Question 1

In the mid-1990s,WestJet chose to compete head-on with Air Canada by launching WestJetLite,an alternative low-fare commercial airline passenger operation.Top executives at WestJet had expected its no-frills operation to break even within a year of its inception,but the airline fell short of the goal.A source close to the company explained it by saying,"Its costs were too high,and its revenues were too low." Some observers criticized WestJetLite's marketing efforts.When the no-frills service was first launched,it lacked a distinct name or identity,missing its chance to make a splash.Then WestJet tried to sell three "brands" at once-Plush ,a new premium service,and its more traditional long-haul domestic flights.As one rival expressed it,"You cannot be all things to all people."
-Refer to WestJetLite.The statement that WestJetLite had problems because,"Its costs were too high,and its revenues were too low," suggests which of the following?

Accepted Answer

The statement suggests that the airline did not make any profit after paying for its activities. The costs were higher than the revenues earned, resulting in a shortfall.

Question 2

In a sluggish economy,consumers will buy even the most modest of products with the same discretion once shown only to big-ticket items,such as computers,air fares,and designer clothes.The result is a growing popularity of cheaper private-label products,and the likelihood that price wars among consumer goods could lead to the same kind of consolidation that occurred in the airline and electronics industries.Moreover,analysts say changing buying habits will force premium brand marketers to lower their prices to protect their positions.These companies may also upgrade products to distinguish them from private labels and promote their brands more aggressively than ever.
One analyst says that consumers are forcing product innovation.Products have to be sold on merit.As a result,there will be fewer brands of significance,but the significant brands will be stronger.Brand loyalty is believed to exist only when,or if,value is provided.How do the significant brands compete? One analyst says that a combination of sensible pricing and innovation with a strong brand name can stabilize market share.Reformulated or repackaged products are typical examples of innovative attempts to solidify market share.
-Refer to Consumer Buying Habits.In the past,Procter & Gamble set prices on significant brands such as Pampers so that total revenue was as large as possible relative to total costs.What type of approach does this represent?

Accepted Answer

Procter & Gamble's approach represents profit maximization, where they aim to set prices to maximize total revenue relative to total costs.

Question 3

Imagine you're planning an after-symphony fund-raising party,and you need a life-size grand piano cake.Or you are a developer proposing a new shopping centre to a group of investors,and you want to serve a cake shaped like an architectural rendition of the centre.Is this impossible? No,you just need to contact Cecilia Villaveces Cakes.She actually built a life-size grand piano cake for a gala in Toronto.You can expect to pay anywhere from $75 to $10,000 for one of Cecilia's creations,depending on complexity of design and size.She uses only the best ingredients,and no two cakes are ever quite alike.
-Refer to Specialty Cakes.To set the price of her cakes,Cecilia simply doubles her costs,which often include many hours of labour and expensive raw materials.What is this method of price setting called?

Accepted Answer

This method of price setting is called keystoning, which involves doubling the cost to set the retail price.

Question 4

In the mid-1990s,WestJet chose to compete head-on with Air Canada by launching WestJetLite,an alternative low-fare commercial airline passenger operation.Top executives at WestJet had expected its no-frills operation to break even within a year of its inception,but the airline fell short of the goal.A source close to the company explained it by saying,"Its costs were too high,and its revenues were too low." Some observers criticized WestJetLite's marketing efforts.When the no-frills service was first launched,it lacked a distinct name or identity,missing its chance to make a splash.Then WestJet tried to sell three "brands" at once-Plush ,a new premium service,and its more traditional long-haul domestic flights.As one rival expressed it,"You cannot be all things to all people."
-Refer to WestJetLite.WestJetLite's pricing objectives were based on gaining as much market share as possible from Air Canada.This suggests that WestJetLite had what type of pricing objectives?

Accepted Answer

WestJetLite's pricing objective was to gain market share from Air Canada, which indicates a sales-oriented pricing objective. The goal wasn't to maximize profits or minimize costs, but rather to increase the number of customers using their service.

Question 5

Len knows little about atlases and does not want to spend the time to learn about them.However,he needs to buy an atlas to use in a school history project.Not wanting to make a poor choice,he is likely to do which of the following?

Accepted Answer

Given Len's lack of knowledge about atlases and his desire not to make a poor choice without spending time learning about them, he might assume that a higher price indicates better quality and choose the most expensive atlas, potentially overpaying.

Question 6

Marketing managers who attempt to raise the quality image of their product by selling it at high prices are following which type of strategy?

