by emphasizing their key benefits,rather than setting the price lower than that of competitive goods.This emphasis on the product's benefits illustrates a(n) _______ strategy.

The Internet allows customers to compare prices of many goods and services.This technology will likely:

The formula for break-even analysis includes which of the following components?

Phil asks you to calculate the break-even point for his firm.You respond that you will need the following information:

A competition-based pricing strategy in which all the competitors in an industry follow the pricing practices of one or more dominant firms is known as:

Barker Brothers Pens utilizes a strategy of low priced pens to attract customers and discourage competition.This represents a _______ strategy.

Firms utilize ________ when they attempt to add value to their product by offering service after the sale,product demonstrations,or interactive customer Web sites.

The strategy of first determining what the market is willing to pay,then subtracting a desired profit margin to determine a desired cost of production is called:

The cost of raw materials used to produce a good or service represent the firm's ________ costs.

Which of the following strategies establishes a price based on the actions of rival firms?

As firms develop their marketing mix,it is important to remember that:

Which of the following statements about non-price competition is most accurate?

The rent a firm pays each month for office space is an example of a(n) :