Question 1

Julia wants her firm's gourmet snacks to be the leading brand in the U.S.market.When adopting a pricing strategy designed to gain market share,she should remember that
A) rarely is the lowest-price offering the dominant brand in a market.
B) prestige products need to be competitively priced.
C) companies can gain market share by offering low-quality products at a high price.
D) total value equals total cost minus variable costs leading to price escalation.
E) price wars are the way to become the dominant brand.

Accepted Answer

Adopting a pricing strategy based solely on low prices rarely leads to becoming the leading brand in a market. Instead, companies should focus on creating a strong brand image and offering unique value propositions. Competitively pricing prestige products may be necessary, but low-quality products at high prices are unlikely to gain market share. Additionally, simply engaging in price wars can often lead to a race to the bottom and hurt profitability in the long run.

Question 2

Customers must see value in a product or service before they are willing to exchange time or money to obtain it,but not all customers see the same value in a product.To analyze how many units will be sold at any given price point,marketers draw on
A) a demand curve.
B) the law of averages.
C) multiple regression analyses.
D) target return strategies.
E) a sales orientation.

Accepted Answer

Marketers use a demand curve to analyze how many units will be sold at different price points. This curve helps to determine the optimal price point where demand and revenue are maximized. The other options listed are not directly related to analyzing demand and pricing.

Question 3

A demand curve is built assuming that
A) income is derived from demand.
B) price remains the same,and fixed costs change.
C) everything but price and demand remains the same.
D) a change in quantity demanded causes a change in price.
E) the firm does not advertise.

Accepted Answer

A demand curve is built assuming that everything but price and demand remains the same, indicating that all other factors affecting demand, such as income, taste, and preferences, remain constant. This allows economists to isolate the relationship between price and quantity demanded.

Question 4

Customers purchase prestige products or services for the status of owning the products,not just for the functionality.These products may not follow a typical demand curve if
A) people don't know the price.
B) raising the price makes more people want to own one.
C) similar products become less expensive.
D) the marketer can demonstrate that functionality is more important than prestige.
E) value is removed from the equation.

Accepted Answer

Raising the price of prestige products can increase their desirability because they are often seen as status symbols, and higher prices can enhance their perceived exclusivity and prestige.

Question 5

A "no haggle" pricing policy is a type of _______________ pricing strategy.
A) maximizing profits
B) sales orientation
C) target return
D) status quo
E) customer-oriented

Accepted Answer

A "no haggle" pricing policy is customer-oriented as it caters to the customer's preference for simplicity and transparency in pricing. It eliminates the need for negotiating and provides a sense of fairness and trust to the customers.

Question 6

Many years ago Honda's Accord and Ford's Taurus were the top two selling cars in the United States.As the year was coming to an end,Ford cut the price of the Taurus,hoping to outsell the Accord and allow Ford to claim that "Taurus is the best-selling car in America." Ford was using a ___________________ pricing strategy.
A) maximizing profits
B) target profit
C) sales orientation
D) status quo
E) target return

Accepted Answer

Ford was using a sales orientation pricing strategy, where the focus is on increasing sales volume rather than maximizing profits or achieving a target return. By cutting the price of the Taurus, Ford aimed to outsell the Accord and be able to claim the title of the best-selling car in America. This strategy is consistent with a sales orientation approach, where the goal is to capture the largest market share and generate revenue through higher sales volume.

Question 7

A demand curve shows the relationship between ___________________ in a period of time.
A) income and demand
B) demand and cost
C) price and elasticity
D) profit and price
E) price and demand

Accepted Answer

A demand curve shows the relationship between price and demand in a period of time.

Question 8

There is an old saying,"If you have to ask the price of a yacht,you cannot afford it." Products like yachts are most likely to be associated with
A) cross-shopping.
B) competitive parity pricing.
C) target return value.
D) prestige pricing.
E) break-even point pricing.

