Question 1

When pricing products,it is important to remember that:

Accepted Answer

Customer orientation in price setting is important because prices must reflect the value that customers place on a product or service. This requires understanding their needs, preferences, and willingness to pay. Pricing is not only about maximizing profit but also about creating customer satisfaction and loyalty. It is a quantitative process that involves analyzing costs, competition, and market conditions, but it also requires intuition and judgment to balance different factors and make trade-offs. Prices may need to be adjusted over time as conditions change or feedback is received from customers. Therefore, pricing is both an art and a science that requires a customer-centric approach.

Question 2

In ________ pricing,a type of geographical pricing,a small firm charges customers located in different territories different prices for the same products.

Accepted Answer

In zone pricing, the price varies based on the geographical zones where the customers are located. Hence, the small firm charges different prices to customers in different territories but the same price to customers within the same territory. FOB factory pricing refers to the shipping cost and uniform delivered pricing charges the same price to customers regardless of their location. Price lining is a strategy where different products are priced differently based on their quality and features.

Question 3

Tom is working on a pricing strategy for his company's new product line.In order to determine the price ceiling for these products,Tom needs to know:

Accepted Answer

To determine the price ceiling, Tom needs to understand what his customers are willing to pay for the new product line. This will help him avoid setting prices too high that could deter customers from purchasing the product. It's also important to consider the company's cost structures and competitor pricing, but these factors are not as critical as understanding customers' willingness to pay. Ultimately, a product's price point needs to be based on the value perceived by customers, and this requires a deep understanding of their preferences and buying behaviors.

Question 4

________ is a technique which greatly simplifies the pricing function by setting the same price for items with similar characteristics.

Accepted Answer

Price lining is a technique that simplifies the pricing function by setting the same price for items with similar characteristics. For example, a clothing store may have a price lining strategy where all t-shirts are priced at $10, all shorts are priced at $20, and all jackets are priced at $50. This makes it easier for customers to understand the pricing structure and compare prices between different products.

Question 5

The ________ pricing strategy often reinforces the unique,prestigious image of a company.

Accepted Answer

Skimming pricing strategy involves setting a high price for a new product or service during its launch. This strategy is suitable for companies aiming to set themselves as a high-end, luxury brand in the market. By creating an exclusivity and premium status, the company can reinforce its unique and prestigious image.

Question 6

A ________ strategy works well when a company has a mature product,loyal customers,a reputation for quality,and few competitors.

Accepted Answer

A skimming strategy is effective for mature products with loyal customers and a reputation for quality, as it allows the company to maximize profits before competitors enter the market.

Question 7

________ pricing strategy introduces a new product at a low price to gain quick acceptance and extensive distribution in a mass market.

Accepted Answer

Penetration pricing strategy introduces a new product at a low price to gain quick acceptance and extensive distribution in a mass market. This strategy is often used to increase market share and build brand loyalty in the early stages of a product's life cycle. Once the product gains traction and establishes its market position, the prices can be gradually increased to meet profit goals.

Question 8

Geographical pricing includes numerous techniques,such as:

Accepted Answer

Uniform delivered pricing is a geographical pricing technique where the seller charges the same price to all buyers, regardless of their location. This is a common strategy for companies that sell and distribute products over a wide geographical area.

Question 9

The basic objective of a penetration pricing policy is to:

Accepted Answer

The objective of a penetration pricing policy is to gain quick access into a market to realize high sales volume quickly. This is achieved by setting a low price initially to attract customers and establish a foothold in the market. The hope is that as sales volume increases, the company can eventually raise prices and generate profits.

Question 10

A new product ________ pricing strategy is often used in markets with little competition and when the company seeks to recover start-up costs quickly.

Accepted Answer

Skimming pricing strategy involves setting a high price for a new product before gradually lowering it over time. This strategy is often used when there is little competition and the company needs to quickly recoup start-up costs.

Question 11

The final price set by the entrepreneur for the products depends on:

Accepted Answer

The answer of The final price set by the entrepreneur...

Question 12

When small manufacturing companies face rapidly increasing raw material costs,they can adopt a number of strategies including:

Accepted Answer

The answer of When small manufacturing companies face rapidly increasing...

Question 13

When using a skimming price strategy,small business owners should remember that:

Accepted Answer

The answer of When using a skimming price strategy,small business...

Question 14

Small business owners get into trouble when determining their price floor when they:

Accepted Answer

Assuming costs are the same as competitors' can lead to trouble because each business has unique costs. Setting prices based on incorrect cost assumptions can result in losses or reduced profitability.

Question 15

________ pricing policy is used to introduce a relatively low-priced good into a market where no "elite segment" exists.

Accepted Answer

The answer of ________ pricing policy is used to introduce...

Question 16

________ is a technique in which a small firm marks down the price of a popular item below its normal price in an effort to increase customer traffic and to boost sales of other items.

Accepted Answer

Leader pricing is a common technique used by small businesses to attract more customers by offering a popular item at a lower price than usual. This encourages more foot traffic and can ultimately increase sales of other items. Odd pricing involves offering products at slightly odd prices (e.g. $9.99 instead of $10) to make the product seem cheaper and more attractive, price lining involves grouping products into different price categories, and suggested retail pricing is a pricing strategy where the manufacturer suggests a price for the retailer to sell the product at.

Question 17

When a small business practices price lining,it most commonly carries lined merchandise in sets of ________ different ranges.

Accepted Answer

Price lining involves offering a limited number of predetermined price points for a specific product or category. The most common approach is to offer merchandise at three different price points, typically high, medium, and low. Therefore, a small business practicing price lining would carry lined merchandise in sets of three different ranges.

Question 18

The Omega Company introduces products with a higher-than-normal price in an effort to quickly recover the initial developmental and promotional costs of the product.The Omega Company is pursuing a ________ pricing strategy.

Accepted Answer

The Omega Company is using skimming pricing strategy, which involves setting a high price for a new product or service to recover the development and promotional costs quickly before competitors enter the market.

Question 19

Jerry is developing a pricing strategy for an established line of home care products.His premium products are priced over $4000,his best products are in the $2540 range,and his good products are $1015 range.Jerry is using a ________ strategy.

Accepted Answer

Jerry is using price lining strategy, where he is pricing his products based on different levels of quality and features. This allows customers to easily understand the difference between products and make a more informed purchase decision. The premium, best and good products are all clearly differentiated in terms of price and features, making it easier for customers to choose based on their needs and budget.

Question 20

When a retailer routinely prices goods at $9.97 and $7.36 rather than $10.00 and $7.50,the retailer is using:

Accepted Answer

The retailer is using odd pricing, which is a pricing strategy where prices are set at slightly below a round number (e.g. $9.97 instead of $10.00) to make it appear more attractive to customers. This strategy is often used to create the perception of a lower price without actually reducing the price.

Quiz 11: Pricing and Credit Strategies