Question 1

Positioning influences the way customers see value in a product or service, and while the price is of major concern to the marketer, price has much less influence than effective positioning for the customer.

Accepted Answer

False

Question 2

Customer perceptions are more important than reality in setting prices.

Accepted Answer

Customer perceptions influence their willingness to pay for a product or service, thus playing a crucial role in setting prices that the market will accept. If customers perceive a product as high-value, they may be willing to pay more, regardless of the actual cost to produce it.

Question 3

Elastic demand characterizes discretionary items where a small change in the price of the items will have a noticeable effect on the number sold.

Accepted Answer

Elastic demand refers to situations where the quantity demanded of a good or service significantly changes in response to a change in price. Discretionary items, being non-essential, often exhibit this characteristic because consumers can easily decide to purchase less of them if prices rise, or more if prices fall.

Question 4

While marketers must pay attention to the prices charged by competitors and the expectations of customers, the effective way to attract customers at fair prices is to emphasis benefits and non-price elements.

Accepted Answer

Emphasizing benefits and non-price elements allows marketers to differentiate their products and create value beyond just price, attracting customers by highlighting how their needs and desires are met in unique ways.

Question 5

A significant disadvantage of cost-based pricing is that it is difficult to get accurate information about what customers would consider the true price.

Accepted Answer

Cost-based pricing focuses on covering costs and adding a markup for profit, rather than directly considering customer perceptions of value or what they would consider the "true price."

Question 6

One of the major problems marketers face with pricing is that although there are many "wrong" prices, there isn't one "right" price.

Accepted Answer

Pricing is complex because it must consider costs, competition, customer perceptions, and market demand. There isn't a single "right" price because these factors can change, and what works for one product or market may not work for another.

Question 7

While consumers gain from artificially low prices in predatory pricing and price wars, they are harmed by the illegal practice of price-fixing.

Accepted Answer

Price-fixing is an illegal practice where competitors agree on pricing levels, rather than competing, which can lead to higher prices for consumers, thus harming them.

Question 8

It is not unusual to see price mark-downs such as 50% off. A company does not to establish that products were sold at price as long as it can show it had been offered at that price for a reasonable period of time.

Accepted Answer

A company must establish that products were sold at the original price or offered at that price for a reasonable period of time to justify a price mark-down claim like "50% off."

Question 9

Consumers are familiar with the Manufacturer's Suggested Retail Price (MSRP), but it might be illegal to sell products at that price.

Accepted Answer

MSRP is a suggested price, not a fixed price. Retailers are free to sell products at any price they choose.

Question 10

For an exchange to take place, a marketer knows that
A) both the buyer and seller see value being created in the exchange.
B) money needs to change hands.
C) the buyer must know exactly what he or she is receiving.
D) competitors cannot match the total offering.

Accepted Answer

For an exchange to occur in marketing, it is essential that both the buyer and seller perceive value in the transaction. This mutual recognition of value facilitates the willingness to engage in the exchange. Money changing hands, the buyer's complete understanding of the product, or the uniqueness of the offering compared to competitors are not necessary conditions for an exchange to take place.

Question 11

John is trying to figure out what to charge customers in the landscaping business he is starting. He knows what the labor costs are, and how to include the materials (plants, mulch, etc.) that he will use in the price. He thought he could add these two together, add an amount for profit and general expenses, and he'd have a fair price. Is he right?
A) Yes. He has the major items covered and incidentals can be covered in the general expenses.
B) No. He needs to ensure the price covers the tools needed for the job.
C) Yes. For a small or start-up business, pricing should be kept as simple as possible.
D) No. He needs to calculate any other expenses and add those into the price.

Accepted Answer

John needs to consider all potential expenses, including any unforeseen costs, to ensure his pricing is comprehensive and sustainable.

Question 12

Auctions are successful because
A) marketers don't need to set prices.
B) customers prefer to compete with one another.
C) customers have different perceived value for products.
D) marketers can avoid costly couponing and price promotions.

Accepted Answer

Customers have different perceived values for products, which is a fundamental reason auctions are successful. This allows buyers to bid based on their own valuation, potentially leading to higher prices than a single set price might achieve.

Question 13

Which of the following is NOT one of the four primary factors that influence price?
A) Customer perceptions
B) Company costs
C) Analyst expectations
D) Market characteristics

Accepted Answer

Analyst expectations are not considered one of the four primary factors influencing price. The main factors include customer perceptions, company costs, and market characteristics, along with competition. Analyst expectations might influence investor behavior but do not directly set product pricing.

Question 14

If you go to a fancy steak house and see a hamburger on the menu for $1.19 or if you go to a fast food restaurant and see a hamburger on the menu for $24.00, you'd think something was not right. Marketers understand you are comparing those posted menu prices to your own
A) learned dining costs.
B) reference price.
C) perceived cost.
D) expected value.

Accepted Answer

The correct term for the price you compare against when evaluating a product's price is "reference price." This is the price you expect to pay based on past experience or market norms.

