Pricing

Exercies

All of the following are possible perceived benefits directly related to a product's price and value EXCEPT
1. status
2. convenience
3. rationality
4. choice
Price is the ______________ marketing variable to change and the ______________ to copy.
1. Easiest, longest
2. Easiest, hardest
3. Hardest, easiest
4. Easiest, Easiest
Which of the following is NOT an example of an organization that would use "fare" to describe their pricing?
1. An airline company
2. A taxi company
3. A rail company
4. A car rental company
Why does a company's survival or demise depend on a company's pricing strategy?
1. Pricing is the only marketing mix element that affects consumer demand and sales.
2. Pricing is the only marketing mix element that affects a firm's revenues and profits.
3. Pricing represents customers' perception of a product or service.
4. Pricing represents marketers' assessment of product or service value.
Two men assess a pair of shoes displayed in a store window. The first man immediately walks away when he realizes the price tag is $250. The second man glances at the price tag, and decides that the shoes are worth trying on and adding to his shoe collection.Which of the following measures of value did the twomen use in their buying decision?
1. The buyer's utility
2. The seller's utility
3. Exchange value
4. Subjective value
Relative value can be best described as
1. the level of attractiveness measured in terms of the utility of one product relative to another.
2. the level of attractiveness placed by the person who appraises the value of the product.
3. the level of attractiveness based on the ability to resell the product.
4. the level of attractiveness based on the product's ability to increase in utility for customers.
A telecommunications company is selling its latest smartphone at the price of $249. Despite its device having more features than competing smartphones, it has decided to price below its competitors. Which of the following best explains the reasoning behind this approach?
1. The company has a clear advantage on some non-price element of the marketing mix.
2. The company is using price as an indicator or baseline.
3. The company wishes to carve out a market niche and realize a large sales volume.
4. The company is using price to increase its market share.
Two competing consumer product companies want to avoid the risks of a price war. Which of the following non-price competitive tactics could they use in their marketing strategies?
1. Distribute coupons
2. Offer free samples
3. Place products in more store locations
4. All of these answers.
The constant "a" in the demand curve represents
1. the effects of all non-price determinants that influence consumer demand.
2. the willingness of consumers to buy more of a good or service as its price falls.
3. how the price of the good influences consumer demand.
4. the effects of all price-related determinants that influence consumer demand.
If the poultry market experiences a decrease in the supply of healthy chickens, but market demand remains unchanged, it can be concluded that
1. it will lead to a higher equilibrium price and higher quantity of poultry products.
2. it will lead to a lower equilibrium price and lower quantity of poultry products.
3. it will lead to a lower equilibrium price and higher quantity of poultry products.
4. it will lead to a higher equilibrium price and lower quantity of poultry products.
Which of the following best describes why a broad definition of a consumer good would cause it to have a low elasticity of demand in the market?
1. Goods with low price elasticity due to broad definitions tend to have few or no market substitutes.
2. Goods with low price elasticity due to broad definitions tend to have numerous substitutes.
3. Goods with low price elasticity due to broad definitions tend to represent only a negligible portion of a consumer's budget.
4. Goods with low price elasticity due to broad definitions tend to have price changes that hold for long periods for time.
Yield management is particularly suitable for maximizing profits in the airline industry because airline seats are
1. a fixed, perishable resource.
2. a large revenue generator.
3. sold at premium prices.
4. sold at different price points.
When a company sets a price that includes the cost to produce a unit of output, the company has conducted a __________.
1. Demand curve study.
2. Profit maximization study.
3. Negative gradient study.
4. Marginal analysis.
Which of the following is closest to the meaning of fixed costs?
1. Output costs that enable a company to manufacture the product with all features requested by consumer studies.
2. Costs that are directly related to the ecomonies of scale principal.
3. Costs that effect the marketing campaign and unit sales volume.
4. Operational costs that remain constant no matter how many products are sold or how much the product costs to produce.
What problems exist with pricing based upon break even points?
1. All of these answers.
2. It does not provide sales projection information relative to pricing and makes assumptions about fixed costs.
3. It does not take into consideration the fact that costs increase as sales increase and suggests that suppler and product related costs will remain the same.
4. It is based upon the assumption that all products made will be sold and that sales across a company's entire line of products is constant.
When a company recoups through sales, all product related costs it is said to have reached the product's _____________.
1. Linear cost volume.
2. Total fixed cost point.
3. Unit variable cost point.
4. Break even point.
What can a company do to meet its ultiamate objective; to increase its profits?
1. It can review its operational costs and adjust accordingly, it can increase sales or it can analyze and improve on its pricing strategy.
