Marketing Final #17

The marketing manager of icruise.com (a website targeted to consumers who want a luxury vacation) finds that the firm can gain market share and become the industry leader if it slashes prices by 50 percent during December. However, the vice-president of finance is committed to reporting a 25 percent return on investment at all times. What does this conflict illustrate?
a.
how target markets can be ignored
b.
how pricing operates in a mature marketplace
c.
a lack of corporate concentration on the marketing concept
d.
the need for tradeoffs in pricing objectives
D
Different individuals in an organization may have pricing objectives that are not mutually compatible and will involve tradeoffs.
After establishing pricing goals, managers should estimate total revenue at a variety of prices. What should they do next? (Only after performing this task are they are ready to estimate how much profit and how much market share can be earned at each possible price.)
a.
Implement pricing segmentation.
b.
Set a corresponding cost for each price.
c.
Choose the ROI target.
d.
Estimate industry supply.
B
What is the easiest pricing goal for a firm to implement?
a.
meeting competition
b.
return on investment
c.
profit-based
d.
sales volume-based
A
A company’s pricing strategy should do all of the following EXCEPT which one?
a.
define the initial price
b.
give direction for price movements over the product life cycle
c.
ignore the targeting and positioning strategy of the company
d.
set a competitive price
C
The pricing strategy needs to blend with the targeting and positioning strategy of the company.
A 16-ounce bottle of Prairie Herb vinegar sells for $4.95, and a 16-ounce bottle of Heinz vinegar costs $1.05. Prairie Herb vinegar is new to the market, perceived to be of higher quality, and provides a unique flavour to foods even though it is used in the same way as Heinz vinegar. Prairie Herb vinegar is most likely using which type of policy?
a.
price skimming
b.
bundling cost pricing
c.
penetration pricing
d.
status quo pricing
A
Price skimming is common for products in the introductory stage of their product life cycle.
A shortage of blood for transfusions for injured animals has resulted in the introduction of a synthesized product called Oxyglobin, which can be used effectively as a blood replacement. The manufacturer of the product has put a high price on the product in order to recoup its research and development costs. Which type of policy is the manufacturer of Oxyglobin using?
a.
price skimming
b.
price banding
c.
price lining
d.
penetration pricing
A
Price skimming is a pricing policy whereby a firm charges a high introductory price.
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The price-skimming strategy is sometimes called a “market-plus” approach to pricing because it denotes a high price relative to the prices of competing products. When does this strategy work best?
a.
when production capacity is large and flexible
b.
when demand is greater than supply
c.
when supply is greater than demand
d.
when revenues are equal to expenses
B
Price skimming denotes a high price; therefore, the demand must be great.
When the Mosquito Magnet was introduced, it was designed to rid the immediate area of mosquitoes and other annoying insects. The technology for the Mosquito Magnet took years to develop. It is a patented grill-like apparatus that emits carbon dioxide to attract bugs to a fan, which draws them into the device where they die. What type of pricing policy would you have recommended the company use to introduce this product to the market?
a.
price skimming
b.
leader pricing
c.
penetration pricing
d.
status quo pricing
A
The price-skimming strategy will recoup the R&D costs quickly. Also, the product is probably price inelastic. Patents will limit or prohibit direct competition.
For which of the following situations would a price-skimming strategy be most appropriate?
a.
the elimination of demand for low-wattage light bulbs
b.
the introduction of a Barbie Olympic champion doll by Mattel and the International Olympic Committee
c.
the introduction of a unique, roomy automobile model that has extremely low energy and fuel costs
d.
the introduction of a new brand of bottled water
C
The automobile will justify a price-skimming strategy because the manufacturer will need to recoup R&D costs, and it will take several years for the competition to catch up.
The DCS Stainless Steel Gas Grill for outside cooking costs $3,995. The market for a grill that could easily replace a kitchen range is limited even though a lot of people have seen articles about this grill in cooking magazines and in the cooking section of newspapers. There is no potential competitor for this grill. Which strategy is probably best?
a.
price lining
b.
price skimming
c.
status quo
d.
penetration pricing
B
Like products in the introductory stage of the product life cycle, this grill has no competition.
The market for turkey products is large. If a major producer of turkeys were to introduce a boneless fresh turkey wrapped around savory dressing, most of the large market for this new product would be aware of its existence. The market is price sensitive, and there is some potential competition. What would be the appropriate strategy?
a.
price skimming
b.
cost bundling
c.
penetration pricing
d.
price lining
C
The market for the new product is price sensitive.
