Question 1

List four key factors used to estimate demand.

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Question 2

The executive vice president of Washburn Guitars has set a sales target of 2,000 units for a new line of guitars.This type of objective is most closely related to a(n) ________ pricing objective.

Accepted Answer

The executive vice president's sales target of 2,000 units is a reflection of a unit volume pricing objective, where the objective is to sell a certain number of units, rather than achieve a specific profit, target return, or market share. The survival pricing objective is focused on setting prices that will ensure the company's survival during difficult times.

Question 3

What are the six major steps involved in setting prices?

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Question 4

List four of the demand oriented approaches to selecting an approximate price level and define what they are.

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Question 5

When is skimming pricing an effective strategy?

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Question 6

In the process of setting price, a marketer must first identify pricing objectives and constraints.Next, in Step 2 three specific estimates are necessary.What are they?

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Question 7

Explain the price equation in the context of a new car purchase.

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Question 8

What are the conditions favoring the use of penetration pricing?

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Question 9

The average price Washburn charges for a guitar is $349.This price must cover its average costs of $25 for direct materials and $120 in direct labor.It must also cover fixed expenses of $38,000.Assuming everything else stays the same, the company's planned move to Nashville, Tennessee, will reduce its fixed costs by $4,800.This would cause the slope of the total cost curve to _________ and the break-even quantity to _________.

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Question 10

The average price Washburn charges for a guitar is $349.This pricing level is most reflective of a(n) _______ approach.

Accepted Answer

Odd-even pricing involves setting prices a few dollars or cents under an even number, such as $349 instead of $350, to make the price appear more attractive to consumers.

Question 11

What is the difference between a movement along a demand curve and a shift of a demand curve?

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Question 12

Price elasticity of demand measures how sensitive consumer demand and the firm's revenues are to changes in the product's price.Explain the difference between a product with elastic demand and a product with inelastic demand.

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Question 13

What is standard markup pricing and when would it be used?

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Question 14

Explain why odd-even pricing may be successful.

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Question 15

How do consumers use price as an indicator of value?

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Question 16

Figure 12-1 above, indicates that there are four common approaches for selecting an approximate price level.List and provide a brief description for each one.

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Question 17

Give an example of yield management pricing and explain why it is used.

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Question 18

Washburn recently purchased Parker Guitar, another guitar manufacturer that designed products for professionals and collectors, and will combine the two production facilities into a new location.Washburn expects the acquisition to reduce its rent and tax expenses by 40 percent, and the new skilled employees will reduce the hours of work needed for each unit by 15 percent.This would cause the slope of the total cost curve to _________ and the break-even quantity to _________.

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Question 19

Washburn sell their guitars through a number of channels such as chains and online dealers, but they feel it is their independent dealers who sell the guitar for them.In recognition of their hard work, Washburn takes a smaller profit margin from them because they have to do more work.In essence, this special adjustment to the list price or quoted price is an example of a(n)

Accepted Answer

A trade discount is given to a specific group of customers, such as wholesalers or retailers, in recognition of the extra work they do in selling the product or representing the brand. In this case, Washburn gives a smaller profit margin to their independent dealers, who are an important part of their distribution network. This is a trade discount because it recognizes the value that these dealers bring to the company.

Question 20

Explain why price elasticity is important to marketing managers.

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Quiz 12: Pricing Products and Services