2. It can increase or change the features of its product to make competitive comparision difficult.
3. It can sell products that are not too expensive and do not use a high percentage of the consumer's total income.
4. It can make sure all of its products represent a gain rather than a loss for the consumer.
Which of the following statements about consumer needs and the competitive environment is TRUE?
1. Needs are based upon the lowest price for the product and the company that offers it.
2. Needs are fulfilled by perceived value and value is based upon comparative competitive analysis.
3. Needs are based upon a product's feature and the different features offered by each competitor.
4. Needs are based upon differentiated value and the sales incentives offered by competitors.
Prices are regulated by government in order to_________.
1. All of these answers.
2. Keep costs proportional to incomes earned.
3. Prevent excessive price increases when shortages occur and maintain income levels for suppliers of certain goods.
4. To maintain proportion with regards to price and value of good.
Which of the following is considered most important factor in the survival of a company?
1. Successful new products
2. High profit margins
3. Desirable sales patterns
4. Brand image
A company produces 100,000 pairs of shoes at a marginal cost of $10 million. The company's marginal revenue is currently $20 million. Based on the marginal cost perspective, which of the following is true?
1. Marginal profit is negative and a lesser quantity should be produced.
2. Marginal profit is zero and a higher level output gives lower profit levels.
3. Marginal profit is positive and a greater quantity should be produced.
4. Marginal profit is zero and a lower level output gives higher profit levels.
The return on investment metric measures which of the following?
1. The per period rates of return on dollars invested in an economic entity
2. The asset usage and capital requirements of an economic entity
3. The expected or required rates of return on dollars invested in an economic entity
4. The overall financial, marketing, and strategic objectives of an economic entity
Pricing strategy is significant in creating and sustaining market share BECAUSE
1. modifying prices may prevent a competitive response.
2. modifying prices helps drive strategic or tactical performance.
3. modifying prices may increase demand and lead to higher market share.
4. modifying prices works in tandem with macro environmental and economic variables.
A company trying to set prices in a way that allows them to capture a large share of the sales in their industry is utilizing which type of pricing objective? Choose one answer.
1. Maximizing profits
2. Maintaining status quo
3. Maximizing market share
4. Targeted return on investment
Which of the following is a common strategy for generating cash flow in an organization?
1. Funding new investments
2. Issuing seasonal discounts
3. Hiring employees
4. None of these answers.
Which of the following companies would be best positioned to implement a status quo pricing strategy?
1. A company with limited financial resources
2. A company with limited visibility into operating costs
3. A company with limited visibility into the competitive landscape
4. All of these answers.
A firm that sets out to maintain its current prices and/or its competitors’ prices is utilizing which type of pricing objective? Choose one answer.
1. Maximizing profits
2. Targeted return on investment
3. Maximizing market share
4. Maintaining the status quo
Which aspect of product quality determines the useful life of a product?
1. Reliability
2. Performance
3. Conformance
4. Durability
What type of quality costs are associated with activities designed to ensure quality or uncover defects?
1. Appraisal costs
2. Failure costs
3. Return on quality costs
4. Prevention costs
Which of the following statements about cost based pricing is TRUE?
1. It is predicated on knowing exactly how much it costs to produce the product being sold.
2. It is based on high variable costs and near-zero marginal costs.
3. Costs go up when sales increase because variable costs are impacted.
4. The amount of sales is proportional to proper cost based pricing.
Factors that affect pricing strategies include which of the following?
1. customers and competitors
2. customers and competitors, government regulations, production costs
3. government regulation
4. production costs
Afrin offers a regular and extra strength version of a nasal spray for the same price. The ingredients are exactly the same but the dosage per tablet has changed. This is an example of _______.
1. Psychological Pricing.
2. Price Descrimination.
3. Value based Pricing.
4. Penetration Pricing.
A new sugar substitute is cutting into the market share of its competitors. It is selling at a price that is 25% lower than most other brands . This is an example of ____________.
1. Psychological Pricing
2. Penetration Pricing.
3. Price Skimming
4. Price Descrimination.
Sony's pricing on 3D televisions is high but will be lowered as more competition enters the marketing. This is an example of ________.
1. Psychological Pricing.
2. Price Skimming.
3. Value based Pricing.
4. Fixed cost Pricing.
Marketers who start with the price demanded by consumers and then create offerings to meet the price are utilizing which pricing strategy? Choose one answer.
1. Forward pricing
2. Price lining
3. Demand backward (or demand based) pricing
4. Premium pricing
Pop's Root Beer has decided to use A&W Root Beer pricing in the marketplace. Why?