Dell’s new line of computers is selling for up to 20 percent lower than similar computers sold by its largest competitors. Since Dell’s goal is to maximize its sales, it is probably using which type of strategy?
a.
status quo pricing
b.
price lining
c.
penetration pricing
d.
price skimming
C
Consumers are price sensitive in this market.
When a firm introduces a new product at a relatively low price because it hopes to reach the mass market, which type of strategy is it following? (The low price is designed to capture a large share of a substantial market and produce lower production costs.)
a.
price elasticity
b.
penetration pricing
c.
price skimming
d.
cost bundling
B
A penetration strategy tends to be effective in a price-sensitive market. Thus, one of the purposes of penetration pricing is to do which of the following?
a.
recoup product development costs quickly
b.
discourage competitors from entering the market
c.
produce a large margin of profit per unit
d.
attract the price-insensitive buyer who demands the latest in technology
B
A low price will mean a low profit margin and will be attractive only if a large volume of business can be seized. The first company on the market that uses penetration pricing has a great advantage.
Penetration pricing means charging a relatively low price for a product as a way to reach the mass market. The low price is designed to capture a large share of a substantial market. Thus, which of the following BEST describes penetration pricing in this case?
a.
It tends to lower production costs.
b.
It recoups product development costs quickly.
c.
It tempts competitors to enter the market.
d.
It provides a large profit per unit sold.
A
The low price is designed to capture a large share of the market, resulting in lower production costs. Production costs are lowered because of economies of scale in production.
The introductory price for the Nintendo Gamecube video game console was $100 lower than the list price of Xbox and Playstation 2, its only two competitors. Given this information, you can assume Nintendo used what type of policy for its Gamecube?
a.
cost bundling
b.
flexible pricing
c.
penetration pricing
d.
competitive skimming
C
When does a penetration pricing strategy tend to be most effective?
a.
under unitary conditions
b.
in price-sensitive markets
c.
when the company can perform only small production runs
d.
if unit costs are high
B
Penetration pricing is the logical choice given an elastic demand curve.
Leupold & Stevens, Inc. makes Leupold scopes for rifles and has introduced a new scope that has the quality and performance for which Leupold & Stevens is famous at a price much lower than it has ever sold a rifle scope before. The new scope offers several different magnifications and is the only scope in the $200 range that is made in the United States. (All similar scopes are priced much higher.) Which pricing strategy is Leupold & Stevens using to appeal to a larger market?
a.
status quo pricing
b.
penetration pricing
c.
cost sharing
d.
price skimming
B
As production experience increases, the average cost per unit produced decreases. What is this drop called?
a.
the cost curve
b.
the experience curve
c.
the demand curve
d.
the short-run average cost curve
B
A firm charging a price identical to or very close to the competition’s price is using which type of strategy?
a.
differentiation pricing
b.
leader pricing
c.
preemptive pricing
d.
status quo pricing
D
In Canada, most of the legal issues regarding pricing are covered by which of the following?
a.
the Better Business Bureau
b.
the Competition Act
c.
the Consumer Protection Act
d.
the Advertising Act
B
Super-Sav supermarket employees regularly shop at other local supermarkets in order to make certain that Super-Sav is charging prices comparable to the other supermarkets. What type of pricing strategy is Super-Sav using?
a.
status quo pricing
b.
leader pricing
c.
preemptive pricing
d.
flexible pricing
A
Status quo pricing is simply meeting the competition.
Sellers must carry adequate levels of merchandise that has been price promoted or offer “rain cheques” if the product sells out. What will failure to comply result in a charge of?
a.
deceptive pricing
b.
price fixing
c.
resale price maintenance
d.
price discrimination
A
General Electric Co. was accused of conspiring with De Beers Centenary AG to set a price for industrial diamonds, which are used on industrial cutting tools. As a result, what were the two companies charged with?
a.
channel control pricing tactics
b.
unfair trade practices
c.
price discrimination
d.
price fixing
D
What is the illegal practice of manufacturers controlling prices at the retail level?
a.
price discrimination
b.
deceptive pricing
c.
price fixing
d.
resale price maintenance
C
The Association of Specialty Surgical Practice has published a minimum fee schedule for services and distributed this schedule throughout the medical profession. What is Specialty Surgical encouraging?
a.
bait pricing
b.
price fixing
c.
predatory pricing
d.
unfair trade practices
B
Publishing and circulating minimum fee schedules is an example of price fixing.
