Question 1

A manufacturer of lighting fixtures has six warehouses and a pricing policy of charging freight from the closest warehouse to the customer,regardless of where parts are shipped.For instance,if the customer is in Vancouver,British Columbia,the closest warehouse to the customer is in Seattle,Washington.If the ordered car part actually comes from the Toronto warehouse,the customer still pays freight from Seattle.Which type of pricing is the manufacturer using?

Accepted Answer

This is an example of basing-point pricing, where the price of goods is determined from a specific location (the closest warehouse in this case) regardless of the origin of the product.

Question 2

What is an advantage associated with a flexible pricing policy?

Accepted Answer

A flexible pricing policy allows a seller to adjust prices to accommodate price-sensitive customers, which can lead to increased sales and customer loyalty. This can be particularly helpful in competitive markets where customers are likely to shop around for the best price.

Question 3

The Hagarty & Adolph funeral home has coffins priced at $1,200,$2,000,$3,500,and $5,000.Why have the owners of the funeral home chosen price lining?

Accepted Answer

Price lining is used to offer products at different price points to appeal to various target market segments, allowing customers to choose a product that fits their budget while still meeting their needs.

Question 4

Merck & Co. ,the manufacturer of the AIDS drug Crixidan,distributes exclusively to one distributor,Stadtlanders Pharmacy.The pharmacy has been criticized for charging too high a price for the drug and exploiting inelastic demand.Stadtlanders claims the charges are ethical because of high staffing costs and associated discounts with various health plans.This situation describes issues associated with which of the following?

Accepted Answer

The answer of Merck & Co. ,the manufacturer of the...

Question 5

The Dollar Tree is a small chain of discount stores where all of the merchandise is priced at $1.What does the Dollar Tree use?

Accepted Answer

The Dollar Tree uses a single-price tactic, which means all items are priced at the same amount, $1.

Question 6

One tactic allows different customers to pay different prices for essentially the same merchandise bought in equal quantities This tactic is often found in the sale of shopping goods,specialty merchandise,and most industrial goods except supply items.What is it?

Accepted Answer

Flexible (or variable) pricing allows for different customers to pay different prices for the same merchandise based on various factors such as quantity ordered, location, or negotiated contracts. This tactic is often used in the sale of shopping goods, specialty merchandise, and most industrial goods except supply items.

Question 7

Eustis Lee is a lawyer who handles only drunk-driving cases.No matter how quickly he resolves the case,he charges each customer $5,000.Lee justifies the fee because of his lengthy education and the years he has spent learning how the judicial system operates.Which pricing policy is the lawyer using?

Accepted Answer

The lawyer is using a professional services pricing strategy, which is common for lawyers and other professionals who charge based on their expertise and qualifications rather than the specific services provided. This type of pricing is also typically a fixed fee rather than variable or based on potential pricing.

Question 8

Suppose price is not set on the product until the item is either finished or delivered.Which of the following is being used?

Accepted Answer

Delayed-quotation pricing is when a price is not set until after the product is finished or delivered. This can be beneficial in situations where the cost of production or delivery is uncertain, or when custom products require more time to complete. This strategy allows for more flexibility in pricing while also ensuring profitability.

Question 9

Why is price lining a valuable tactic for marketing managers?

Accepted Answer

Price lining allows marketing managers to offer a range of prices for different products or services within a category, making it easier for customers to understand the different options and choose the one that meets their needs and budget. This can reduce confusion and the need for a large inventory while still offering competitive pricing.

Question 10

Often a seller will establish a series of prices for a family of merchandise items.There may be several different models at specific price points but no prices in between.What is this policy called?

Accepted Answer

This policy is called price lining, where a series of prices are established for a family of merchandise items, with specific price points and no prices in between. This allows customers to easily know what to expect for each model and makes the purchasing decision simpler.

Question 11

Ahmad Jing operates a wedding consultant service.He will often provide essentially the same service to different customers at distinctly different prices depending on how he likes the customer and how much he thinks the customer needs his services.What does Jing use?

