Question 1

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

Accepted Answer

Price skimming is a strategy where a company enters the market at a high price point and then gradually lowers the price over time. This strategy is typically used for innovative products with unique features that set them apart from competitors. By entering the market at a high price, the company can maximize its profits before competitors enter the market with similar products.

Question 2

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

Accepted Answer

All of the options (time invested, costs incurred, and opportunity costs) are factors that customers consider when making a purchase decision. Therefore, the best choice is E, which includes all three options.

Question 3

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 the best price based on all of the information.Mark is utilizing __________________.

Accepted Answer

Mark is using competitor-based pricing to determine the best price for his driving range. He is looking at the pricing of his competitors and using that information to set his own pricing strategy. Therefore, option D is the best choice.

Question 4

The measure of customers' price sensitivity,estimated by dividing relative changes in quantity sold by relative changes in price is known as __________________.

Accepted Answer

The measure described in the question is known as price elasticity of demand. It measures the responsiveness of customers to changes in price and helps businesses determine the optimal price point for their products or services. Stability pricing, pricing tactics, auction pricing, and reverse auctions are not direct measures of customers' price sensitivity.

Question 5

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

Penetration pricing is a pricing strategy where the firm sets a low price for its product or service and aims to capture a large market share quickly. This strategy is often used by firms that are launching a new product or entering a new market where there are already well-established competitors. By pricing the product lower than competitors, the firm can attract price-sensitive customers who may be willing to switch to the new product. This approach can help the firm gain a foothold in the market and increase its market share over time.

Question 6

__________________ overtly attempts to consider the role of price as it reflects the bundle of benefits sought by the customer.

Accepted Answer

Value pricing overtly attempts to consider the role of price as it reflects the bundle of benefits sought by the customer. It focuses on delivering a high level of value to the customer and setting prices based on the perceived value of the product or service.

Question 7

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

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 8

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

Michael Porter has been a strong proponent of the cost leadership strategy, which emphasizes producing goods or services at the lowest possible cost. By achieving efficiency and cost savings in internal processes, firms can offer lower prices compared to competitors or earn higher profit margins while maintaining a competitive price. This gives them a significant advantage in the marketplace.

Question 9

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

Accepted Answer

Target return on investment (ROI) is a pricing strategy in which the company establishes a bottom line profit goal and then sets the price to achieve that objective. This approach ensures that the company achieves its desired profit margin, and it is particularly appropriate for companies with a clear understanding of their costs and profit objectives.

Question 10

The ________ strategy is used for profit maximization.

Accepted Answer

The Target Return on Investment (ROI) strategy involves setting prices with the aim of achieving a particular return on investment. This means the company would attempt to price its products or services in such a way to ensure it covers its costs, operating expenses, taxes, and gains a profit margin. This strategy allows the company to earn maximum profits while ensuring that it meets its financial objectives.

Question 11

________________is the percentage of total category sales accounted for by a firm.

Accepted Answer

Market share is defined as the percentage of total category sales accounted for by a particular firm. Therefore, option A is the correct answer. Value ratio, cost, value pricing, and product adoption do not specifically refer to the percentage of total category sales accounted for by a firm.

Question 12

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 13

Gaining a thorough understanding of competitors' marketing practices is a key element of successful marketing planning and execution and utilizing that information to determine your pricing is an example of __________________.

Accepted Answer

Competitor-based pricing involves setting prices based on competitor pricing strategy and positioning. Understanding competitors' marketing practices is a key element of competitor-based pricing.

Question 14

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 15

________________ 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

Competitor based pricing involves setting prices based on the prices of similar products offered by competitors in the market. This 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.

Question 16

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

Jean Claude is using price skimming, which involves setting a high price for a new product in order to communicate its high quality and capture early adopters who are willing to pay a premium price. He also plans to lower the price after the season, which is a common strategy in price skimming. Penetration pricing involves setting a low price to quickly gain market share, target ROI involves setting a price to achieve a specific return on investment, competitor based pricing involves setting a price based on the prices of competitors, and value pricing involves setting a price based on the perceived value to the customer. None of these options accurately describe Jean Claude's pricing strategy.

Question 17

___________occurs when a seller offers different prices to different customers without a substantive basis,such that competition is reduced.

Accepted Answer

Price discrimination occurs when a seller offers different prices to different customers without a substantive basis. This reduces competition as some customers may be charged higher prices than others. Price fixing involves two or more sellers agreeing to set the same price, deceptive pricing involves misleading customers about the actual price of a product, bait and switch involves enticing customers with a cheap offer and then selling a more expensive product, and predatory pricing involves setting very low prices to drive competitors out of the market.

Question 18

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 at the beginning,but slowly raising the price over time.Amelie is applying _____.

Accepted Answer

Amelie is implementing penetration pricing, which involves setting a low price initially to attract customers and gain market share. The plan to gradually increase the price over time is consistent with this strategy. Price skimming refers to setting a high price initially and then gradually lowering it over time, which is not what Amelie is doing. Target ROI, competitor-based pricing, and value pricing are also pricing strategies, but do not apply to the scenario described.

Question 19

One should 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

Penetration pricing is a low pricing strategy aimed to gain market share quickly. However, if the price is too low, consumers may perceive the product as low quality, which can negatively affect the value proposition. Therefore, companies should be careful when implementing a penetration pricing strategy.

Question 20

When a company purposefully makes pricing decisions to undercut one or more competitors and gain sales and net market share they are demonstrating a(n)__________________.

Accepted Answer

When a company makes pricing decisions to undercut competitors and gain market share, they engage in a price war. This strategy can be effective in the short-term, but it may lead to long-term damage to the industry and lower profitability for all competitors.

Quiz 10: Managing Pricing Decisions