1. Pop's is a small company and cannot afford to spend a great deal of money on market research.
2. It believes its product is as good a value if not better than A&W's product.
3. It wants to safeguard against price wars.
4. It wants to make the most profit by cutting into A&W's market share.
When a buyer pays the same price regardless of where they purchase the product the situation describes __________.
1. cost-plus pricing
2. going-rate pricing
3. leader pricing
4. penetration pricing strategy
When markup pricing is used, a company can easily justify its pricing to consumers and competitors. Why?
1. It is calculated on historical data rather than variable costs.
2. It is based upon a predictable demand curve and the response to historical pricing.
3. It is based upon the set rate of total cost increases and an average annual percentage of output.
4. It is calculated on data that is quantifiable and readily available; the desired amount of profit the company wants to earn combined with fixed and variable costs of production.
Fill in the blank: _____ is when a company take the cost of the product and then add a profit to determine the price.
1. going-rate pricing
2. leader pricing
3. penetration pricing strategy
4. cost-plus pricing
What factors must a company control in order to maximize profits?
1. Fixed costs in the short run and proper pricing.
2. Variable costs to insure the ideal output level and proper pricing.
3. Total costs in the short run and maintaining the lowest price possible.
4. They must increase variable costs to maximize output and price the product as high as possible.
A new product pricing strategy that tends to block competition and deplete inventory quickly is called ________.
1. Fixed price.
2. Penetration pricing.
3. Hi-lo pricing.
4. Skimming.
A new pricing strategy that is used to recoup the cost to invent the product and may allow competition to gain market share is called ________.
1. Penetration pricing.
2. Fractional pricing.
3. Hi-lo pricing.
4. Skimming.
Fill in the blank: _____ is when a company sets a high initial price for a product in order to recoup its investment in the product faster.
1. going-rate pricing
2. leader pricing
3. penetration pricing strategy
4. skimming pricing strategy
Fill in the blank: _____ is when a low initial price is set in order to get as much of the market as possible to try to product.
1. cost-plus pricing
2. going-rate pricing
3. leader pricing
4. penetration pricing
What characteristic associated with line pricing is TRUE?
1. Shopping is less confusing to the customers and quality perceived as consistent.
2. All of these answers.
3. The quality of products can change but pricing remain constant.
4. Prices are compatible with the products offered and inventory levels are is easily controlled.
When a product is offered at a price that causes the customer to react or feel a certain way about the product or price itself it is called __________.
1. Price points.
2. Customary pricing.
3. Fractional pricing.
4. Psychological pricing.
Which of the following occurs when a company prices a product a few cents or a few dollars below the next dollar amount? Choose one answer.
1. Odd-even pricing
2. Demand backward pricing
3. Cost-plus pricing
4. Forward pricing
What impact does a successful fighter brand strategy have on a company?
1. It causes customers to delay buying until a new fighter brand is introduced.
2. Creates new sales, new markets and wipes out a competitor using a lower pricing strategy.
3. It causes a reduction in all company pricing.
4. The value of the brand goes down.
What factors must be considered before cutting prices in difficult economic times?
1. All of these answers.
2. Its effect on profitability and the strength of the brand's image.
3. Its impact on customer buying habits in the short and long term.
4. The actual perceived product value in the customer's eyes before cutting prices.
What aspect of EDLP strategy causes the cost of sales to be lower than in a hi-lo pricing stratgey?
1. Advertising is minimized or costs less because it can be bought on a long term basis.
2. Staffing in the stores is more flexible.
3. The company does not have to offer a wide variety of products.
4. It only works for companies that offer niche product.
Which of the following statements about a high/low pricing strategy is FALSE?
1. Customers understand a great deal about the product being sold.
2. The strategy is based upon customer loyalty to a company as opposed to a specific product sold.
3. The lower priced products are offered to customers through ads, coupons and special promotions.
4. Some goods or services offered by the company are priced higher than competitor's.
Which pricing strategy is most difficult for companies to compete against and why?
1. Pricing Above Competitors because of a sales environment that is full of comparative price information.
2. Non-Price Competition because it is based on characteristics that competitive products may possess.
3. Dynamic pricing for identical goods that correspond to a customer's willingness to pay.
4. Cost-Plus Pricing due to its vulnerability to demand.
What is the primary purpose of a Trade Discount?
1. To increase the liquidity of a company.
2. To increase the list price of products.
3. To encourage buyers to make larger purchases.
4. Business to business sales incentives involving powerful retailers.
Which of the following statements about discounts is TRUE?
1. Discounts are social policy and are mandatory sales tools.
2. Retailers insist upon discounts from manufacturers. to increase their profit.
3. Discounts can be applied to the manufacturer's, retail or list price of a product.
4. Discounts are used exclusively at the consumer level.
What type of discount is predicated on regulating the volume of sales or production over a specific period of time of the year?