Accepted Answer

Prestige pricing involves setting high prices for products to create an image of quality and exclusivity. This strategy is often used by luxury brands to differentiate themselves and appeal to high-end customers willing to pay a premium for quality and status.

Question 7

In a sluggish economy,consumers will buy even the most modest of products with the same discretion once shown only to big-ticket items,such as computers,air fares,and designer clothes.The result is a growing popularity of cheaper private-label products,and the likelihood that price wars among consumer goods could lead to the same kind of consolidation that occurred in the airline and electronics industries.Moreover,analysts say changing buying habits will force premium brand marketers to lower their prices to protect their positions.These companies may also upgrade products to distinguish them from private labels and promote their brands more aggressively than ever.
One analyst says that consumers are forcing product innovation.Products have to be sold on merit.As a result,there will be fewer brands of significance,but the significant brands will be stronger.Brand loyalty is believed to exist only when,or if,value is provided.How do the significant brands compete? One analyst says that a combination of sensible pricing and innovation with a strong brand name can stabilize market share.Reformulated or repackaged products are typical examples of innovative attempts to solidify market share.
-Refer to Consumer Buying Habits.One analyst said that the big brands can compete by combining sensible pricing and innovation with a strong brand name.This is done to stabilize market share.This is an example of which type of pricing?

Accepted Answer

The answer of In a sluggish economy,consumers will buy even...

Question 8

In a sluggish economy,consumers will buy even the most modest of products with the same discretion once shown only to big-ticket items,such as computers,air fares,and designer clothes.The result is a growing popularity of cheaper private-label products,and the likelihood that price wars among consumer goods could lead to the same kind of consolidation that occurred in the airline and electronics industries.Moreover,analysts say changing buying habits will force premium brand marketers to lower their prices to protect their positions.These companies may also upgrade products to distinguish them from private labels and promote their brands more aggressively than ever.
One analyst says that consumers are forcing product innovation.Products have to be sold on merit.As a result,there will be fewer brands of significance,but the significant brands will be stronger.Brand loyalty is believed to exist only when,or if,value is provided.How do the significant brands compete? One analyst says that a combination of sensible pricing and innovation with a strong brand name can stabilize market share.Reformulated or repackaged products are typical examples of innovative attempts to solidify market share.
-Refer to Consumer Buying Habits.Changing consumer buying habits will force premium brand marketers to lower their prices to protect their positions (maintain the same revenue).This suggests that demand for premium products is which of the following?

Accepted Answer

The answer of In a sluggish economy,consumers will buy even...

Question 9

The advertisements for Joy brand perfume claim that it is the most expensive perfume in the world.This is an example of which type of pricing?

Accepted Answer

The advertisements for Joy brand perfume claim that it is the most expensive perfume in the world, which implies that the pricing strategy used is prestige pricing. This strategy involves setting high prices for products to create a perception of high quality and exclusivity, which in turn attracts customers who are willing to pay a premium price for the product.

Question 10

Imagine you're planning an after-symphony fund-raising party,and you need a life-size grand piano cake.Or you are a developer proposing a new shopping centre to a group of investors,and you want to serve a cake shaped like an architectural rendition of the centre.Is this impossible? No,you just need to contact Cecilia Villaveces Cakes.She actually built a life-size grand piano cake for a gala in Toronto.You can expect to pay anywhere from $75 to $10,000 for one of Cecilia's creations,depending on complexity of design and size.She uses only the best ingredients,and no two cakes are ever quite alike.
-Refer to Specialty Cakes.Which of the following is the BEST example of a variable cost for Cecilia Villaveces Cakes?

Accepted Answer

Flour and sugar are ingredients used in making the cakes, and the cost of these ingredients will vary depending on the size and complexity of the cake being created. This makes it a variable cost. The other options are not directly related to the creation of the cakes and are not affected by the number or complexity of cakes produced.

Question 11

In the mid-1990s,WestJet chose to compete head-on with Air Canada by launching WestJetLite,an alternative low-fare commercial airline passenger operation.Top executives at WestJet had expected its no-frills operation to break even within a year of its inception,but the airline fell short of the goal.A source close to the company explained it by saying,"Its costs were too high,and its revenues were too low." Some observers criticized WestJetLite's marketing efforts.When the no-frills service was first launched,it lacked a distinct name or identity,missing its chance to make a splash.Then WestJet tried to sell three "brands" at once-Plush ,a new premium service,and its more traditional long-haul domestic flights.As one rival expressed it,"You cannot be all things to all people."
-Refer to WestJetLite.Consumers who travelled on WestJetLite or Air Canada were very sensitive to price changes.What does this suggest?

