Question 1

________ uses buyers' perceptions of what a product is worth, not the seller's cost, as the key to pricing.
A)Customer value-based pricing
B)Target return pricing
C)Variable costs
D)Price elasticity
E)Product image

Accepted Answer

Customer value-based pricing is based on the buyers' perceptions of what a product is worth, not the seller's cost. This approach takes into account the benefits the product offers the consumer and the value they place on those benefits. It is a customer-centric approach that is driven by the value delivered to the customer, rather than the cost of production.

Question 2

Consumer perceptions of the product's value set the ________ for prices.
A)demand curve
B)floor
C)ceiling
D)variable cost
E)image

Accepted Answer

Consumer perceptions of a product's value will set the upper limit or ceiling for prices. This means that a company cannot realistically charge more than what consumers believe the product is worth. If a company sets a price above what consumers perceive to be the value of the product, demand will decrease and sales will suffer. Therefore, understanding consumer perceptions of value is crucial in setting an appropriate pricing strategy that is in line with customer expectations.

Question 3

In ________, price is considered along with the other marketing mix variables before the marketing program is set.
A)target return pricing
B)value-based pricing
C)variable costs
D)price elasticity
E)cost-based pricing

Accepted Answer

In value-based pricing, price is considered along with the other marketing mix variables before the marketing program is set. This approach involves setting prices based on the perceived value that customers have for the product or service, rather than solely on the cost of production or competitors' prices.

Question 4

Costs that do not vary with production or sales level are referred to as ________ costs.
A)fixed
B)variable
C)target
D)total
E)unit

Accepted Answer

Fixed costs remain constant regardless of the level of production or sales, while variable costs change with production or sales levels. Target costs are set as a goal for the cost of a product, and total costs and unit costs are derived from both fixed and variable costs.

Question 5

The simplest pricing method is ________.
A)value-based pricing
B)going-rate and sealed-bid pricing
C)cost-plus pricing
D)break-even analysis
E)target return pricing

Accepted Answer

Cost-plus pricing is the simplest pricing method as it involves adding a markup percentage to the cost of producing a product or service. This method is easy to calculate and understand, making it a good choice for small businesses or those just starting out. The other pricing methods listed involve more complex calculations and considerations, such as market demand and competition, which may be more appropriate for established businesses with larger budgets and resources.

Question 6

________ are the sum of the ________ and ________ for any given level of production.
A)Fixed costs; variable; total costs
B)Fixed costs; total; variable costs
C)Variable costs; fixed; total costs
D)Total costs; fixed; variable costs
E)Break-even costs; fixed; total costs

Accepted Answer

Total costs are the sum of fixed costs and variable costs for any given level of production. Fixed costs do not change with the level of production, while variable costs do.

Question 7

________ involves charging a constant low price with few or no temporary price discounts.
A)High-low pricing
B)Target return pricing
C)Cost-plus pricing
D)Everyday low pricing (EDLP)
E)Penetration pricing

Accepted Answer

Everyday low pricing (EDLP) involves charging a constant low price with few or no temporary price discounts. This pricing strategy is often used by retailers such as Walmart, who strive to maintain low prices consistently rather than fluctuating prices for temporary promotions.

Question 8

Value-based pricing is the reverse process of ________ pricing.
A)variable cost
B)cost-plus
C)cost-based
D)good-value
E)value-added

Accepted Answer

Cost-based pricing starts with calculating the cost of producing a product and then adding a markup to determine the selling price. In contrast, value-based pricing starts with the desired price point in the market and then works back to determine the costs associated with producing a product that customers are willing to pay for.

Question 9

Price is the only element in the marketing mix that produces ________.
A)revenue
B)variable costs
C)expenses
D)fixed costs
E)stability

Accepted Answer

Price is directly related to revenue, as it is the amount that customers pay for a product or service, and therefore the primary source of income for a business. The other elements in the marketing mix (product, promotion, and place) can all impact revenue indirectly, but pricing decisions have the most direct and immediate impact on a company's bottom line.

Question 10

________ pricing involves setting prices based on the costs for producing, distributing, and selling the product plus a fair rate of return for the company's efforts and risks.
A)Value-based
B)Fixed cost
C)Cost-based
D)Variable
E)Skimming

Accepted Answer

Cost-based pricing involves setting prices based on the costs for producing, distributing, and selling the product plus a fair rate of return for the company's efforts and risks. This approach is often used in industries where the market is highly competitive and margins are slim. By using cost-based pricing, companies can ensure that their prices are competitive while still generating a reasonable profit. It is a common method used by manufacturers and retailers.

Question 11

Underpriced products sell very well, but they produce less revenue than they would have if price were raised to the ________ level.
A)perceived value
B)value-based
C)variable
D)demand curve
E)price-floor

Accepted Answer

The answer of Underpriced products sell very well, but they...

