Question 1

Imagine you're planning an after-symphony fundraising party,and you need a life-size grand piano cake.Or,you are a developer proposing a new shopping centre to a group of investors,and you want to serve a cake shaped like an architectural rendition of the centre.Is this impossible? No,you just need to contact Cecilia Villaveces Cakes.She actually built a life-size grand piano for a major gala.You can expect to pay anywhere from $75 to $10,000 for one of Cecilia's artistic creations,depending on complexity of design and size.She uses only the best ingredients,and no two cakes are ever quite alike.
-Refer to Specialty Cakes.Which of the following is the best example of a fixed cost for Cecilia Villaveces Cakes?

Accepted Answer

Delivery costs,electricity consumption,and use of part-time employees will vary according to the job.

Question 2

In the mid-1990s,Continental Airlines in the United States chose to compete head-on with Southwest Airlines by launching Continental Lite,an alternative low-fare commercial airline passenger operation.Top executives at Continental had expected its no-frills operation to break even within a year of its inception,but the airline fell short of the goal.A source close to the company explained it by saying,"Its costs were too high,and its revenues were too low." Some observers criticized Continental's marketing efforts.When the no-frills service was first launched,it lacked a distinct name or identity,missing its chance to make a splash.Then Continental tried to sell three "brands" at once-Lite,a new premium service,and its more traditional long-haul domestic flights.As one rival expressed it,"You cannot be all things to all people."
-Refer to Continental Lite.The airline industry's demand curve slopes downward and to the right.This curve indicates the quantity demanded is increased as which of the following occurs?

Accepted Answer

The lower the price,the more travel will be demanded.

Question 3

In a sluggish economy,consumers will buy even the most modest of products with the same discretion once shown only to big-ticket items,like computers,airfares,and designer clothes.The results are a growing popularity of cheaper private-label products and the likelihood that price wars among consumer goods could lead to the same kind of consolidation that occurred in the airline and electronics industries.Moreover,analysts say changing buying habits will force premium brand marketers to lower their prices to protect their positions.These companies may also upgrade products to distinguish them from private labels and promote their brands more aggressively than ever.
One analyst says that consumers are forcing product innovation.Products have to be sold on merit.As a result,there will be fewer brands of significance,but the significant brands will be stronger.Brand loyalty is believed to exist only when,or if,value is provided.How do the significant brands compete? One analyst says that a combination of sensible pricing and innovation with a strong brand name can stabilize market share.Reformulated or repackaged products are typical examples of innovative attempts to solidify market share.
-Refer to Consumer Buying Habits.In the past,Procter & Gamble set prices on significant brands such as Pampers so that total revenue was as large as possible relative to total costs.Which type of approach does this represent?

Accepted Answer

Profit maximization means setting prices so that total revenue is as large as possible relative to total costs.

Question 4

Which of the following best describes prestige pricing?

Accepted Answer

Actually,prestige pricing emphasizes all the intangible considerations buyers make when purchasing.

Question 5

The advertisements for Bernard Hinault brand bicycles claim that it is the most expensive bicycle in the world.Which type of pricing is this?

Accepted Answer

Prestige pricing strategy sets high prices to connote high product quality and exclusiveness.

Question 6

In a sluggish economy,consumers will buy even the most modest of products with the same discretion once shown only to big-ticket items,like computers,airfares,and designer clothes.The results are a growing popularity of cheaper private-label products and the likelihood that price wars among consumer goods could lead to the same kind of consolidation that occurred in the airline and electronics industries.Moreover,analysts say changing buying habits will force premium brand marketers to lower their prices to protect their positions.These companies may also upgrade products to distinguish them from private labels and promote their brands more aggressively than ever.
One analyst says that consumers are forcing product innovation.Products have to be sold on merit.As a result,there will be fewer brands of significance,but the significant brands will be stronger.Brand loyalty is believed to exist only when,or if,value is provided.How do the significant brands compete? One analyst says that a combination of sensible pricing and innovation with a strong brand name can stabilize market share.Reformulated or repackaged products are typical examples of innovative attempts to solidify market share.
-Refer to Consumer Buying Habits.Assume a product has a strong brand name,a reasonable price,and good quality.Which of the following strategies should NOT be implemented?