Accepted Answer

Prestige pricing is the strategy of pricing a product high in order to give it the appearance of high quality and exclusivity. Yachts are luxury products and owners are willing to pay a premium price for the prestige associated with owning one. The saying mentioned in the question further confirms the association between yachts and prestige pricing.

Question 9

A strategy of setting prices based on how customers develop their perceptions of value can often be the most effective pricing strategy,especially if the strategy
A) leads the marketer to being the low-cost seller.
B) is supported by consistent advertising and distribution strategies.
C) challenges consumers to discard their perceptions of value.
D) is consistent with a competitive target return strategy.
E) does all of these.

Accepted Answer

Setting prices based on how customers develop their perceptions of value requires consistent advertising and distribution strategies to reinforce the perceived value of the product to the customer. While being the low-cost seller can be a pricing strategy, it is not necessarily the most effective in all situations. Challenging consumers to discard their perceptions of value can be risky and may not always be successful. Additionally, while a competitive target return strategy can be effective, it is not necessarily the same as a value-based pricing strategy. Therefore, option B is the best choice as it highlights the importance of consistent advertising and distribution strategies to reinforce perceived value.

Question 10

Ryan gave the manager of his convenience store a set of binoculars so she could see the gasoline prices charged by the other convenience store at that intersection.Ryan told the manager to always match the gasoline prices of the other store.Ryan is using a _____________________ pricing strategy.
A) maximizing profits
B) target profit
C) target return
D) status quo
E) sales

Accepted Answer

Ryan is using a status quo pricing strategy, where he is simply matching the prices of the other convenience store to maintain the current market price and avoid losing customers to the competition.

Question 11

_________________ measures consumers' sensitivity to price changes.
A) Cross-price elasticity of demand
B) Price elasticity of demand
C) Income elasticity of demand
D) Competitive profit elasticity of demand
E) Inelastic demand price parity

Accepted Answer

Price elasticity of demand measures how much the quantity demanded of a good or service changes in response to a change in its price. It indicates the level of consumer responsiveness to price changes.

Question 12

According to a typical demand curve,the higher the price,
A) the greater the income effect.
B) the lower the quantity consumers will buy.
C) the lower the output of producers.
D) the greater the production costs.
E) the lower the cross-price elasticity.

Accepted Answer

According to the law of demand, as the price of a good increases, the quantity demanded decreases. Therefore, the higher the price, the lower the quantity consumers will buy.

Question 13

A customer orientation toward pricing implicitly invokes the concept of
A) knowing the dimensions of the target market.
B) positioning.
C) the income effect.
D) value.
E) None of these.

Accepted Answer

A customer orientation toward pricing means that pricing decisions are made based on the perceived value to the customer. Therefore, the concept of value is implicitly invoked.

Question 14

In many high-end resort markets,Westin hotels compete directly with Crown Plaza hotels.Each firm weighs the comparative advantages and disadvantages of its offerings to determine whether to price above,equal to,or below the other hotel.In these markets,the hotels are using a _______________ pricing strategy.
A) maximizing profits
B) target profit
C) target return
D) competitive parity
E) sales oriented

Accepted Answer

Competitive parity pricing strategy is used when firms set their prices equal or close to their competitors to avoid price wars and maintain their market share. In this scenario, both Westin and Crown Plaza are competing directly in the same high-end resort markets, hence using a competitive parity pricing strategy is the most suitable option.

Question 15

Julia's is an upscale women's clothing store.Prices are based on customers' beliefs about the value of the clothing.The store focuses on a limited target market and provides excellent customer service.Julia's is using a ________________ pricing strategy.
A) customer-oriented
B) target profit
C) target return
D) status quo
E) maximizing profits

Accepted Answer

Julia's is using a customer-oriented pricing strategy, which means that prices are based on customers' beliefs about the value of the clothing. Additionally, the store focuses on a limited target market and provides excellent customer service, further emphasizing their customer orientation. Target profit and target return strategies are more focused on achieving specific financial goals, while maximizing profits may prioritize profit over customer satisfaction. The status quo strategy involves maintaining the current pricing practices without much consideration for customer needs or values.