Question 15

Your reference price will become more accurate and reflect real prices when
A) you have found a similar item online.
B) you have experience related to the product.
C) you have consulted your friends, family and colleagues.
D) you are not emotionally involved in making the purchase.

Accepted Answer

Having experience related to the product allows you to have a better understanding of its value and market price, leading to a more accurate reference price.

Question 16

Simon is reviewing the marketing department's budget and expenses, and some figures would not fit easily into fixed or variable costs categories. Paul gave him an easy way to distinguish between the two, which was to determine
A) if the costs are part of the marketing mix, then they are variable costs.
B) if the costs are linked to things that cannot be easily moved, then they are fixed expenses.
C) if the cost can be assigned on a per unit basis, then it is a variable cost.
D) if it is a cost associated with headquarters, then it is a fixed cost.

Accepted Answer

Variable costs are those that change in proportion to the level of activity or volume, such as materials and labor costs, which can be assigned on a per unit basis. Fixed costs, on the other hand, do not vary with the level of production or sales, such as rent or salaries.

Question 17

The product life cycle curve can help marketers determine pricing. In general, as a product matures, the price will go down as
A) competitors exit the market.
B) costs to make the product go down as it matures.
C) inelastic prices are now becoming more elastic.
D) all profits have been realized in a product, and the firm is moving to harvest the remaining value.

Accepted Answer

As a product matures, the costs to make the product go down as it matures. This is because the company has gained experience in producing the product, and has found ways to make it more efficiently. As a result, the company can lower the price of the product and still make a profit.

Question 18

Price wars are usually harmful to firms because non-loyal customers will switch to whichever product has a lower price, and loyal customers
A) take advantage of lower prices, which diminishes profit.
B) will abandon the product as the image becomes cheapened.
C) will often pursue legal remedies.
D) will stay out of the market until prices stabilize.

Accepted Answer

Loyal customers may take advantage of lower prices, leading to reduced profits for firms engaged in price wars.

Question 19

While it is relatively easy to determine variable costs as they are linked to the units produced, fixed costs are more difficult to determine as
A) much of the information is confidential and not readily available to the marketer.
B) there are no formulas to work with.
C) they must cover all the expenses of the firm and it may be difficult to get accurate estimates.
D) depreciation on fixed assets can vary with accounting practices.

Accepted Answer

Fixed costs are challenging to determine because they must cover all the firm's expenses, and obtaining accurate estimates can be difficult due to the complexity and variability of these costs.

Question 20

One of the most challenging pricing decisions a marketer faces is
A) knowing when the product is changing from the mature stage to the decline stage in the product life cycle.
B) keeping prices low without starting a price war.
C) establishing a price for new products without any market experience.
D) keeping track of the laws and regulations affecting pricing.

Accepted Answer

Establishing a price for new products without any market experience is particularly challenging because there is no historical data or market benchmarks to guide the pricing decision, making it a complex and uncertain task.

Quiz 10: Managing Price and Customer Cost Perceptions

Positioning influences the way customers see value in a product or service, and while the price is of major concern to the marketer, price has much less influence than effective positioning for the customer.

Customer perceptions are more important than reality in setting prices.

Elastic demand characterizes discretionary items where a small change in the price of the items will have a noticeable effect on the number sold.

While marketers must pay attention to the prices charged by competitors and the expectations of customers, the effective way to attract customers at fair prices is to emphasis benefits and non-price elements.

A significant disadvantage of cost-based pricing is that it is difficult to get accurate information about what customers would consider the true price.

One of the major problems marketers face with pricing is that although there are many "wrong" prices, there isn't one "right" price.

While consumers gain from artificially low prices in predatory pricing and price wars, they are harmed by the illegal practice of price-fixing.

It is not unusual to see price mark-downs such as 50% off. A company does not to establish that products were sold at price as long as it can show it had been offered at that price for a reasonable period of time.

Consumers are familiar with the Manufacturer's Suggested Retail Price (MSRP), but it might be illegal to sell products at that price.

For an exchange to take place, a marketer knows that

Auctions are successful because

Which of the following is NOT one of the four primary factors that influence price?

If you go to a fancy steak house and see a hamburger on the menu for $1.19 or if you go to a fast food restaurant and see a hamburger on the menu for $24.00, you'd think something was not right. Marketers understand you are comparing those posted menu prices to your own

Your reference price will become more accurate and reflect real prices when

Simon is reviewing the marketing department's budget and expenses, and some figures would not fit easily into fixed or variable costs categories. Paul gave him an easy way to distinguish between the two, which was to determine

The product life cycle curve can help marketers determine pricing. In general, as a product matures, the price will go down as

Price wars are usually harmful to firms because non-loyal customers will switch to whichever product has a lower price, and loyal customers

While it is relatively easy to determine variable costs as they are linked to the units produced, fixed costs are more difficult to determine as

One of the most challenging pricing decisions a marketer faces is