Question 1

Which of the following is a key similarity between selective distribution and exclusive distribution?

Accepted Answer

Both selective and exclusive distribution involve limiting the number of retailers that carry a product in order to maintain control over how the product is sold and to maintain a certain image for the brand.

Question 2

Kreme, a biscuit manufacturer, offers retailers a 20% discount on its latest product, Coco-Bite. The discount offer comes with a rider that retailers have to feature the product in their promotional material. Kreme is offering a(n) _____ to its retailers.

Accepted Answer

Kreme is offering an advertising allowance, which is a type of discount offered to retailers on the condition that they feature the product in their promotional material.

Question 3

Pluto, a footwear company, designs and creates sports shoes for children. Since most of Pluto's target market consists of children who are in school, Pluto's retailers agree to sell its shoes for a certain amount below the actual price on the products. The price that Pluto and its retailer agree to sell the sports shoes for is known as _____.

Accepted Answer

The manufacturer's suggested retail price (MSRP) is the price that a product's manufacturer recommends it be sold for in retail stores.

Question 4

LockIt, a manufacturer of electronic safes, accounts for 5% of the safes sold in the U.S. LockIt's current business strategy is aimed at selling better-quality products at higher prices than competitors. The higher prices make LockIt one of the leaders in terms of revenue earned. Having satisfied initial objectives of earning a certain ROI, LockIt sets a target of accounting for 25% of the units sold during the next financial year. To further this goal, LockIt introduces a line of lower-priced safes that are priced below similar competing products. LockIt's new pricing strategy is _____.

Accepted Answer

LockIt's new pricing strategy is sales oriented because they are focusing on increasing their market share by selling more units, even if it means lowering prices.

Question 5

Which of the following is a typical feature of large and sophisticated channel members?

Accepted Answer

Large and sophisticated channel members often have fewer supply chain intermediaries because they have the resources and capabilities to manage distribution more efficiently and directly.

Question 6

When firms collude to set prices for products, it is referred to as _____.

Accepted Answer

Price fixing refers to the coordinated effort between two or more firms to set a market price for a good or service. This is typically done to eliminate competition and maximize profits. It is illegal in many countries, including the United States, under antitrust laws.

Question 7

Port, an OEM of computer hardware, accounts for 6% of the computer hardware sold in the U.S. Retailers uses hardware from OEMs like Port to assemble personal computers. Owing to the competitive nature of the industry, Port's pricing is uniform with offerings from other manufacturers. The rise and fall in pricing is dictated more by the rise and fall in prices of raw material, labor, and utilities across the industry. Port's pricing strategy is focused on _____.

Accepted Answer

Port's pricing strategy is focused on competitive parity where they price their products uniformly with offerings from other manufacturers in the industry. This suggests that Port aims to maintain its market share by offering competitive prices rather than trying to maximize profits or target specific returns.

Question 8

Carnival Cruise Lines increased the price of its seven-day cruise package by 20 percent recently. If demand for its cruises is negatively elastic, which of the following is the likely outcome of the increase in price?

Accepted Answer

If demand for a product is negatively elastic, an increase in price will lead to a decrease in total revenue. This is because the percentage decrease in quantity demanded will exceed the percentage increase in price, resulting in a net decrease in revenue. Therefore, choice C is the likely outcome - Carnival Cruise Lines will see a decrease in total revenue.

Question 9

In Travnia, an industrial country, the government controls most of the utilities, including power and water supply. The bottled-water market, however, has four major players: Balk, Pentl, Valr, and Tidum. Each of the companies markets its product using a distinct branding strategy. In an attempt to gain a larger market share, Pentl reduces the price of its products by 10%. It expects to make up for the lost revenue from an increase in sales. Which of the following is true of this scenario?

Accepted Answer

A price war could occur if other firms also reduce their prices in response to Pentl's price cut, leading to further reductions and potentially harming all firms' profitability.

Question 10

What do retail outlets hope to achieve from using promotions in conjunction with markdowns?

Accepted Answer

Retail outlets hope to increase store traffic through promotions and markdowns, hoping customers will also purchase non-promotional products at regular prices. This leads to increased sales and profits for the store.

