Question 1

A strategy of _______________ addresses the objective of entering a market at a relatively high price point.

Accepted Answer

A strategy of price skimming addresses the objective of entering a market at a relatively high price point. In proposing price skimming, the marketing manager usually is convinced that a strong price-quality relationship exists for the product.

Question 2

Amelie is the marketing manager at a café in Charleston,South Carolina.The chef/owner is about to introduce a new dish and Amelie is planning on pricing the dish low to begin,but slowly raising the price over time.Amelie is utilizing _______________.

Accepted Answer

Sometimes penetration pricing is used as part of a new-product introduction. In both the B2C and B2B markets, it is common for prices to be set low initially to ward off competition and then for prices to creep up over time.

Question 3

A firm attempts to find a neutral set point for price that is neither low enough to raise the ire of competition nor high enough to put the value proposition at risk with customers.The firm is adopting a(n)_______ strategy.

Accepted Answer

A potentially more productive strategy related to competitor-based pricing is stability pricing, in which a firm attempts to find a neutral set point for price that is neither low enough to raise the ire of competition nor high enough to put the value proposition at risk with customers.

Question 4

Jean Claude has just completed a new line of designer handbags.He wants the price to communicate to the customer that the handbags are high quality,so he sets it high.He knows that after this season,the price will lower.Jean Claude is using _______________.

Accepted Answer

Price skimming is sometimes used in a new-product introduction by a firm with a first-mover advantage to skim early sales while the product has a high level of panache and exclusivity in the marketplace.

Question 5

A company's core cost advantages translate directly to an edge over its competitors based on much more flexibility in its __________________ as well as its ability to translate some of the cost savings to the bottom line.

Accepted Answer

Although firms competing on cost leadership will likely also engage in one of Michael Porter's other competitive strategies (differentiation or focus/niche), their core cost advantages translate directly to an edge over their competitors based on much more flexibility in their pricing strategies as well as their ability to translate some of the cost savings to the bottom line.

Question 6

In markets where customers are sensitive to price and where internal efficiencies lead to cost advantages allowing for acceptable margins even with aggressive pricing,a ______ strategy can create a powerful barrier to market entry for other firms.

Accepted Answer

In markets where customers are sensitive to price and where internal efficiencies lead to cost advantages allowing for acceptable margins even with aggressive pricing, a penetration objective can create a powerful barrier to market entry for other firms, thus protecting market share.

Question 7

Pricing objectives very frequently are designed for profit maximization,which necessitates a ________________________ pricing strategy.

Accepted Answer

Pricing objectives very frequently are designed for profit maximization, which necessitates a target return on investment (ROI) pricing strategy. Here, a bottom-line profit is established first and then pricing is set to achieve the target.

Question 8

Be careful with a __________________ strategy.Because price is a cue for developing customer perceptions of product quality,the value proposition may be reduced if a low price belies the product's actual quality attributes.

Accepted Answer

Be careful with a penetration pricing strategy. Because price is a cue for developing customer perceptions of product quality, the value proposition may be reduced if a low price belies the product's actual quality attributes.

Question 9

__________________ is(are)considered by the customer when making a purchasing decision.

Accepted Answer

Value is a ratio of the bundle of benefits a customer receives from an offering compared to the costs incurred by the customer in acquiring that bundle of benefits. From the customer's perspective, many but not all of those costs are reflected within the price paid for the offering. There are other types of costs, such as time invested in the purchase process or the opportunity costs of choosing one offering over another. But for most purchasers, regardless of whether the setting is B2C or B2B, the vast majority of costs are associated with the purchase price.

Question 10

Mark runs a driving range in New York City.He has noticed that within a 15-minute walk you can get to three competitors.Mark decides to look at his competitors' pricing and then determine his best pricing strategy based on all of the information.Mark is utilizing ___________________.

Accepted Answer

Gaining a thorough understanding of competitors' marketing practices is a key element of successful marketing planning and execution. A competitor's price is one of the most visible elements of its marketing strategy, and you can often infer the pricing objective by carefully analyzing historical and current pricing patterns. Based on such analysis, a firm may develop competitor-based pricing strategies.

Question 11

______________ is a critical component that plays into a customer's assessment of the value afforded by a firm and its offerings.

Accepted Answer

Pricing objectives are but one component leading to an overall value proposition. However, a product's price tends to be so visible and definitive that customers often have trouble moving past price to consider other critical benefits the product affords.

Question 12

_______________________ could lead the marketing manager to decide to price at some market average price,or perhaps above or below it in the context of penetration or skimming objectives.

Accepted Answer

A firm may develop competitor-based pricing strategies. This approach might lead the marketing manager to decide to price at some market average price, or perhaps above or below it in the context of penetration or skimming objectives.

Question 13

Juan is researching new cars.He would like to buy a car that is both good quality and a good price.After much consideration,Juan purchases a car from a manufacturer where the initial price paid is high,but the cars are known to have much lower maintenance costs.The pricing strategy employed by the dealership where Juan bought his car is _____________________.

Accepted Answer

Value pricing considers the whole deliverable and its possible sources of differential advantage-image, service, product quality, personnel, innovation, and many others-the whole gamut of elements that create customer benefit. For instance, Toyotas and Hondas cost more to purchase initially than other comparable vehicles, but they last longer, require fewer repairs, are more fuel-efficient, and hold their resale value much better; overall, they have a lower lifetime cost of ownership.

Question 14

When using _______________ a bottom line profit is established first and then pricing is set to achieve the target.

Accepted Answer

Pricing objectives very frequently are designed for profit maximization, which necessitates a target return on investment (ROI) pricing strategy. Here, a bottom-line profit is established first and then pricing is set to achieve the target.

Question 15

When a firm's objective is to gain as much market share as possible,a likely pricing strategy is _________________,sometimes also referred to as pricing for maximum marketing share.

Accepted Answer

Market share is the percentage of total category sales accounted for by a firm. When a firm's objective is to gain as much market share as possible, a likely pricing strategy is penetration pricing, sometimes also referred to as pricing for maximum marketing share.

Question 16

When a company purposefully makes pricing decisions to undercut one or more competitors and gain sales and net market share it is demonstrating a(n)___________________ strategy.

Accepted Answer

A price war occurs when a company purposefully makes pricing decisions to undercut one or more competitors and gain sales and net market share.

Question 17

Michael Porter has consistently advocated that firms that are able to compete based on some extraordinary efficiency in one or more internal processes bring to the market a competitive advantage based on _________________.

Accepted Answer

From a marketing planning and strategy perspective, Michael Porter has consistently advocated that firms that are able to compete based on some extraordinary efficiency in one or more internal processes bring to the market a competitive advantage based on cost leadership.

Question 18

Firms that have an objective of utilizing pricing to communicate positioning use a _______ strategy.

Accepted Answer

Firms that have an objective of utilizing pricing to communicate positioning use a value pricing strategy. Value pricing overtly attempts to consider the role of price as it reflects the bundle of benefits sought by the customer.

Question 19

The logic of competitor-based pricing is quite rational unless _______.

Accepted Answer

The logic of competitor-based pricing is quite rational unless (a) it is the only approach considered when making the ultimate pricing decisions or (b) it leads to exaggerated extremes in pricing such that on the high end a firm's products do not project customer value or on the low end price wars ensue.

Question 20

In proposing _______________,the marketing manager usually is convinced that a strong price-quality relationship exists for the product.

Accepted Answer