What is an agreement between two or more businesses on the price they will charge for a product?
a.
price discrimination
b.
resale price maintenance
c.
deceptive pricing
d.
price fixing
D
K&G Restaurant Supplies sells paper products and commodity items such as flour to for-profit businesses. It charges a substantially lower price to companies that operate multiple locations such as a restaurant chain. It charges a higher price to small or independent operations because they are less profitable customers. What is K&G Restaurant Supplies engaging in?
a.
unfair trade practices
b.
price fixing
c.
bait pricing
d.
price discrimination
D
If a seller charges different prices to different customers for the same product, price discrimination is occurring.
In Canada, federal legislation prohibits firms from selling to two or more competing buyers on an ongoing basis, within a short period of time, goods of like grade and quality at different prices where the result would be to lessen competition in the marketplace. What is this infraction known as?
a.
resale price maintenance
b.
predatory pricing
c.
price discrimination
d.
deceptive pricing
C
Imagine you have developed a device that can be used to tell whether uncooked meat has been irradiated. Several smaller retail chains have agreed to carry your product, but a large discount retailer has asked you to sell the device to it for a substantially lower price. What is the large discount retailer asking you to practise?
a.
price discrimination
b.
channel control pricing
c.
unfair trade practices
d.
price fixing
A
When Microsoft introduced its Windows NT network operating system, it gave buyers free Web server software. At the same time, Netscape was trying to sell similar Web server software for $4,999. Once Microsoft got a lion’s share of the market, and Netscape’s market share declined substantially, Microsoft began charging above-market price for its Web server software. Many people thought Microsoft was guilty of which of the following?
a.
unfair trade practices
b.
price discrimination
c.
price fixing
d.
predatory pricing
D
Predatory pricing is the practice of charging a very low price for a product with the intent of driving competitors out of business or out of a market.
In Canada, under federal legislation, it is unlawful for a firm to price below its costs with the intent of driving the competition out of business. What is this practice known as?
a.
price discrimination
b.
predatory pricing
c.
price fixing
d.
resale price maintenance
B
After managers understand both the legal and the marketing consequences of price strategies, they should set a price, the general level at which a company expects to sell a good or service. What is this price?
a.
base
b.
demand
c.
leader
d.
functional
A
Razer-Edge makes machines for sharpening the blades used by butchers to slice meat. When Razer-Edge priced its Primary Sharpener, its salespeople were told that it would be sold for $1,700, but that there would be room for discounts and flexibility. The $1,700 price is which of the following prices for the Primary Sharpener?
a.
functional
b.
base
c.
channel leader
d.
demand
B
The $1,700 price is the general price level at which the company intends to sell the product, and this price is also known as the base price.
When a buyer pays a lower price for buying in multiple units or above a specified dollar amount, what is the buyer receiving?
a.
a quantity discount
b.
a functional discount
c.
a promotional allowance
d.
a cash discount
D
Which type of discount is a deduction from list prices that is aimed at encouraging customer loyalty?
a.
noncumulative quantitative
b.
cumulative quantitative
c.
frequent-buyer
d.
cash
B
Because quantity discounts are allowed to be achieved over time, customers become locked into buying from a single supplier to qualify for the discount. There is no such term as frequent-buyer discount.
One order of over $500 from The Baker’s Catalogue earns a 5 percent discount, and one order of $1,000 and over earns a 10 percent merchandise discount. What are these discounts examples of?
a.
promotional allowances
b.
noncumulative quantity discounts
c.
frequent buyer discounts
d.
cumulative quantity discounts
B
Why are quantity discounts most often used?
a.
to increase the sales potential of slow-moving items
b.
to reward a channel intermediary for performing some service
c.
to reward the buyer who pays in cash
d.
to shift the storage function backward to the supplier
A
Quantity discounts encourage wholesalers or retailers to buy in larger amounts.
Current is a catalogue retailer that sells greeting cards, wrapping paper, and decorative bows. Since its inception, the catalogue retailer has offered three separate prices on each item purchased. The highest price is for purchases of a single item. The middle price is for purchases between two and five of the same item. The lowest price is for purchases over five of the same item. What common form of purchase discount is Current using?
a.
quantity discount
b.
cash discount
c.
functional discount
d.
promotional allowance
A
Quantity discounts offer lower prices for buying in multiple units or above a specified dollar amount.