Accepted Answer

Jing is using flexible pricing, as he is offering different prices based on his subjective evaluation of the customer's needs and his personal relationship with them. This approach allows him to adjust prices on a case-by-case basis to maximize his profits.

Question 12

In a catalogue targeted to people who like to bake,customers can buy a single yeast bread mix designed specifically to be baked in bread machines for $3.95 each or 12 different mixes for $37.50.What is this an example of?

Accepted Answer

This is an example of price bundling, as the company is offering a discount for buying multiple products together.

Question 13

If a manufacturer designates a shipping point from which to calculate all freight charges and charges customers freight from that point (even if the goods were shipped from another location),which type of pricing is the manufacturer using?

Accepted Answer

The manufacturer is using basing-point pricing, where a designated point is used to calculate all freight charges regardless of where the goods were actually shipped from. This type of pricing is common for heavy or bulky items where freight charges can be a significant portion of the total cost.

Question 14

Green Earth Marketing sells containers for temporary storage of recyclables nationally through its catalogue.The company wants to simplify pricing and reduce its risk.Green Earth also desires some type of difference in price due to distance.Which type of pricing should the company use?

Accepted Answer

Zone pricing allows for price differentiation based on distance or location, which meets Green Earth's desired pricing strategy. This method uses zones to group customers based on proximity to the company and charges a uniform price within each zone. It simplifies pricing and reduces the company's risk. Freight absorption, two-part and flexible pricing are not suitable for this specific requirement.

Question 15

Landover Carpentry,Inc.currently markets its garden benches in the Ontario market.It would like to expand into the Western Canada market,but the competition there is intense.Which geographic pricing tactic should the Landover use?

Accepted Answer

Freight absorption pricing is the best tactic for Landover Carpentry, Inc. to use when entering a new market with intense competition like Western Canada. By absorbing the shipping costs, they can offer their garden benches at more competitive prices, making their products more attractive to potential customers in the new market. This approach helps mitigate the disadvantage of geographical distance and can be a strategic move to gain market share.

Question 16

Which of the following is an attempt by the marketing manager to induce store patronage through selling a product near cost or even below cost?

Accepted Answer

Leader pricing is a strategy where a product is sold near or below cost to attract customers and induce store patronage. This can create a perception of value and a reason for customers to choose that store over competitors. Price skimming involves setting high prices initially and gradually lowering them over time, odd-even pricing involves setting prices ending in odd or even numbers to create the perception of a value price, and price lowballing is a tactic where a low price is offered but additional fees or costs are added on later.

Question 17

Lee Valley,Inc.is a catalogue retailer of woodworking tools used by craftspeople.It uses two different shipping prices.All customers west of Manitoba pay $6.99 shipping and handling costs per order,while all east of Manitoba pay $8.99.This is an example of which type of pricing?

Accepted Answer

This is an example of zone pricing, where shipping costs are based on the geographic location of the customer. Customers in the western zone pay a lower shipping cost than customers in the eastern zone.

Question 18

Which of the following BEST describes single-price selling?

Accepted Answer

Single-price selling means that all items sold in a store are priced the same, regardless of their cost or demand. This removes price comparisons from the buyer's decision-making process, making it easier for the buyer to make a purchase without having to spend time comparing prices. This can be beneficial for the retailer as it simplifies pricing and can lead to increased sales. It is not necessarily more effective during an inflationary period, nor does it encourage clerical errors.

Question 19

If the seller pays all or part of the actual freight charges and does not pass them on to the buyer,which type of pricing is the seller using?

Accepted Answer

Freight absorption is when the seller pays all or part of the actual freight charges and does not pass them on to the buyer. Therefore, option A is the best choice.

Question 20

The owner of a flower shop decided to sell a dozen red roses for $13.50.He hopes the below-cost price for the roses will attract current and new customers who will also buy regularly priced items.The manager is encouraging store patronage through which of the following?

Accepted Answer

Leader pricing is a strategy where a business offers a product at a below-market price to attract customers, with the hope that they will purchase other regularly priced items along with the discount product. In this case, the owner of the flower shop is offering a dozen red roses at a price below the cost, which can be considered as leader pricing.

Quiz 17: Setting the Right Price