Accepted Answer

With a strong brand name,further lowering of price is unnecessary.

Question 7

Imagine you're planning an after-symphony fundraising party,and you need a life-size grand piano cake.Or,you are a developer proposing a new shopping centre to a group of investors,and you want to serve a cake shaped like an architectural rendition of the centre.Is this impossible? No,you just need to contact Cecilia Villaveces Cakes.She actually built a life-size grand piano for a major gala.You can expect to pay anywhere from $75 to $10,000 for one of Cecilia's artistic creations,depending on complexity of design and size.She uses only the best ingredients,and no two cakes are ever quite alike.
-Refer to Specialty Cakes.Which of the following is the best example of a variable cost for Cecilia Villaveces Cakes?

Accepted Answer

Only the consumption of flour and sugar would vary from cake to cake.

Question 8

In the mid-1990s,Continental Airlines in the United States chose to compete head-on with Southwest Airlines by launching Continental Lite,an alternative low-fare commercial airline passenger operation.Top executives at Continental had expected its no-frills operation to break even within a year of its inception,but the airline fell short of the goal.A source close to the company explained it by saying,"Its costs were too high,and its revenues were too low." Some observers criticized Continental's marketing efforts.When the no-frills service was first launched,it lacked a distinct name or identity,missing its chance to make a splash.Then Continental tried to sell three "brands" at once-Lite,a new premium service,and its more traditional long-haul domestic flights.As one rival expressed it,"You cannot be all things to all people."
-Refer to Continental Lite.The statement that Continental Lite had problems because "Its costs were too high,and its revenues were too low," after paying for airline activities it suggests that the airline had none of which of the following left over?

Accepted Answer

Profit is what is left over after paying for company activities.

Question 9

Petra knows little about cooking and does not want to spend the time to learn how to make a quiche.However,she has been asked to bring a quiche to an office retirement party.Not wanting to make a poor choice,what is she likely to do?

Accepted Answer

Most consumers equate price and quality.

Question 10

In a sluggish economy,consumers will buy even the most modest of products with the same discretion once shown only to big-ticket items,like computers,airfares,and designer clothes.The results are a growing popularity of cheaper private-label products and the likelihood that price wars among consumer goods could lead to the same kind of consolidation that occurred in the airline and electronics industries.Moreover,analysts say changing buying habits will force premium brand marketers to lower their prices to protect their positions.These companies may also upgrade products to distinguish them from private labels and promote their brands more aggressively than ever.
One analyst says that consumers are forcing product innovation.Products have to be sold on merit.As a result,there will be fewer brands of significance,but the significant brands will be stronger.Brand loyalty is believed to exist only when,or if,value is provided.How do the significant brands compete? One analyst says that a combination of sensible pricing and innovation with a strong brand name can stabilize market share.Reformulated or repackaged products are typical examples of innovative attempts to solidify market share.
-Refer to Consumer Buying Habits.Changing consumer buying habits will force premium brand marketers to lower their prices to protect their positions (maintain the same revenue).What does this suggest about demand for premium products?

Accepted Answer

If the price goes down and revenue remains the same,elasticity is unitary.

Question 11

In the mid-1990s,Continental Airlines in the United States chose to compete head-on with Southwest Airlines by launching Continental Lite,an alternative low-fare commercial airline passenger operation.Top executives at Continental had expected its no-frills operation to break even within a year of its inception,but the airline fell short of the goal.A source close to the company explained it by saying,"Its costs were too high,and its revenues were too low." Some observers criticized Continental's marketing efforts.When the no-frills service was first launched,it lacked a distinct name or identity,missing its chance to make a splash.Then Continental tried to sell three "brands" at once-Lite,a new premium service,and its more traditional long-haul domestic flights.As one rival expressed it,"You cannot be all things to all people."
-Refer to Continental Lite.Continental Lite's pricing objectives were based on gaining as much market share as possible from Southwest Airlines.This suggests that Continental Lite had which type of pricing objectives?