Merchants frequently offer a discount off the base price to customers who pay immediately, or within a specified time period. What is this called?
a.
a cash discount
b.
a functional discount
c.
a promotional allowance
d.
a base discount
A
When a customer of Vegas Sign Company chooses to pay immediately on delivery rather than wait to be billed in 30 days, the buyer receives a 5 percent discount. What is this 5 percent discount an example of?
a.
a rebate
b.
a promotional allowance
c.
a cash discount
d.
a functional discount
C
A cash discount is offered to those who pay immediately or within a specified time frame.
When a channel intermediary is compensated for the ordinary services and tasks performed within the channel of distribution, the compensation, usually in the form of a discount from base price, is called which of the following?
a.
a functional (or trade) discount
b.
a rebate or refund
c.
a promotional allowance
d.
a cumulative or noncumulative quantity discount
A
When the salesperson from R.W. Hunt & Sons, a distributor of rifles and other items needed for hunting or target practice, calls on retail sporting goods stores, she is authorized to offer the retailers a 15 percent discount from the list price in recognition of activities retailers perform for the distributor. These activities include unpacking, floor display setup, and a repair service. What is this 15 percent discount called?
a.
a trade discount
b.
a quantity discount
c.
a promotional allowance
d.
a channel allowance
A
A functional, or trade, discount is the customary discount from list price that is offered to intermediaries in recognition of functions that are performed in the selling of the product.
What is a price reduction that shifts the storage function forward to the purchaser and enables manufacturers to maintain steady production year-round?
a.
a base allowance
b.
a promotional allowance
c.
a seasonal discount
d.
a quantity discount
C
A June sale on chocolate eggs, an Easter staple for many people, is an example of which of the following pricing tactics?
a.
a promotional allowance
b.
a functional discount
c.
a quantity discount
d.
a seasonal discount
D
A seasonal discount is a price reduction for buying merchandise out of season.
What are cash refunds given for the purchase of a product during a specific period?
a.
reciprocal allowances
b.
rebates
c.
demand discounts
d.
promotional allowances
B
When Janeka purchased a pair of walkie-talkies so she could stay in contact with her 10-year-old son when he was playing in the neighbourhood, she noticed that if she mailed the manufacturer a proof-of-purchase and the cash register receipt showing where and when she had purchased the two-way radio system and how much she had paid, she would receive a cheque for $25. What is this $25 an example of?
a.
a rebate
b.
a trade promotion
c.
a cash discount
d.
a reciprocal allowance
A
Rebates are cash refunds.
Supposed a firm is customer-driven and seeks to understand the attributes customers want in the goods and services they buy and the value customers contribute to those attributes. The firm sets the price of the product at a level that seems to the customer to be a good price compared with the prices of other options. What is this pricing?
a.
price
b.
value-based
c.
market concept
d.
noncumulative
B
When a coffee shop in a suburban mall and an upscale cafe in a luxury hotel charge different prices for the same cup of coffee served to customers who find the atmosphere in the hotel worth the difference, what is the pricing method used?
a.
demand-based
b.
break-even
c.
value-based
d.
cost-based
C
Which of the following uses buyers’ perceptions of a product’s worth, not the sellers’ costs, as the basis of pricing?
a.
price elasticity
b.
demand management
c.
everyday low pricing
d.
value-based pricing
D
What is the basic assumption behind value-based pricing?
a.
Consumers are more concerned about price than quality.
b.
Additional long-term costs to manufacturers will increase.
c.
Increased profitability for wholesalers will increase the number of services they are willing to perform.
d.
The firm is both customer-driven and competitor-driven.
D
The basic assumption is that the business is seeking to understand its customers. Because of the unlikelihood that it is operating as a monopoly, it must also pay attention to what its competitors are doing.
One price tactic requires the purchaser to absorb the freight costs from the shipping point. In this case, the farther buyers are from sellers, the more they pay because transportation costs generally increase with the distance merchandise is shipped. What is being described?
a.
uniform delivered pricing
b.
FOB origin pricing
c.
zone pricing
d.
freight absorption pricing
B
FOB is an acronym for which of the following?
a.
first on board
b.
free on board
c.
freight on board
d.
fee on buyer
B
Shipping fresh-cut flowers to international buyers can be risky because of price changes during the time required for shipment, expense incurred over long distances, and quality of product delivered. To minimize costs, what would a seller likely employ?
a.
basing-point pricing
b.
freight absorption pricing
c.
