Question 1

In determining the price for his company's new small business accounting software,Raymond is assessing how much better the software is as compared to alternative products available in the market.Raymond is using __________ pricing.
A) improvement value
B) odd-even
C) everyday low pricing
D) reference-based
E) cost-based

Accepted Answer

Raymond is assessing the improvement value of his product compared to alternative products in the market, which means he is using improvement value pricing. This means that he is setting the price based on how much better his product is compared to existing alternatives, rather than using a cost-based approach or setting a price based on market competition.

Question 2

One of the problems associated with an everyday low pricing (EDLP)strategy is that
A) stores may have to offer too many noncumulative wholesale discounts.
B) some consumers may associate EDLP with lower quality goods.
C) the retailer may be accused of price discrimination.
D) too many coupons may be redeemed.
E) it may conflict with price-based cost calculations.

Accepted Answer

Some consumers may associate EDLP with lower quality goods. This is because they may perceive that the lower price is due to lower quality rather than a pricing strategy. This can lead to a negative impact on the retailer's brand image and reputation.

Question 3

Firms using a(n)____________ pricing method set their prices relative to what other firms are charging.
A) improvement value
B) value-based
C) competitor-based
D) reference-based
E) cost-based

Accepted Answer

Competitor-based pricing method involves setting prices based on what other firms are charging for similar products or services. This pricing method is effective in competitive markets where price is a significant factor in consumer decision-making. By setting prices relative to competitors, firms can ensure that their prices are competitive and attractive to consumers.

Question 4

One of the difficulties associated with value-based pricing is that
A) the way consumers perceive value constantly changes.
B) only the creator of a new product can fully understand its value to consumers.
C) value depends on variable costs and not fixed costs.
D) everyday low pricing has neutralized the impact of price on consumers' purchase decisions.
E) costs are invaluable.

Accepted Answer

The way consumers perceive value is subject to external and internal factors that are constantly changing. This makes it challenging to maintain a consistent value-based pricing strategy.

Question 5

In determining the price for his company's new pocket digital camera,Matt determines what consumers consider the regular or original price for similar cameras available in the market.Matt is assessing the influence of __________ on pricing strategy.
A) improvement value
B) odd-even prices
C) everyday low pricing
D) reference prices
E) cost of ownership

Accepted Answer

Matt is assessing the influence of reference prices on pricing strategy. Reference prices are the prices that consumers consider as the normal or original price for a product based on their past experiences with similar products or competitors' prices. By determining these reference prices, companies can set their prices to be competitive and attractive to consumers.

Question 6

An everyday low pricing strategy stresses the continuity of retail prices
A) at a level above regular retail prices and below deep-discount prices.
B) based on horizontal price fixing.
C) bundled with cost-based,cash discounts.
D) at a level somewhere between the regular price and the deep-discount sale prices competitors may offer.
E) at a price skimming level.

Accepted Answer

An everyday low pricing strategy aims to offer prices consistently at a level that is in between regular retail prices and deep-discount sale prices of competitors. This approach can create a perception of overall value for customers and helps retailers to avoid the price wars that can damage profit margins.

Question 7

Value-based pricing methods include approaches to setting prices that focus on the overall value of the product offering
A) when the product is produced.
B) as recognized by competitors.
C) as perceived by the consumer.
D) in order to minimize bundling charges.
E) relative to production costs.

Accepted Answer

Value-based pricing methods aim to set prices based on the value perceived by the consumer rather than production costs or competitor pricing. The focus is on the overall value of the product offering, which is determined by the benefits and satisfaction the product provides to the customer.

Question 8

Each generation of cell phones has provided greater clarity,range,and multi-functionality.Marketers of cell phones can use these upgrades in __________ pricing.
A) everyday low pricing
B) odd-even
C) improvement value
D) reference-based
E) cost-based

Accepted Answer

The statement suggests that the upgrades in technology from each generation can be used to justify an improvement value pricing strategy. This means that the marketers can charge higher prices for the newer, better phones based on the added value and functionality they provide to the consumers.

Question 9

A reference price is
A) the actual price.
B) the price against which buyers compare the actual selling price.
C) the manufacturer's cost.
D) a cumulative quantity discount price.
E) the external horizontal fixed price.

