Question 1

The key to setting a final price for a product is finding an approximate price level to use as a reasonable starting point. Four common approaches to selecting an approximate price level are: (1) demand-oriented; (2) cost-oriented; (3) profit-oriented; and (4) __________ approaches.

Accepted Answer

The fourth common approach to selecting an approximate price level is competition-oriented. This approach involves setting prices based on what competitors are charging for similar products or services. It is important to consider the competition when determining the final price of a product, as customers will often compare prices and choose the most affordable option.

Question 2

Demand-oriented approaches weigh factors that underlie expected __________ more heavily than such factors as cost, profit, and competition when selecting a price level.

Accepted Answer

Demand-oriented approaches focus on factors that customers consider when making purchase decisions. Customer tastes define the wants and preferences of customers and, therefore, carry the most weight when selecting a price level.

Question 3

All of the following are demand-oriented approaches to selecting an approximate price level EXCEPT:

Accepted Answer

Customary pricing is not a demand-oriented approach; it is based on tradition or a standard price that customers expect, rather than on demand.

Question 4

Setting the highest initial price that customers really desiring the product are willing to pay when introducing a new or innovative product is referred to as a

Accepted Answer

Setting a high initial price to capture the market segment that is willing to pay more is called a skimming strategy. This may be used when introducing a new or innovative product with unique features where customers may be willing to pay a premium price to be the first to own it. The price is gradually lowered as the product becomes more widely adopted.

Question 5

Skimming pricing is a strategy that introduces a new or innovative product by

Accepted Answer

Skimming pricing involves setting a high initial price for a new or innovative product with the goal of generating high profits from early adopters willing to pay a premium. As the product becomes more widely adopted, the price may be gradually lowered to appeal to a wider customer base. This strategy is effective for products with strong features or benefits that are not yet available in the market, allowing the business to maximize profits before competitors enter the market.

Question 6

A skimming pricing policy is likely to be most effective when

Accepted Answer

A skimming pricing policy is effective when the product is new and innovative, and there is a relatively low likelihood of competitors entering the market quickly. This is because the high initial price can only be sustained if there is no competition undercutting it. Therefore, a skimming pricing policy would not be effective if competitors are likely to be attracted to the market.

Question 7

A skimming pricing policy is likely to be most effective when

Accepted Answer

Skimming pricing is effective when customers are willing to pay a high price initially, often due to perceived uniqueness or innovation.

Question 8

The key to setting a price for a product is finding an approximate price level to use as a reasonable starting point. Four common approaches to selecting an approximate price level are: (1) demand-oriented; (2) cost-oriented; (3) __________; and (4) competition-oriented approaches.

Accepted Answer

The answer of The key to setting a price for...

Question 9

Skimming pricing is considered to be a __________ approach to pricing.

Accepted Answer

Skimming pricing is a demand-oriented approach to pricing. It involves setting a high initial price for a new product or service with the intention of generating high profits from early adopters or customers with a high willingness to pay. This strategy is typically used for products or services that offer unique features, technology, or benefits that differentiate them from the competition. As demand for the product or service levels off, the price is gradually lowered to attract more price-sensitive customers.

Question 10

A manufacturer of a digital video recorder (DVR) is thinking of using a skimming pricing strategy for its new product. Which of the following conditions would argue AGAINST using a skimming pricing strategy for the DVR?

Accepted Answer

Skimming pricing strategy is suitable for products with high demand and low competition in the market. However, if increasing volume leads to a substantial reduction in production costs, it would be beneficial to adopt a penetration pricing strategy instead of skimming pricing strategy. This will help to capture a larger market share and establish a strong foothold in the market. Option A, D and E are favorable conditions for skimming pricing strategy, and Option B indicates an advantage.

Question 11

A skimming pricing policy is likely to be most effective when

Accepted Answer

Skimming pricing is effective when lowering the price has a minor effect on increasing sales volume and reducing the unit cost. This is because skimming pricing relies on pricing a product high initially and gradually lowering the price over time as demand increases. If the price is already low or if customers are highly price sensitive, a skimming pricing policy may not be effective.

Question 12

-Figure 11-2 above represents the four approaches to selecting an appropriate price level. Box B includes standard markup and cost-plus so it represents which approach?

Accepted Answer

The answer of 
-Figure 11-2 above represents the four approaches...

Question 13

-Figure 11-2 above represents the four approaches to selecting an appropriate price level. Box C includes target profit and target return on sales so it represents which approach?

Accepted Answer

The answer of 
-Figure 11-2 above represents the four approaches...

Question 14

-Figure 11-2 above represents the four approaches to selecting an appropriate price level. Box A represents which approach?