FOB origin pricing
d.
uniform delivered pricing
C
With which of the following does the seller pay the actual freight charges and bill every purchase with an identical, flat freight charge?
a.
uniform delivered pricing
b.
FOB origin pricing
c.
basing-point pricing
d.
freight absorption pricing
A
What does uniform delivered pricing enable a firm to do?
a.
maintain a nationally advertised price
b.
charge each customer the actual cost of shipping its products
c.
charge each customer its fair share of the cost of shipping
d.
discriminate in favour of buyers that are geographically closer to the seller
A
With uniform delivered pricing, all customers will pay the same price regardless of their location.
A Toronto-based catalogue retailer features cast-iron skillets. Its customers in New Brunswick are charged one shipping rate, and customers in B.C. are charged a different rate. Customers in Quebec are charged yet another rate. What kind of geographical pricing is the catalogue using?
a.
zone pricing
b.
FOB origin pricing
c.
freight absorption pricing
d.
FOB factory
A
If your favourite mail-order catalogue lists freight charges according to the dollar amount of merchandise purchased, you know that it is using which of the following pricing?
a.
freight absorption
b.
uniform delivered
c.
zone
d.
FOB origin
B
With uniform delivered pricing, all customers will pay the same price regardless of their location.
Which of the following BEST describes uniform delivered pricing?
a.
It is prevalent in the steel, cement, corn oil, and lead industries.
b.
It is common where freight costs are a large portion of total costs.
c.
It is sometimes called “postage stamp pricing.”
d.
It creates no geographical price discrimination.
C
With uniform delivered pricing, all customers pay the same amount for freight regardless of location.
If a company decides to divide its market area into segments or regions and charge a flat rate for freight to all customers in a given region, what type of pricing is the company using?
a.
freight absorption
b.
basing-point
c.
zone
d.
uniform delivered
C
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?
a.
freight absorption
b.
two-part
c.
flexible
d.
zone
D
In zone pricing, the freight prices are set according to geographic areas.
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?
a.
zone
b.
skimming
c.
freight absorption
d.
basing-point
A
Two zones have been established. Every customer pays the same price in zone 1 while every customer in zone 2 pays a higher price.
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?
a.
freight absorption
b.
uniform delivered
c.
FOB origin
d.
basing-point
A
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?
a.
freight absorption pricing
b.
zone pricing
c.
FOB origin pricing
d.
basing-point pricing
A
In freight absorption pricing, the seller pays all or part of the freight costs and does not pass them on to the purchaser. This keeps the purchase price low.
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?
a.
zone
b.
freight absorption
c.
basing-point
d.
FOB origin
C
With a basing-point price, the seller designates a location as a basing-point and charges all buyers the freight costs from that point.
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?
a.
freight absorption
b.
uniform delivered
c.
zone
d.
basing-point
D
In basing-point pricing, customers pay freight from a set base point, regardless of the location from which the goods are shipped.
Suppose price is not set on the product until the item is either finished or delivered. Which of the following is being used?
a.
price shading
b.
delayed-quotation pricing
c.
escalator pricing
d.
bid pricing
B
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?
a.
flexible pricing
b.
a single-price tactic
c.
leader pricing
d.
price lining
B
The single-price tactic offers all goods and services at the same price.
Which of the following BEST describes single-price selling?
a.
It does not benefit the retailer.
b.
It is most effective when used during an inflationary period.
c.
It encourages clerical errors.
d.
It removes price comparisons from the buyer’s decision-making process.
D
Single-price selling allows retailers to enjoy the benefits of simplified pricing and minimal clerical errors. Inflation creates headaches as retailers must raise prices frequently in order to continue earning a profit.
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?
a.
psychological (or odd-even) pricing
b.
flexible (or variable) pricing
c.
zoning (or basing) pricing
d.
price maintenance
B
What is an advantage associated with a flexible pricing policy?
a.
It enables a seller to close a sale with a price-conscious customer.
b.
It causes inconsistent profit margins.
c.
It causes ill will among customers if they discover that other customers are paying lower prices.
d.
It enables salespeople to automatically lower the price to make a sale.
A
Flexible pricing may allow a salesperson to negotiate with a price-sensitive customer, which is an advantage.
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?
a.
two-part pricing
b.
price maintenance
c.
an illegal pricing policy
d.
flexible pricing
D
Flexible pricing is defined as selling essentially the same product to different customers for different prices.