Accepted Answer

A reference price is the price against which buyers compare the actual selling price. It can be an internal or external price point that helps consumers gauge whether a price is reasonable or not. This could be a previous price they paid for the same product, the prices of competing products, or the manufacturer's suggested retail price (MSRP). By comparing the actual selling price to the reference price, consumers can assess the value of the product and are more likely to make a decision to purchase it based on that perceived value.

Question 10

Dan is especially price sensitive.He has been known to line up on "Black Friday" (the day after Thanksgiving)at 4 a.m.in order to be among the first to buy sale items.Dan would likely respond to a __________ pricing strategy.
A) high / low
B) premium
C) slotting allowance
D) horizontal flattening
E) vertical triangulation

Accepted Answer

Dan is price sensitive and looks for good deals. A high/low pricing strategy offers high prices initially but then offers discounts and sales to attract customers like Dan who are looking for good deals. This strategy is commonly used during events like Black Friday where customers are looking for sales and discounts.

Question 11

Everyday low pricing (EDLP)provides value to consumers by
A) continually offering items on sale.
B) minimizing the number of options a consumer can evaluate.
C) noncumulative quantity discounts.
D) reducing their search costs.
E) creative use of referencing pricing.

Accepted Answer

Everyday low pricing (EDLP) reduces consumers' search costs by providing a consistent and predictable pricing structure, eliminating the need for shoppers to constantly search for sales or discounts. This can create a sense of value for consumers and encourage repeat purchases.

Question 12

Ben owns a lawn care business.From experience,Ben has found that John Deere equipment lasts almost twice as long as competitors' machines.For John Deere,Ben's perception about its products makes __________ pricing possible.
A) improvement value
B) odd-even
C) everyday low pricing
D) reference-based
E) cost of ownership

Accepted Answer

Cost of ownership pricing is possible because Ben perceives John Deere equipment to last longer, which implies lower long-term costs despite potentially higher initial prices.

Question 13

In determining the price for his company's new personal computer photography printer,Raymond is assessing the total cost of owning his printer as compared to alternative products available in the market.Raymond is using __________ pricing.
A) improvement value
B) odd-even
C) everyday low pricing
D) reference-based
E) cost of ownership

Accepted Answer

Raymond is assessing the total cost of owning his printer in comparison to alternative products, which implies that he is using cost of ownership pricing. This pricing strategy involves considering not just the purchase cost, but also the ongoing costs associated with owning and using the product, such as maintenance and supplies. By determining the total cost of ownership, Raymond can offer a competitive price for his product while ensuring that customers are aware of the long-term value of his product.

Question 14

When Sony introduced its new PlayStation 3 game system,buyers who could not get them the first day bid up the price of the systems on eBay and other auction sites.As Sony provided more PlayStation 3 units to the market and early demand was satisfied,prices dropped because
A) the way consumers perceived their value changed.
B) Sony fully understood its value to consumers.
C) variable costs became constant and fixed costs increased.
D) everyday low pricing neutralized the impact of price on consumers' purchase decisions.
E) Sony discontinued using the improvement value method of pricing.

Accepted Answer

The increase in price on eBay and other auction sites was due to the high demand and limited supply of the PlayStation 3 units. As Sony provided more units to the market, the perceived value of the system changed and the demand no longer exceeded the supply, causing the prices to drop.

Question 15

Cost-based pricing assumes costs
A) vary with the level of prices.
B) are used to estimate value.
C) will not vary much for different levels of production.
D) are calculated based on historical consumer perceptions of what things should cost.
E) will continue to decrease as production increases.

Accepted Answer

Cost-based pricing assumes that costs will not vary much for different levels of production. This means that pricing decisions are based on the production cost of the product or service rather than its perceived value or what consumers are willing to pay.

Question 16

One of the difficulties associated with value-based pricing is that
A) costs are impossible to compute.
B) only the creator of a new product can fully understand its value to consumers.
C) value depends on variable costs and not fixed costs.
D) everyday low pricing has neutralized the impact of price on consumers' purchase decisions.
E) it necessitates a great deal of consumer research to be implemented successfully.

Accepted Answer

Value-based pricing requires a thorough understanding of the perceived value of a product to consumers, which necessitates extensive consumer research to implement successfully. While costs are considered in value-based pricing, they are not the sole determining factor in setting a price. The creator of a product may have insight into its value, but it is important to gather input from the target market. Everyday low pricing is a separate pricing strategy that does not necessarily negate the impact of price on consumer decisions.