Question 16

For which of the following is demand likely to be least sensitive to price increases?
A) Spring break vacations.
B) A specific brand of cereal.
C) Prescription drugs.
D) Theater tickets.
E) Restaurant meals.

Accepted Answer

Prescription drugs are essential goods that are often prescribed by doctors to treat a specific illness or condition. As such, the demand for prescription drugs is less likely to be affected by price increases since consumers are dependent on them for their well-being and may not have suitable alternatives. The demand for medication is also less likely to be sensitive to changes in income since it is a necessity.

Question 17

When firms set prices similar to those of competitors,they are following a strategy of
A) me-too pricing.
B) copycat pricing.
C) competitive parity.
D) market-broadening pricing.
E) industry-standard pricing.

Accepted Answer

Competitive parity is when a firm sets prices similar to those of their competitors. This strategy is used to avoid price wars and maintain market share.

Question 18

When Ursula decides how to price new products in her gift store,she measures the value of her product offerings against those of the other stores in her area.Ursula uses a __________________ pricing strategy.
A) maximizing profits
B) target profit
C) target return
D) competitor-oriented
E) sales oriented

Accepted Answer

Ursula is using a competitor-oriented pricing strategy, where she is measuring the value of her products relative to those of other stores in her area. This approach is focused on staying competitive with other businesses in the market.

Question 19

Sharon knew that her established customers liked her product much better than the competitors.She was planning to expand into new markets,and she was considering pricing.She was leaning toward charging a higher price than competitors to help demonstrate that hers was a high-quality product.Sharon was considering
A) a top of market strategy.
B) the value of quality.
C) advantageous pricing.
D) premium pricing.
E) differential pricing.

Accepted Answer

Sharon is considering charging a higher price than competitors to demonstrate that hers is a high-quality product. This pricing strategy is known as premium pricing.

Question 20

Traditional demand curve economic theory is used by marketers to understand _______________ in the five Cs of pricing.
A) competitors
B) channel members
C) cost
D) customers
E) company objectives

Accepted Answer

Traditional demand curve economic theory is used to understand customer behavior and how they will respond to changes in price. Therefore, it is helpful for marketers to use this theory when making pricing decisions based on customer demand.

Quiz 14: Pricing Concepts for Establishing Value

Julia wants her firm's gourmet snacks to be the leading brand in the U.S.market.When adopting a pricing strategy designed to gain market share,she should remember that

Customers must see value in a product or service before they are willing to exchange time or money to obtain it,but not all customers see the same value in a product.To analyze how many units will be sold at any given price point,marketers draw on

A demand curve is built assuming that

Customers purchase prestige products or services for the status of owning the products,not just for the functionality.These products may not follow a typical demand curve if

A "no haggle" pricing policy is a type of _______________ pricing strategy.

A demand curve shows the relationship between ___________________ in a period of time.

There is an old saying,"If you have to ask the price of a yacht,you cannot afford it." Products like yachts are most likely to be associated with

A strategy of setting prices based on how customers develop their perceptions of value can often be the most effective pricing strategy,especially if the strategy

Ryan gave the manager of his convenience store a set of binoculars so she could see the gasoline prices charged by the other convenience store at that intersection.Ryan told the manager to always match the gasoline prices of the other store.Ryan is using a _____________________ pricing strategy.

_________________ measures consumers' sensitivity to price changes.

According to a typical demand curve,the higher the price,

A customer orientation toward pricing implicitly invokes the concept of

Julia's is an upscale women's clothing store.Prices are based on customers' beliefs about the value of the clothing.The store focuses on a limited target market and provides excellent customer service.Julia's is using a ________________ pricing strategy.

For which of the following is demand likely to be least sensitive to price increases?

When firms set prices similar to those of competitors,they are following a strategy of

When Ursula decides how to price new products in her gift store,she measures the value of her product offerings against those of the other stores in her area.Ursula uses a __________________ pricing strategy.

Traditional demand curve economic theory is used by marketers to understand _______________ in the five Cs of pricing.