Question 12

Costs that vary directly with the level of production are referred to as ________ costs.
A)fixed
B)variable
C)target
D)total
E)unit

Accepted Answer

Variable costs are directly proportional to the level of production or activity, meaning they increase or decrease in the same proportion as the production level changes. Examples of variable costs include labor, raw materials, and commissions. Fixed costs, on the other hand, remain constant regardless of the production level, while target costs refer to a specific cost that a company aims to achieve for a particular product or service. Total costs refer to the sum of fixed and variable costs, and unit costs are the average cost per unit of output.

Question 13

When there is price competition, many companies adopt ________ rather than cutting prices to match competitors.
A)pricing power
B)value-added pricing strategies
C)fixed costs
D)price elasticity
E)image pricing

Accepted Answer

Value-added pricing strategies involve adding more value to the product or service offered, which can justify a higher price point than competitors. This approach allows companies to maintain their profit margins and differentiate themselves from competitors instead of engaging in a price war that may hurt all companies involved.

Question 14

With ________ pricing, price is set to match consumers' perceptions of product value.
A)variable cost
B)cost-plus
C)cost-based
D)value-based
E)everyday low

Accepted Answer

Value-based pricing is a strategy that sets the price based on how much the customer values the product or service. It takes into account the benefits and perceived value by the customer and sets the price accordingly. This type of pricing is effective for premium products that are unique or have a strong value proposition.

Question 15

The company designs what it considers to be a good product, totals the expenses of making the product, and sets a price that adds a standard mark-up to the cost of the product. This approach to pricing is called ________ pricing.
A)value-based
B)fixed cost
C)cost-plus
D)variable
E)skimming

Accepted Answer

This approach to pricing is called cost-plus pricing, as it involves calculating the cost of making the product and adding a mark-up to that cost to determine the final price.

Question 16

Rent, electricity, and executive salaries are examples of ________ costs.
A)fixed
B)variable
C)total
D)accumulated
E)marketing

Accepted Answer

Fixed costs are those that remain constant regardless of the level of production or sales. Rent, electricity, and executive salaries are all examples of fixed costs.

Question 17

Product costs set a(n)________ to a product's price.
A)demand curve
B)experience curve
C)floor
D)ceiling
E)break-even cost

Accepted Answer

Product costs set a floor to a product's price, which means that the price cannot be set lower than the total cost of producing and marketing the product. The demand curve, experience curve, ceiling, and break-even cost are all factors that can influence the final price, but they do not directly set a limit on the lowest possible price.

Question 18

Measuring ________ can be difficult. A company might conduct surveys or experiments to test this in the different products they offer.
A)target returns
B)fixed costs
C)perceived value
D)break-even pricing
E)variable costs

Accepted Answer

Perceived value is a subjective measure of the worth or value of a product or service from the customer's perspective. It can be difficult to measure accurately as it is based on the customer's perception and can vary from person to person. Surveys or experiments can be conducted to understand the customer's perception of the value of different products offered by a company. Therefore, option C is the correct answer.

Question 19

Fixed costs ________ as the number of units produced increases.
A)decrease
B)increase
C)divide in half
D)remain the same
E)increase at a diminishing rate

Accepted Answer

Fixed costs remain the same regardless of the number of units produced. This is because fixed costs are costs that do not vary with the level of production or sales. Examples of fixed costs include rent, salaries, and insurance.

Question 20

________ is the amount of money charged for a product or service.
A)Experience curve
B)Demand curve
C)Price
D)Wage
E)Salary

Accepted Answer

Price is the amount of money charged for a product or service. The other choices (Experience curve, Demand curve, Wage, Salary) do not directly relate to the amount charged for a product or service.

Quiz 10: Pricing: Understanding and Capturing Customer Value

________ uses buyers' perceptions of what a product is worth, not the seller's cost, as the key to pricing.

Consumer perceptions of the product's value set the ________ for prices.

In ________, price is considered along with the other marketing mix variables before the marketing program is set.

Costs that do not vary with production or sales level are referred to as ________ costs.

The simplest pricing method is ________.

are the sum of the and for any given level of production.

________ involves charging a constant low price with few or no temporary price discounts.

Value-based pricing is the reverse process of ________ pricing.

Price is the only element in the marketing mix that produces ________.

________ pricing involves setting prices based on the costs for producing, distributing, and selling the product plus a fair rate of return for the company's efforts and risks.

Underpriced products sell very well, but they produce less revenue than they would have if price were raised to the ________ level.

Costs that vary directly with the level of production are referred to as ________ costs.

When there is price competition, many companies adopt ________ rather than cutting prices to match competitors.

With ________ pricing, price is set to match consumers' perceptions of product value.

The company designs what it considers to be a good product, totals the expenses of making the product, and sets a price that adds a standard mark-up to the cost of the product. This approach to pricing is called ________ pricing.

Rent, electricity, and executive salaries are examples of ________ costs.

Product costs set a(n) ________ to a product's price.

Measuring ________ can be difficult. A company might conduct surveys or experiments to test this in the different products they offer.

Fixed costs ________ as the number of units produced increases.

________ is the amount of money charged for a product or service.