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?
a.
price maintenance
b.
potential (or base) pricing
c.
flexible (or variable) pricing
d.
professional services pricing
D
Professional services pricing is used by people with lengthy experience and training, who are often certified by a licensing board.
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?
a.
uniform delivered pricing
b.
flexible pricing
c.
professional services pricing
d.
resale price maintenance
C
Professional services pricing is often used with products and services that have an inelastic demand.
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?
a.
price bracketing
b.
price lining
c.
price bundling
d.
family pricing
B
Why is price lining a valuable tactic for marketing managers?
a.
A company that uses price lining is able to carry a smaller total inventory and reduce confusion for its customers.
b.
The price lining strategy allows the company to gain brand loyalty from its targeted segments.
c.
A company that uses price lining has more price markdowns and greater markup.
d.
Price lining tends to confuse customers and requires them to listen closely to the salesperson pitch.
A
With price lines, a retailer can choose to carry a smaller inventory because it wants to offer products at certain price levels but not at every possible point of the price scale.
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?
a.
It will enable them to carry a larger total inventory
b.
It will maintain all of the product line at the same stage in the product life cycle.
c.
It will reach several different target market segments.
d.
It will thwart competitors that are trying to sell similar products.
C
Price lining allows a retailer to appeal to several different target markets. It is not an uncommon strategy and competitors probably use it. It should not affect inventory overall and will not confuse customers.
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?
a.
status quo pricing
b.
penetration pricing
c.
psychological pricing
d.
price bundling
D
The 12 items sold together are priced less expensively than if purchased separately.
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?
a.
leader pricing
b.
price skimming
c.
odd-even pricing
d.
price lowballing
A
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?
a.
price lowballing
b.
leader pricing
c.
psychological pricing
d.
variable pricing
B
Leader pricing involves selling a product near or even below cost to attract business.
What can leader pricing be used to do?
a.
attract customers to the store so they will buy other products in addition to the leader product
b.
bundle products together for sale
c.
attract customers to a store so they can be persuaded to buy a more expensive product instead
d.
price products at odd-numbered amounts to stimulate demand
A
Leader pricing involves selling a product near or even below cost to attract business.
The office supply store was selling two-drawer file cabinets for $20, which is a below-market price, to lure customers into the store in hopes that while they are in the store to buy a file cabinet they will also buy other items that have a much higher markup. What is the office supply store using?
a.
price lowballing
b.
leader pricing
c.
price lining
d.
functional pricing
B
Leader pricing involves selling a product near or even below cost to attract business.
If a marketer decides to price goods at odd-numbered dollar amounts to denote bargains, and at even-numbered amounts to denote quality, what is he or she using?
a.
decoy pricing
b.
price lining
c.
two-part pricing
d.
psychological pricing
D
Which of the following phrases accurately describes psychological pricing?
a.
It is essentially the same as price shading
b.
It is also called odd-even pricing
c.
It is equally effective on all types of products
d.
It is designed to aid the economy-minded purchaser
B
Psychological pricing has mixed results, depending on the type of product.
What is the term for marketing two or more products in a single package for a special price?
a.
price bundling
b.
price lining
c.
two-part pricing
d.
family pricing
A
R.W. Hunt & Sons, a distributor of hunting bows and anything needed for hunting or target practice, has packaged a new range-finder scope with a package of paper targets at one low price. R.W. Hunt is selling the scope slightly below cost, but the paper targets are very profitable. Which pricing technique is R.W. Hunt using?
a.
bait pricing
b.
price bundling
c.
psychological pricing
d.
two-part pricing
B
Marketing two or more products in a single package for a special price is called price bundling.
OfficeMax, a retailer of office supplies, is selling a point-and-shoot digital camera, the printer and software needed to print photographs, and a starter package of photograph paper for $230. If purchased separately, the items would cost a total of $250. What has OfficeMax used?
a.
two-part pricing
b.
price bracketing
c.
price lining
d.
price bundling
D
Marketing two or more products in a single package for a special price is called price bundling.
The Terra Vista Airport is a small airport frequently used by people who love skydiving. To help keep costs in line, the airport now charges its customers a small parking fee. At one time, the cost of parking at the airport was included in the price of the jump. What is Terra Vista Airport using?
a.
unbundling
b.
professional services pricing
c.
potential (or base) pricing
d.
price maintenance
A
Reducing the bundle of services that comes with the basic product is called unbundling.