1. Quantity.
2. Seasonal.
3. Supply.
4. Cash Flow.
Value based pricing is ______.
1. Driven by the customer's perceived or estimated value.
2. Often used when targeting a highly knowledgeable customer in a large market.
3. Based upon information gathered through customer research, surveys and historical information.
4. All of these answers.
What type of geographic pricing tactic is based upon competitive pricing specific to an industry?
1. Basing point.
2. Zone.
3. Uniform Delivery.
4. FOB Origin.
What type of geographic pricing tactic refers to the location where goods are shipped from?
1. FOB Origin.
2. Basing Point.
3. Zone Pricing.
4. Uniform Delivery.
Which of the following statements about transfer pricing is TRUE?
1. A company must comply with the tax codes of the country in which the subsidiary is located.
2. When using transfer pricing the demand curve, optimum price and quantities change radically.
3. Transfer pricing puts pressure on the external market for the product.
4. Marginal price determination theory is not involved.
Consumer penalties exist to __________.
1. To create different income streams for the company and to insure customer loyalty.
2. To brand the company as a conservative and serious organization and garner new customers.
3. Insure that policy serving a company's interest is followed and/or to recapture profit lost if a contract is terminated earlier than its term.
4. To differentiate companies from their competitors by having a strict policy.
Unfair business practices often involve oppressive or unconscionable acts by companies against consumers. Which is the best example?
1. A construction company that is using materials that are less expensive and do not meet required safety codes but is charging for the higher quality and alleging the use of safe "code" materials.
2. An appliance company that is advertising a model of appliance as the "best" in its classification when there is no evidence to support that claim.
3. A gas station slashing its price per gallon to a low point that makes it impossible for the competitor across the street to compete, sustain and survive.
4. A deli located in a very remote location has increased all of its prices by 40% because a large construction crew has broken ground just down the road.
Illegal price advertising misleads or predicates sales on false information. Which of the following are examples of illegal price advertising?
1. A "Closing Our Doors Discounts" where prices have actually increased prior to the discount days to compensate for the deep discounts advertised.
2. All of these answers.
3. Dawn's Appliances Ads offer 32" flat screen TVs at a $299 each with no stock available at that price. Customers are pitched other, higher priced TVs once they are in the store.
4. Gilda's Meat Market is offering 95% ground sirloin at a low sale price.However the actual sirloin content is about 75% with chuck steak making up 15% rather than the 5% difference.
Which of the following statements about predatory pricing is TRUE?
1. In countries where the practice is illegal, a predatory pricing strategy is easy to substantiate in a court of law.
2. A company incorporating predatory pricing hopes to generate profit from the volume of product sold during the strategy.
3. The ability to sustain low prices for as long as it takes to defeat competitors is key to a successful predatory pricing strategy.
4. It doesn't matter if the company using a predatory pricing strategy is stronger or weaker than its competitors.
All of the following are examples of price descrimination EXCEPT_______.
1. The neighborhood deli, located near the main branch of the US Post Office, offers a low cost lunch special to anyone with a Post Office I.D.
2. Tylenol offers Extra Strength at a higher price but ingredients are the same as regular, the suggested daily dose is 2 instead of 3 times a day yet ingredient amounts administered are the same.
3. Coca Cola and Pepsi set a maximum price for glass bottles purchased from suppliers.
4. A dry cleaner charges $5.00 to launder, starch and press women's blouses while the same service on men's shirts costs $2.00 per shirt.
Price fixing is legal in certain countries. They cannot be prosecuted under the same national and antitrust laws that exist in developed countries. What motivates companies in these countries to fix prices?
1. They want to systematically carve up the business from a supply, demand, cost and profit perspective and reduce competitive pressures.
2. They want to offer stable pricing so that consumers will budget and have enough to buy their products.
3. They to stabilize the industry so that other companies are able to enter the marketplace.
4. They want to increase competitive pressures and create a healthier environment for consumers to buy at the lowest possible price.
Which of the following scenarios illustrates examples of price fixing?
1. Bayer Aspirin, Tylenol and Advil agree to the same wholesale price when selling to drugstore chains Rite Aide, Walgreen and Duane Reade.
2. Goodyear and Bridgestone Tires enter into an agreement with the vulcanized rubber industry to buy raw materials at a set maximum price.
3. All major computer manufacturers, Apple, IBM, Toshiba, Dell, Asus and HP decide to discontinue the one year free service warranty policy and charge for all customer technical support needs.
4. All of these answers.