Accepted Answer

Consumers who are sensitive to price changes suggest that demand for airline travel is elastic, meaning that changes in price will have a significant impact on the quantity of tickets sold. This is supported by the fact that WestJetLite's costs were too high and its revenues were too low, indicating that they were not able to attract enough price-sensitive customers to make the venture profitable.

Question 12

In a sluggish economy,consumers will buy even the most modest of products with the same discretion once shown only to big-ticket items,such as computers,air fares,and designer clothes.The result is a growing popularity of cheaper private-label products,and the likelihood that price wars among consumer goods could lead to the same kind of consolidation that occurred in the airline and electronics industries.Moreover,analysts say changing buying habits will force premium brand marketers to lower their prices to protect their positions.These companies may also upgrade products to distinguish them from private labels and promote their brands more aggressively than ever.
One analyst says that consumers are forcing product innovation.Products have to be sold on merit.As a result,there will be fewer brands of significance,but the significant brands will be stronger.Brand loyalty is believed to exist only when,or if,value is provided.How do the significant brands compete? One analyst says that a combination of sensible pricing and innovation with a strong brand name can stabilize market share.Reformulated or repackaged products are typical examples of innovative attempts to solidify market share.
-Refer to Consumer Buying Habits.Assume a product has a strong brand name,a reasonable price,and good quality.Which of the following strategies should be implemented?

Accepted Answer

Improving product quality aligns with the strategy of product innovation and differentiation to compete effectively in a market where consumers are increasingly value-conscious and discerning.

Question 13

Imagine you're planning an after-symphony fund-raising party,and you need a life-size grand piano cake.Or you are a developer proposing a new shopping centre to a group of investors,and you want to serve a cake shaped like an architectural rendition of the centre.Is this impossible? No,you just need to contact Cecilia Villaveces Cakes.She actually built a life-size grand piano cake for a gala in Toronto.You can expect to pay anywhere from $75 to $10,000 for one of Cecilia's creations,depending on complexity of design and size.She uses only the best ingredients,and no two cakes are ever quite alike.
-Refer to Specialty Cakes.Which of the following is the BEST example of a fixed cost for Cecilia Villaveces Cakes?

Accepted Answer

Food preparation licences would be considered a fixed cost as it is a necessary expense for operating the business and is not directly related to the number of cakes produced or sold. Delivery costs, part-time employees and electricity consumption would be considered variable costs as they can fluctuate based on the number of orders or amount of production needed.

Question 14

In a sluggish economy,consumers will buy even the most modest of products with the same discretion once shown only to big-ticket items,such as computers,air fares,and designer clothes.The result is a growing popularity of cheaper private-label products,and the likelihood that price wars among consumer goods could lead to the same kind of consolidation that occurred in the airline and electronics industries.Moreover,analysts say changing buying habits will force premium brand marketers to lower their prices to protect their positions.These companies may also upgrade products to distinguish them from private labels and promote their brands more aggressively than ever.
One analyst says that consumers are forcing product innovation.Products have to be sold on merit.As a result,there will be fewer brands of significance,but the significant brands will be stronger.Brand loyalty is believed to exist only when,or if,value is provided.How do the significant brands compete? One analyst says that a combination of sensible pricing and innovation with a strong brand name can stabilize market share.Reformulated or repackaged products are typical examples of innovative attempts to solidify market share.
-Refer to Consumer Buying Habits.To compete against the private labels,the significant brands can upgrade products to distinguish them from private labels and advertise their brands more aggressively than ever.Most of the ads will feature cents-off coupons.This pricing strategy clearly involves manipulation of which of the following?

Accepted Answer

The pricing strategy of featuring cents-off coupons is a promotion strategy, as it involves offering a discount to incentivize consumers to purchase the product.

Question 15

Imagine you're planning an after-symphony fund-raising party,and you need a life-size grand piano cake.Or you are a developer proposing a new shopping centre to a group of investors,and you want to serve a cake shaped like an architectural rendition of the centre.Is this impossible? No,you just need to contact Cecilia Villaveces Cakes.She actually built a life-size grand piano cake for a gala in Toronto.You can expect to pay anywhere from $75 to $10,000 for one of Cecilia's creations,depending on complexity of design and size.She uses only the best ingredients,and no two cakes are ever quite alike.
-Refer to Specialty Cakes.Many party planners will use only Cecilia Villaveces Cakes at their parties-no matter what the price.They know that Cecilia's cakes can make a party a success.Moreover,the cakes are what people remember most about the parties.From this description,you should assume Cecilia Villaveces Cakes have which of the following?