Kasha has decided to keep her new power boat in a “drystack” storage facility rather than in the water at a marina. The storage facility charges her a fee of $500 per year, plus $25 each time she calls ahead and asks the facility to put her boat in the water for the day or weekend. Which pricing tactic is the facility using?
a.
price bundling
b.
professional services pricing
c.
two-part pricing
d.
price lining
C
Two-part pricing involves two separate charges to consume a single product or service.
Why do consumers sometimes prefer two-part pricing?
a.
Consumers prefer a limited number of choices.
b.
Consumers like to be in control of costs.
c.
Prices have little or no psychological influence on most consumers.
d.
Consumers are uncertain about the number and types of activities that might be used at places like amusement parks.
D
Two-part pricing is a price tactic that charges two separate amounts to consume a single good or service.
What are extra fees paid by consumers for violating the terms of purchase agreements?
a.
financial judgments
b.
consumer penalties
c.
punitive fees
d.
decoy fees
B
Lipton makes several easy-to-prepare side dishes that all use macaroni shells. In promoting this product line, Lipton offers a 50-cents-off coupon that can be used for any of its macaroni-based mixes. Therefore, what must Lipton consider when pricing its mixes?
a.
joint costs
b.
potential (or basing) costs
c.
bundling costs
d.
differential costs
A
Joint costs are costs that are shared in the manufacturing and marketing of several products in a product line.
Which of the following factors can a manager IGNORE when deciding on prices for an entire product line?
a.
Products in the line could be substitutes for one another.
b.
Products in the line are complementary to one another.
c.
The buyer considers the brand or the price first.
d.
Products share joint costs.
C
The manager is trying to determine the relationships between the various products in the line and is looking at the products, not the buyer.
Which of the following BEST describes delayed-quotation pricing?
a.
It requires a seller to submit a bid after the closing date.
b.
It prevents the competitor from submitting an earlier bid.
c.
It allows the final selling price to reflect cost increases incurred between the time the order is placed and the final delivery takes place.
d.
It is also known as price-shading bidding.
C
Delayed-quotation pricing delays the setting of the final price.
Which of the following allows for price increases based on the cost-of-living index or some other formula?
a.
a price-shading index
b.
a factorial clause
c.
an escalator price clause
d.
a quotation index differential
C
What is escalator pricing?
a.
It is a demand-oriented pricing tactic.
b.
It is similar to price shading.
c.
It is also called postage stamp pricing.
d.
It is similar to delayed-quotation pricing.
D
Escalator pricing allows for price increases and delays the setting of the final price.
Business-to-business salespeople often use a discounting practice that is often done routinely without much forethought. The goal is to heighten the demand for certain items in a product line. Which of the following is being described?
a.
price shading
b.
price lining
c.
devaluation
d.
consumer discounts
A
What can a marketing manager do to make demand for his or her product more inelastic?
a.
create similar offerings
b.
create supplier dependency
c.
change the package design
d.
cultivate selected supply
C
What can a marketing manager do to make demand for his or her product more inelastic?
a.
avoid making any product changes
b.
eliminate brand equity
c.
cultivate selected demand
d.
eliminate any unique products from the product line
C
The marketing manager would need to use some demand-oriented tactic. Escalator pricing is a cost-oriented tactic. Creating unique products and changing packaging are both recommended tactics.
Which of the following pricing methods can be used to build market share during a recession?
a.
psychological pricing
b.
variable pricing
c.
resale price maintenance
d.
bundling
D
The other commonly used technique is value-based pricing.
During the recent worldwide recession when wine usage was declining, Nickel & Nickel launched a new brand of wine, which it sold at $125 a bottle. The wine is allowed to age three times as long as lower-priced wines, and the grapes used in the wine’s production are a rare variety. Wine lovers appreciate how both production techniques improve wine quality. What did Nickel & Nickel use to build market share?
a.
price lining
b.
value-based pricing
c.
status quo pricing
d.
leader pricing
B
Value-based pricing indicates the consumers are getting value for their money.
What are two effective pricing tactics, which can be used during a recession, to hold or build market share?
a.
value pricing and bundling
b.
unbundling and price shading
c.
flexible pricing and price shading
d.
price lining and escalator pricing
A
Value pricing stresses that customers are getting a good value for their money. If features are added to a bundle, customers may perceive the offering as having a greater value.