Question 1

Companies that employ ________ offer discounted but limited early purchases, higher-priced late purchases, and the lowest rates on unsold inventory just before it expires.

Accepted Answer

The pricing strategy described in the question is yield pricing, which involves offering different prices to different customers based on their willingness to pay. In this case, the company is offering discounted early purchases to entice early adopters, higher-priced late purchases for those who place less value in early access, and the lowest rates on unsold inventory right before it expires to encourage those who might not have been willing to pay the initial prices. This is a common pricing strategy in industries such as airlines, hotels, and entertainment.

Question 2

There are ways that brand leaders can respond to competitors' price declines. Which of the following strategies involves spending money to improve perceived quality.

Accepted Answer

Further differentiating the product or service involves spending money to enhance its perceived quality, setting it apart from competitors.

Question 3

________ occurs when a company sells a product or service at two or more prices that do not reflect a proportional difference in costs.

Accepted Answer

Price discrimination occurs when a company charges different prices for the same product or service based on certain factors such as location, customer segment, or time of purchase, and these different prices do not reflect a proportional difference in costs. This allows the company to maximize revenue by charging each customer the highest price they are willing to pay.

Question 4

Given strong consumer resistance to price hikes, marketers go to great lengths to find alternative approaches that will allow them to postpone a price increase. Which of the following approaches would apply to the discontinuation of free delivery?

Accepted Answer

The discontinuation of free delivery is an example of removing or reducing product services, which is a strategy to effectively increase the cost to the consumer without directly raising the product's price.

Question 5

Generally, consumers prefer ________ price increases on a regular basis to sudden, sharp increases.

Accepted Answer

Consumers prefer small price increases on a regular basis because sudden, sharp increases can be jarring and cause them to feel like they are being taken advantage of. Small increases over time are easier to adjust to and may be more tolerable to consumers.

Question 6

Some of the considerations that companies face when deciding to match a competitor's price decline include the product's importance in the company's portfolio, the competitor's intentions, and the

Accepted Answer

The answer of Some of the considerations that companies face...

Question 7

Companies sometimes initiate price cuts in a drive to dominate the market through lower costs. A price-cutting strategy involves possible traps. One of these "traps" is

Accepted Answer

The trap mentioned in the statement is "shallow-pockets" which refers to the possibility that the company's profit margin may decrease due to the price cut, and the company may not have enough financial resources to sustain the lower prices in the longer run. Therefore, this trap is associated with companies that have limited financial resources or with a weak financial position. The other options (A, C, D, E) are not related to the trap explained in the statement.

Question 8

Evian prices a 1.4-litre bottle of its mineral water at $.200 and 50 mL of the same water in a moisturizer spray at $6.00. With which of the following types of pricing are different versions of the product priced differently but not proportionately to their respective costs?

Accepted Answer

This scenario illustrates product-form pricing, where different versions of the same product are priced differently based on the form they are offered in. In this case, the 1.4-litre bottle and moisturizer spray contain the same Evian mineral water, but are priced significantly differently. This type of pricing is not proportional to the respective costs of the versions, as the moisturizer spray likely has additional production costs that the bottle does not. Customer-segment pricing involves different prices for different customer groups, channel pricing involves different prices for different distribution channels, location pricing involves different prices for different geographic locations, and new product pricing involves pricing strategies for newly launched products.

Question 9

The popularity of "early-bird" specials at restaurants is an example of what type of price discrimination?

Accepted Answer

The popularity of early-bird specials at restaurants is an example of time pricing, where prices vary based on the time of day or night. This is a form of price discrimination, as the restaurant is charging different prices to different groups of customers based on the timing of their visit.

Question 10

When different customer groups are charged different prices for the same product or service, it is called

Accepted Answer

Customer-segment pricing is when different customer groups are charged different prices for the same product or service.

Question 11

The seller sells a plant, equipment, or technology to another country and agrees to accept as partial payment products manufactured with the supplied equipment in a(n)

Accepted Answer

This is a classic definition of a buyback arrangement, where the seller agrees to accept products manufactured using the supplied technology or equipment as partial payment. The other options are not relevant in this context. Co-optation refers to the process of bringing external parties into an organization; an auction is a public sale where goods are sold to the highest bidder; barter involves direct exchange of goods without using money, and offset refers to an arrangement where local content is required as a condition of a sale.

Question 12

When supermarkets and department stores drop the price on well-known brands to stimulate store traffic, this is called

Accepted Answer

When supermarkets and department stores drop the price on well-known brands to stimulate store traffic, this is called loss-leader pricing. It is a strategy of setting a low price and losing profit on a product in the hopes that the customers will come into the store and buy other products as well.

Question 13

A major circumstance provoking price increases is

Accepted Answer

Cost inflation, which is an increase in the cost of production inputs such as labor, raw materials, and energy, can lead to higher prices for the final product to maintain profitability.

Question 14

Your competitor has reduced prices on his entire line of products. You can interpret these price cuts by assuming that your competitor is trying to gain market share, that the competitor is doing poorly and wants to increase revenue quickly, and that

Accepted Answer

The answer of Your competitor has reduced prices on his...

Question 15

A(n) ________ is a price reduction to buyers who pay their bills promptly.

Accepted Answer

A discount is a reduction in price offered to buyers who pay their bills promptly. It is a common incentive for customers to pay their bills on time and helps to improve a company's cash flow. Functional discounts, quantity discounts, seasonal allowances, and allowances may also be offered by companies, but they do not specifically relate to prompt payment.

Question 16

A ________ is offered by a manufacturer to trade-channel members if they will perform certain functions, such as selling, storing, and record keeping.

Accepted Answer

A functional discount is offered by a manufacturer to trade-channel members if they will perform certain functions, such as selling, storing, and record keeping. Quantity, cash, and volume discounts are based on the amount purchased or paid, while an allowance is a reimbursement for certain expenses.

Question 17

Most companies will ________ their list price and give discounts and allowances for early payments, volume purchases, and off-season buying.

Accepted Answer

Most companies will adjust their list price to accommodate different situations such as early payments, volume purchases, and off-season buying. This means the list price may not always stay the same and can be modified to ensure customer satisfaction and maintain a competitive edge in the market.

Question 18

In markets that are characterized by products that are highly homogenous, how should a firm react to a competitor's price decline?

Accepted Answer

The answer of In markets that are characterized by products...

Question 19

One of the traps of instituting a price decrease is when that low price buys market share in the short term. The same customers will shift to any lower-priced product that may come along. This trap is called

Accepted Answer

This trap is called the fragile-market-share trap because it highlights the risk of gaining market share through low pricing, which can be easily lost if competitors offer even lower prices, indicating that the loyalty of customers gained through low prices is fragile and not deeply rooted in brand loyalty or product quality.

Question 20

Prices that vary by time of the day, the season of the year, or the day of the week are called

Accepted Answer

The practice of setting prices that vary by time of day, season of the year, or day of the week is known as time pricing. This strategy allows companies to maximize profits by charging higher prices during peak demand periods and lower prices during periods of low demand. It is a form of dynamic pricing that takes into account the varying levels of consumer demand over time.

Quiz 14: Developing Pricing Strategies and Programs