Question 11

Why don't the majority of customers bother to redeem rebates?

Accepted Answer

The procedure to redeem a rebate is often seen as complex and lengthy by customers, which can deter them from taking advantage of the discount offered.

Question 12

The Better Business Bureau suggests that at least _____ of the sales should occur at a price for it to be used as a reference price.

Accepted Answer

The Better Business Bureau suggests that at least 50 percent of the sales should occur at a price for it to be used as a reference price.

Question 13

A firm sells 20,000 units of a particular product at a price of $50 per unit. The company spends $30 per unit in raw materials and labor charges. What are company's fixed costs if it made a profit of $100,000?

Accepted Answer

The total revenue from selling 20,000 units at $50 each is:
20,000 x $50 = $1,000,000
The total cost of producing 20,000 units is:
20,000 x $30 = $600,000
The profit made by the company is:
$1,000,000 - $600,000 = $400,000
We are given that the profit made by the company is $100,000. So, we can set up the equation:
$400,000 - Fixed Costs = $100,000
Solving for Fixed Costs, we get:
Fixed Costs = $300,000
Therefore, the company's fixed costs are $300,000.

Question 14

Which of the following retailers offers a broad variety of merchandise, limited service, and low prices?

Accepted Answer

Full-line discount stores generally offer a broad variety of merchandise, limited service, and low prices. This category includes stores like Walmart and Target. Specialty stores offer a narrow assortment of merchandise within a specific category, Extreme value retailers offer a limited assortment of merchandise at very low prices, Department stores offer a wide range of merchandise and full service, and Convenience stores offer a limited assortment of merchandise with high convenience factors.

Question 15

A seller's costs are usually determined during or after a product is made, with a specified percentage or dollar amount added to the cost to establish a price. In this case, the organization is using _____ pricing.

Accepted Answer

Cost-plus pricing involves calculating the cost of producing a product and then adding a specified percentage or dollar amount as a markup to arrive at the final price. This method is often used by sellers to ensure that they cover their costs and make a profit.

Question 16

A Macy's manager designs the casual clothing department such that one of Macy's private label pairs of jeans, priced at $24.99, is positioned next to a national brand of jeans, such as Levis, priced at $39.99. What is the manager attempting to accomplish?

Accepted Answer

The manager is attempting to use reference pricing strategy by placing a private label pair of jeans priced lower than a national brand next to it to influence customers to perceive the private label as a good value.

Question 17

In Ravonia, the telecom sector is dominated by four major service providers: Flank, Zelno, Tuhaz, and Klock. The service providers determine call rates and broadband rates using a collective strategy. They maintain uniform pricing and compete mainly on quality and service. Flank, Zelno, Tuhaz, and Klock are using a _____ strategy.

Accepted Answer

The telecom service providers are engaging in horizontal price fixing by collectively setting their rates and maintaining uniform pricing. This restricts competition and can harm consumers by limiting their options and potentially raising prices.

Question 18

Why do companies offer seasonal discounts to customers?

Accepted Answer

Companies offer seasonal discounts to increase the demand for a product at a time when consumers are less likely to buy or use the product. This helps in clearing out the inventory and increasing the sales of the product. It also enables the company to maintain a steady revenue flow throughout the year rather than only during peak seasons.

Question 19

Which of the following is true of price elasticity?

Accepted Answer

Rises in income can lead to drops in price elasticity because consumers may become less sensitive to price changes when they have more disposable income.

Question 20

Fly, a manufacturer of indoor and outdoor heaters, has production facilities that are not running at their full capacity because of piled up inventory. Fly offers a discount to retailers who purchase heaters while the weather is still warm, because the cold months are still at least three months away. Based on historical sales data, Digimart, a retailer, picks up 200 heaters from Fly at a discount of 30% on the usual price. This scenario is an example of a(n) _____.

Accepted Answer

The scenario describes a discount offered by Fly to retailers for purchasing heaters while the weather is still warm, as the cold months are still at least three months away. This type of discount is commonly referred to as a seasonal discount. Therefore, the correct answer is E. The scenario does not involve a noncumulative or cumulative quantity discount, slotting allowance, or cash discount.

Exam 1: Professional Certified Marketer