Accepted Answer

The answer of 
-Figure 11-2 above represents the four approaches...

Question 15

The key to setting a final price for a product is finding an approximate price level to use as a reasonable starting point. Four common approaches to selecting an approximate price level are: (1) demand-oriented; (2) __________; (3) profit-oriented; and (4) competition-oriented approaches.

Accepted Answer

The demand-oriented approach considers the customer's willingness to pay and the value they place on the product, which may not always align with the costs of producing the product. The profit-oriented approach focuses solely on maximizing profits, which may not be the best option for building customer loyalty or establishing a market presence. The competition-oriented approach looks at what competitors are charging, but this may not reflect the unique value and costs of a company's product. Therefore, the most reliable starting point for setting a final price is the cost-oriented approach, which considers the costs of producing and delivering the product, as well as a reasonable profit margin.

Question 16

Which of the following statements about the price-setting process is most accurate?

Accepted Answer

Seasoned marketers often consider multiple pricing strategies to determine the most appropriate price level, as strategies can overlap and depend on various factors.

Question 17

-Figure 11-2 above represents the four approaches to selecting an appropriate price level. Box D includes customary and loss leader so it represents which approach?

Accepted Answer

The answer of 
-Figure 11-2 above represents the four approaches...

Question 18

Skimming pricing refers to

Accepted Answer

Skimming pricing refers to setting the highest initial price that customers really desiring the product are willing to pay when introducing a new or innovative product. This strategy is often used by companies to recover the research and development costs of the product and to create an image of exclusivity and high quality. As demand levels off, companies can gradually lower the price to appeal to a broader market.

Question 19

When microwave ovens were in the introduction stage of their product life cycle, some consumers were willing to pay exorbitant prices for these innovative ovens. Taking advantage of this strong consumer desire, marketers set the price for microwave ovens at the highest initial price possible. Marketers of microwave ovens used a __________ pricing strategy.

Accepted Answer

The strategy used by the marketers of microwave ovens is called skimming pricing, where high prices are set initially to maximize profits from early adopters who are willing to pay more for new technology.

Question 20

A skimming pricing policy is likely to be most effective when

Accepted Answer

Skimming pricing policy works well when customers perceive the high price as an indication of high quality. This is because customers are willing to pay more for superior products. Skimming pricing is not suitable for price-sensitive customers or products that are similar to other products in the market. A lower price would be more effective in reducing fixed costs, and measurable sales unit goals can be achieved with any pricing strategy, so they are not relevant to the choice of pricing policy.

Quiz 11: Pricing Products and Services

The key to setting a final price for a product is finding an approximate price level to use as a reasonable starting point. Four common approaches to selecting an approximate price level are: (1) demand-oriented; (2) cost-oriented; (3) profit-oriented; and (4) __________ approaches.

Demand-oriented approaches weigh factors that underlie expected __________ more heavily than such factors as cost, profit, and competition when selecting a price level.

All of the following are demand-oriented approaches to selecting an approximate price level EXCEPT:

Setting the highest initial price that customers really desiring the product are willing to pay when introducing a new or innovative product is referred to as a

Skimming pricing is a strategy that introduces a new or innovative product by

A skimming pricing policy is likely to be most effective when

A skimming pricing policy is likely to be most effective when

The key to setting a price for a product is finding an approximate price level to use as a reasonable starting point. Four common approaches to selecting an approximate price level are: (1) demand-oriented; (2) cost-oriented; (3) __________; and (4) competition-oriented approaches.

Skimming pricing is considered to be a __________ approach to pricing.

A manufacturer of a digital video recorder (DVR) is thinking of using a skimming pricing strategy for its new product. Which of the following conditions would argue AGAINST using a skimming pricing strategy for the DVR?

A skimming pricing policy is likely to be most effective when

-Figure 11-2 above represents the four approaches to selecting an appropriate price level. Box B includes standard markup and cost-plus so it represents which approach?

-Figure 11-2 above represents the four approaches to selecting an appropriate price level. Box C includes target profit and target return on sales so it represents which approach?

-Figure 11-2 above represents the four approaches to selecting an appropriate price level. Box A represents which approach?

The key to setting a final price for a product is finding an approximate price level to use as a reasonable starting point. Four common approaches to selecting an approximate price level are: (1) demand-oriented; (2) __________; (3) profit-oriented; and (4) competition-oriented approaches.

Which of the following statements about the price-setting process is most accurate?

-Figure 11-2 above represents the four approaches to selecting an appropriate price level. Box D includes customary and loss leader so it represents which approach?

Skimming pricing refers to

A skimming pricing policy is likely to be most effective when