Accepted Answer

Sales-oriented pricing objectives are based on either market share or dollar or unit sales.

Question 12

Imagine you're planning an after-symphony fundraising party,and you need a life-size grand piano cake.Or,you are a developer proposing a new shopping centre to a group of investors,and you want to serve a cake shaped like an architectural rendition of the centre.Is this impossible? No,you just need to contact Cecilia Villaveces Cakes.She actually built a life-size grand piano for a major gala.You can expect to pay anywhere from $75 to $10,000 for one of Cecilia's artistic creations,depending on complexity of design and size.She uses only the best ingredients,and no two cakes are ever quite alike.
-Refer to Specialty Cakes.Many party planners will use only Cecilia Villaveces Cakes at their parties-no matter what the price is.They know that Cecilia's cakes can make a party a success.Moreover,the cakes are what people remember most about the parties.From this description,what should you assume that Cecilia Villaveces Cakes have?

Accepted Answer

Price increases do not decrease demand for cakes.

Question 13

Imagine you're planning an after-symphony fundraising party,and you need a life-size grand piano cake.Or,you are a developer proposing a new shopping centre to a group of investors,and you want to serve a cake shaped like an architectural rendition of the centre.Is this impossible? No,you just need to contact Cecilia Villaveces Cakes.She actually built a life-size grand piano for a major gala.You can expect to pay anywhere from $75 to $10,000 for one of Cecilia's artistic creations,depending on complexity of design and size.She uses only the best ingredients,and no two cakes are ever quite alike.
-Refer to Specialty Cakes.To set the price of her cakes,Cecilia simply doubles her costs,which often include several hours of labour and expensive raw materials.What is this method of price setting called?

Accepted Answer

The practice of marking prices up 100 percent is called keystoning.

Question 14

Kables Optic builds quality binoculars,which have innovative components (such as water resistance)and superior durability.Kables Optic has managed to keep its price lower than its competitors.However,Kables's sales have been disappointing.For a fast and simple remedy,what should Kables do?

Accepted Answer

The price needs to fit the product quality for a more cohesive image.

Question 15

Which type of strategy is being followed by marketing managers who attempt to raise the quality image of their product by selling it at high prices?

Accepted Answer

Prestige pricing strategy sets high prices to connote high product quality.

Question 16

Imagine you're planning an after-symphony fundraising party,and you need a life-size grand piano cake.Or,you are a developer proposing a new shopping centre to a group of investors,and you want to serve a cake shaped like an architectural rendition of the centre.Is this impossible? No,you just need to contact Cecilia Villaveces Cakes.She actually built a life-size grand piano for a major gala.You can expect to pay anywhere from $75 to $10,000 for one of Cecilia's artistic creations,depending on complexity of design and size.She uses only the best ingredients,and no two cakes are ever quite alike.
-Refer to Specialty Cakes.There are many occasions for which people may need to buy a cake,but most people do not have the time or interest to learn about cakes and their bakers.Why might these people who do not know about the quality of the Cecilia Villaveces Cakes choose them?

Accepted Answer

Most consumers equate price and quality.

Question 17

In the mid-1990s,Continental Airlines in the United States chose to compete head-on with Southwest Airlines by launching Continental Lite,an alternative low-fare commercial airline passenger operation.Top executives at Continental had expected its no-frills operation to break even within a year of its inception,but the airline fell short of the goal.A source close to the company explained it by saying,"Its costs were too high,and its revenues were too low." Some observers criticized Continental's marketing efforts.When the no-frills service was first launched,it lacked a distinct name or identity,missing its chance to make a splash.Then Continental tried to sell three "brands" at once-Lite,a new premium service,and its more traditional long-haul domestic flights.As one rival expressed it,"You cannot be all things to all people."
-Refer to Continental Lite.Consumers who travelled on Continental Lite or Southwest were very sensitive to price changes.This suggests which of the following?