Accepted Answer

The fact that party planners are willing to pay any price for Cecilia Villaveces Cakes and view them as essential to the success of their parties indicates that the demand for her cakes is inelastic - meaning that customers are willing to pay a higher price for her cakes regardless of the cost. This suggests that Cecilia Villaveces Cakes has a stable, reliable customer base that is loyal to the brand, rather than offering an elastic supply that could be easily replaced by competitors.

Question 16

Imagine you're planning an after-symphony fund-raising party,and you need a life-size grand piano cake.Or you are a developer proposing a new shopping centre to a group of investors,and you want to serve a cake shaped like an architectural rendition of the centre.Is this impossible? No,you just need to contact Cecilia Villaveces Cakes.She actually built a life-size grand piano cake for a gala in Toronto.You can expect to pay anywhere from $75 to $10,000 for one of Cecilia's creations,depending on complexity of design and size.She uses only the best ingredients,and no two cakes are ever quite alike.
-Refer to Specialty Cakes.Although many factors determine the prices charged by Cecilia Villaveces Cakes,what are the two primary determinants?

Accepted Answer

The primary determinants of the prices charged by Cecilia Villaveces Cakes are the demand for the good and the cost to the seller, as these factors influence how much customers are willing to pay and the expenses incurred in creating the cakes.

Question 17

Tom likes to drink scotch whiskey.He was familiar with the Johnny Walker brand,which he purchased for around $30.When he found a bottle of Johnny Walker Black Label priced at more than $200,he was positive that it would be a much finer whiskey.For Tom,what indicated quality?

Accepted Answer

Tom's belief that the higher price of the Johnny Walker Black Label indicated a "much finer whiskey" suggests that he perceives quality to be tied to prestige pricing - pricing that implies high quality due to its exclusivity and high cost.

Question 18

Kables Optic builds quality binoculars with innovative components (such as water resistance)and superior durability.Kables Optic has managed to keep its price lower than its competitors.However,Kables's sales have been disappointing.For a fast and simple remedy,what should Kables do?

Accepted Answer

The answer of Kables Optic builds quality binoculars with innovative...

Question 19

In the mid-1990s,WestJet chose to compete head-on with Air Canada by launching WestJetLite,an alternative low-fare commercial airline passenger operation.Top executives at WestJet had expected its no-frills operation to break even within a year of its inception,but the airline fell short of the goal.A source close to the company explained it by saying,"Its costs were too high,and its revenues were too low." Some observers criticized WestJetLite's marketing efforts.When the no-frills service was first launched,it lacked a distinct name or identity,missing its chance to make a splash.Then WestJet tried to sell three "brands" at once-Plush ,a new premium service,and its more traditional long-haul domestic flights.As one rival expressed it,"You cannot be all things to all people."
-Refer to WestJetLite.The airline industry's demand curve slopes downward and to the right.This curve indicates the quantity demanded is increased as which of the following occurs?

Accepted Answer

The demand curve slopes downward and to the right, indicating that as the price of the product decreases, the quantity demanded increases. This means that if WestJetLite were to lower its prices, it could potentially increase its revenue by attracting more passengers.

Question 20

Which of the following BEST describes prestige pricing?

Accepted Answer

Prestige pricing is a strategy where high prices are used to convey the quality and exclusivity of a product. The high price tag is often associated with luxury, status, and high quality. Therefore, option D is the best description of prestige pricing. The other options are incorrect as leader pricing refers to a pricing strategy where the price is set lower than competitors, emphasizing the lowest price in the market. Option B is incorrect as it does not capture the essence of prestige pricing. Option C is also incorrect as marking up prices by 100 percent would not necessarily reflect prestige pricing.

Quiz 16: Pricing Concepts

Len knows little about atlases and does not want to spend the time to learn about them.However,he needs to buy an atlas to use in a school history project.Not wanting to make a poor choice,he is likely to do which of the following?

Marketing managers who attempt to raise the quality image of their product by selling it at high prices are following which type of strategy?

The advertisements for Joy brand perfume claim that it is the most expensive perfume in the world.This is an example of which type of pricing?

Tom likes to drink scotch whiskey.He was familiar with the Johnny Walker brand,which he purchased for around $30.When he found a bottle of Johnny Walker Black Label priced at more than $200,he was positive that it would be a much finer whiskey.For Tom,what indicated quality?

Kables Optic builds quality binoculars with innovative components (such as water resistance) and superior durability.Kables Optic has managed to keep its price lower than its competitors.However,Kables's sales have been disappointing.For a fast and simple remedy,what should Kables do?

Which of the following BEST describes prestige pricing?