Question 17

It is important to Joanne to get value for her money,but she does not want to spend time comparison shopping.Joanne will likely respond to __________ pricing but not __________ pricing.
A) high / low; everyday low
B) premium; everyday low
C) discount; vertical
D) horizontal; flattening
E) everyday low; high / low

Accepted Answer

Joanne values getting value for her money and may not want to spend time comparison shopping, so everyday low pricing would likely appeal to her. She may not respond well to high/low pricing, which involves frequent sales and fluctuating prices. Therefore, option E, which includes everyday low pricing and excludes high/low pricing, is the best choice.

Question 18

Yvonne estimates the average cost of her floral arrangements is $14 regardless of whether she is doing 5 or 20 arrangements that day.She adds a standard markup to the $14 estimate to determine her price.Yvonne is using a(n)__________ pricing method.
A) improvement value
B) value-based
C) everyday low pricing
D) reference-based
E) cost-based

Accepted Answer

Yvonne is using a cost-based pricing method where she determines the price of her floral arrangements based on the cost of producing them, which is estimated at $14 regardless of the number of arrangements. She adds a standard markup to cover her overhead and profit, which is a common practice in cost-based pricing.

Question 19

When Greenbelt Construction Company began building houses in a large subdivision with many other builders,they priced their homes slightly higher than their competitors and promoted the added quality features in their homes.Greenbelt was using a(n)__________ pricing strategy.
A) improvement value
B) value-based
C) everyday low pricing
D) reference-based
E) competitor-based

Accepted Answer

Greenbelt Construction Company priced their homes slightly higher than their competitors and promoted the added quality features in their homes. This is an example of competitor-based pricing, where a company sets its prices in relation to the prices of its competitors.

Question 20

In a __________ pricing strategy,marketers rely on the promotion of sales,during which prices are temporarily reduced to encourage purchases.
A) high / low
B) premium
C) discount
D) horizontal flattening
E) vertical triangulation

Accepted Answer

In a high/low pricing strategy, marketers temporarily reduce prices through promotions or sales to encourage consumer purchases.

Quiz 15: Strategic Pricing Methods

In determining the price for his company's new small business accounting software,Raymond is assessing how much better the software is as compared to alternative products available in the market.Raymond is using __________ pricing.

One of the problems associated with an everyday low pricing (EDLP) strategy is that

Firms using a(n) ____________ pricing method set their prices relative to what other firms are charging.

One of the difficulties associated with value-based pricing is that

In determining the price for his company's new pocket digital camera,Matt determines what consumers consider the regular or original price for similar cameras available in the market.Matt is assessing the influence of __________ on pricing strategy.

An everyday low pricing strategy stresses the continuity of retail prices

Value-based pricing methods include approaches to setting prices that focus on the overall value of the product offering

Each generation of cell phones has provided greater clarity,range,and multi-functionality.Marketers of cell phones can use these upgrades in __________ pricing.

A reference price is

Dan is especially price sensitive.He has been known to line up on "Black Friday" (the day after Thanksgiving) at 4 a.m.in order to be among the first to buy sale items.Dan would likely respond to a __________ pricing strategy.

Everyday low pricing (EDLP) provides value to consumers by

Ben owns a lawn care business.From experience,Ben has found that John Deere equipment lasts almost twice as long as competitors' machines.For John Deere,Ben's perception about its products makes __________ pricing possible.

In determining the price for his company's new personal computer photography printer,Raymond is assessing the total cost of owning his printer as compared to alternative products available in the market.Raymond is using __________ pricing.

When Sony introduced its new PlayStation 3 game system,buyers who could not get them the first day bid up the price of the systems on eBay and other auction sites.As Sony provided more PlayStation 3 units to the market and early demand was satisfied,prices dropped because

Cost-based pricing assumes costs

One of the difficulties associated with value-based pricing is that

It is important to Joanne to get value for her money,but she does not want to spend time comparison shopping.Joanne will likely respond to pricing but not pricing.

Yvonne estimates the average cost of her floral arrangements is $14 regardless of whether she is doing 5 or 20 arrangements that day.She adds a standard markup to the $14 estimate to determine her price.Yvonne is using a(n) __________ pricing method.

When Greenbelt Construction Company began building houses in a large subdivision with many other builders,they priced their homes slightly higher than their competitors and promoted the added quality features in their homes.Greenbelt was using a(n) __________ pricing strategy.

In a __________ pricing strategy,marketers rely on the promotion of sales,during which prices are temporarily reduced to encourage purchases.