Accepted Answer

Demand changes with price changes.

Question 18

Imagine you're planning an after-symphony fundraising party,and you need a life-size grand piano cake.Or,you are a developer proposing a new shopping centre to a group of investors,and you want to serve a cake shaped like an architectural rendition of the centre.Is this impossible? No,you just need to contact Cecilia Villaveces Cakes.She actually built a life-size grand piano for a major gala.You can expect to pay anywhere from $75 to $10,000 for one of Cecilia's artistic creations,depending on complexity of design and size.She uses only the best ingredients,and no two cakes are ever quite alike.
-Refer to Specialty Cakes.Although many factors determine the prices charged by Cecilia Villaveces Cakes,what are the two primary determinants?

Accepted Answer

If there were reduced demand,than Cecilia would have to lower prices.Also,she must charge for the time,energy,and resources that go into each cake.

Question 19

In a sluggish economy,consumers will buy even the most modest of products with the same discretion once shown only to big-ticket items,like computers,airfares,and designer clothes.The results are a growing popularity of cheaper private-label products and the likelihood that price wars among consumer goods could lead to the same kind of consolidation that occurred in the airline and electronics industries.Moreover,analysts say changing buying habits will force premium brand marketers to lower their prices to protect their positions.These companies may also upgrade products to distinguish them from private labels and promote their brands more aggressively than ever.
One analyst says that consumers are forcing product innovation.Products have to be sold on merit.As a result,there will be fewer brands of significance,but the significant brands will be stronger.Brand loyalty is believed to exist only when,or if,value is provided.How do the significant brands compete? One analyst says that a combination of sensible pricing and innovation with a strong brand name can stabilize market share.Reformulated or repackaged products are typical examples of innovative attempts to solidify market share.
-Refer to Consumer Buying Habits.To compete against the private labels,the significant brands can upgrade products to distinguish them from private labels and advertise their brands more aggressively than ever.Most of the ads will feature cents-off coupons.What does this pricing strategy clearly involve manipulation of?

Accepted Answer

Price is used here as a promotional tool to increase consumer interest.

Question 20

In a sluggish economy,consumers will buy even the most modest of products with the same discretion once shown only to big-ticket items,like computers,airfares,and designer clothes.The results are a growing popularity of cheaper private-label products and the likelihood that price wars among consumer goods could lead to the same kind of consolidation that occurred in the airline and electronics industries.Moreover,analysts say changing buying habits will force premium brand marketers to lower their prices to protect their positions.These companies may also upgrade products to distinguish them from private labels and promote their brands more aggressively than ever.
One analyst says that consumers are forcing product innovation.Products have to be sold on merit.As a result,there will be fewer brands of significance,but the significant brands will be stronger.Brand loyalty is believed to exist only when,or if,value is provided.How do the significant brands compete? One analyst says that a combination of sensible pricing and innovation with a strong brand name can stabilize market share.Reformulated or repackaged products are typical examples of innovative attempts to solidify market share.
-Refer to Consumer Buying Habits.One analyst said that the big brands such as Starbucks,Folgers and Maxwell House can compete by combining sensible pricing and innovation with a strong brand name.This is done to stabilize market share.Which type of pricing is this?

Accepted Answer

Sales-oriented pricing objectives are based upon market share.

Quiz 18: Pricing Concepts

Which of the following best describes prestige pricing?

The advertisements for Bernard Hinault brand bicycles claim that it is the most expensive bicycle in the world.Which type of pricing is this?

Petra knows little about cooking and does not want to spend the time to learn how to make a quiche.However,she has been asked to bring a quiche to an office retirement party.Not wanting to make a poor choice,what is she likely to do?

Kables Optic builds quality binoculars,which have innovative components (such as water resistance) and superior durability.Kables Optic has managed to keep its price lower than its competitors.However,Kables's sales have been disappointing.For a fast and simple remedy,what should Kables do?

Which type of strategy is being followed by marketing managers who attempt to raise the quality image of their product by selling it at high prices?