Question 1

When a new product is introduced to a market and is priced high with the intention of eventually lowering the price as the market becomes more competitive, marketers are using a pricing strategy known as

Accepted Answer

This pricing strategy is known as skimming. It involves setting a high price when a product is introduced to the market and then gradually lowering the price over time as competition increases and the novelty of the product decreases. This strategy is often used to recover the initial investment quickly and to take advantage of the product's novelty and lack of competition at the beginning.

Question 2

Eduardo and David have developed a unique gaming accessory and are determining how to price it. Their market analysis has told them the accessory will appeal to a large number of gamers, it is relatively inexpensive to produce, and they already are thinking about how they could enhance the accessory to make it even more attractive. What kind of pricing strategy should they use?

Accepted Answer

Penetration pricing strategy is suitable for products that appeal to a large segment and are inexpensive to produce, aiming to attract a large number of customers quickly by setting a low initial price.

Question 3

When pricing existing products, the marketer must make three basic sets of decisions: the basis for setting the price, if the prices will change very much, and

Accepted Answer

The marketer must consider how the price of a product relates to other products the company sells to ensure consistency and avoid internal competition.

Question 4

An approach services use to set prices according to changing market conditions is known as

Accepted Answer

Dynamic pricing is the strategy where businesses set flexible prices for products or services based on current market demands.

Question 5

Chris and Lynn were watching sales slumping for their line of expensive, exotically-scented candles, and they had narrowed down their options to adjusting the price. Chris suggested the best thing to do would be to raise prices. Lynn thought Chris wasn't thinking clearly, but increasing prices to stimulate sales for luxury items is known as

Accepted Answer

Prestige pricing is a strategy where prices are set higher to give the appearance of a high-value, luxury item, which can actually increase demand among consumers seeking premium products.

Question 6

Ming-tao was trying to figure out how much revenue he would have to bring in on a specific product to start earning a profit. He wanted to know the point at which the total sales at a given price level needed to produce zero profits, but cover costs. To determine the this, he needs to know the fixed costs and

Accepted Answer

To determine the point at which total sales produce zero profits but cover costs (known as the break-even point), Ming-tao needs to know the fixed costs and the contribution margin. The contribution margin is the amount by which the sale of one unit exceeds its variable cost, which is crucial for calculating how many units need to be sold to cover fixed costs and start earning a profit.

Question 7

One of the fundamental "building blocks" of pricing is an estimate or understanding of how many units can be sold in a given period-usually a year. This estimate is known as expected unit sales or

Accepted Answer

Demand forecast is an estimate of how many units of a product or service can be sold in a given period, usually a year.

Question 8

Damon is developing a marketing plan for the product he is managing. What calculation will he use to determine how many incremental sales he will have to make if he increases advertising efforts by three different amounts?

Accepted Answer

Break-even analysis is used to determine the number of units that must be sold at a given price to cover all costs. When planning to increase advertising efforts, Damon can use break-even analysis to calculate how many additional sales are needed to cover the increased advertising costs, thereby determining the incremental sales required.

Question 9

Analyses and calculations use estimates and projections. These will be imprecise, but the calculations require precision. Which of the following is NOT an approach that marketers can use to get more precise estimates?

Accepted Answer

Executive opinions, while valuable for insights and strategic direction, are based on individual perspectives and may not necessarily lead to more precise estimates compared to data-driven approaches like marketing research, sales forecasts, or industry forecasts from trade associations.

Question 10

The first step in setting a base price for a product is

Accepted Answer

Setting pricing objectives is the first step in the process of setting a base price for a product. This involves defining what the company wants to achieve with its pricing strategy, such as maximizing profit, increasing market share, or achieving a target return on investment.

Question 11

Rick had solid information about the internal costs, volume and objectives he needed to set prices for the next year. Before he can set prices, he also needs to understand what is going on the market in general. He will examine the competitors' overall pricing, and he will need to research consumer demand for the products to know how the size of the total market and

Accepted Answer

Rick needs to research consumer demand for his product to understand how it fits into the total market size and to set competitive prices.

Question 12

Maya is setting prices for her home remodeling business. Over the course of the year, there are times of peak activities-such as pre-holidays-and times when consumers were not as interested in home remodeling. This is an issue throughout the industry, so she knows it isn't just her business. After she determines a base price for the service, she could stimulate demand during the slow periods by using

Accepted Answer

Discounts stimulate demand during slow periods by reducing the price of the service.

Question 13

Nevin has an electronics store with a focus on high-end audio and visual products. He knows he cannot compete with the "big box" stores to attract everyone, so he has focused on people who demand high quality in their electronics even though some can't easily afford it. He has already used rebates, especially those offered by the manufacturers. He doesn't want to lower his prices as a large part of his customer base can afford his prices. What other discounting option does Nevin have that makes sense for his business and won't undermine the base price?

Accepted Answer

Financing allows customers to pay over time, making high-end products more accessible without reducing the base price.

Question 14

Angie needed a new refrigerator after her old one stopped working and couldn't be repaired. At the appliance store, she ended getting a new refrigerator plus a new stove and dishwasher because the sales associate showed her that by buying all three, should could save money that she could save not buying any of the items separately. The store used what kind of adjustment to the base price?

Accepted Answer

Bundling is the strategy where multiple products are sold together at a reduced price compared to buying each item separately, which is what the store offered Angie.

Question 15

Businesses in the U.S. often compete on price, and competition can be very tough beyond pricing. Competing on price is an accepted practice in the marketplace and under the law. What is the name of the practice that goes beyond fair competition to drive another business out of the market by dropping prices to an extremely low level with the intention of destroying another business?

Accepted Answer

Predatory pricing is the strategy of lowering prices to a level that is unsustainable for competitors, with the intention of driving them out of the market. This practice is considered anti-competitive and can be illegal under antitrust laws.

Question 16

Some companies will drop prices to a point where competitors may question their motives. Although federal law prohibits predatory pricing and similar actions, the situations are rarely prosecuted because it is difficult to prove and

Accepted Answer

Primary jurisdiction is often with the states, meaning that the federal government will typically defer to state authorities to prosecute predatory pricing cases.

Question 17

Daniel and Sarah were going to a movie, and they started discussing the way the theater offered discounts to senior citizens before 6:00 pm. Sarah commented, "That's discrimination. They see the same movie in the same seats. Why should they pay less?" Which of the following is NOT one of the explanations as to why this is not treated as discrimination?

Accepted Answer

The correct explanation is that while marketers can use pricing strategies to influence demand, offer discounts to certain groups, and are not restricted by the Robinson-Patman Act in the context of services, the assertion that senior citizens can rarely afford full-priced tickets is not a valid reason for not treating this as discrimination. It's a stereotype and not a legal or marketing-based rationale.

Question 18

___________ is one of the most difficult decisions in the marketing mix, since it directly influences customer perceptions of value.

Accepted Answer

Pricing is one of the most challenging decisions in the marketing mix because it directly affects how customers perceive the value of a product or service. It requires careful consideration of various factors, including costs, competition, and customer demand, to strike the right balance between profitability and customer satisfaction.

Question 19

Price is a measure of the relative value of an item for both the customer and the ___________.

Accepted Answer

Price reflects the value of an item from both the customer's perspective and the seller's perspective, as it is a key factor in the exchange process between these two parties.

Question 20

Price is related to _________ for both the buyer and seller.

Accepted Answer

The answer of Price is related to _________ for both...

Quiz 10: Managing Price and Customer Cost Perceptions