Ch. 11
Profit formula
(unit price * quantity sold) - (fixed cost + variable)
Common approaches to pricing are oriented around which 4 elements?
1. competition 2. profit 3. cost 4. demand
match the following pricing issues that have legal implications to the correct description 1. price fixing 2. price discrimination 3. deceptive pricing 4. predatory pricing
1. conspiracy among firms to set prices 2. charging different prices to different buyers for goods of like grade and quality 3. price deals that mislead consumers 4. charging a very low price for a product with the intent of driving competitors out of business
Select all of the following that are common approaches to setting an approximate price level for a product
1. demand-oriented 2. cost-oriented 3. competition-oriented
pricing objectives involves specifying the role of price in what two areas of organization?
1. its marketing plans 2. its strategic plans
Organizations choosing competitor-oriented approaches to set prices might use which two pricing strategies?
1. loss-leader pricing 2. customary pricing
current profit _____ and target _____ are two strategies used by firms that are pursuing a profit pricing objective
1. maximization 2. return
what two strategies can be used as part of a firms profit objectives
1. maximizing current profits 2. target return
Pricing _____ frequently reflect corporate goals, while pricing ____ often relate to conditions existing in the marketplace
1. objectives 2. constraints
cost-oriented approaches to pricing consider which three things in the setting of a products price
1. profit 2. overhead 3. production costs
price elasticity of demand is expressed as percentage change in ____ divided by the percentage change in ____
1. quantity demanded 2. price
Which 2 are profit-oriented approaches to setting a price?
1. target return pricing 2. target profit pricing
What four factors must be taken into consideration to determine the 'right' price for a product?
1. will it generate enough sales dollars to pay for the marketing of the product? 2. What are customers willing to pay for the product? 3. Will the product provide a profit for the company? 4. Will enough money be made to pay for the development and production of the product?
____ - oriented pricing approaches weigh factors underlying expected customer tastes and preferences more heavily than other factors
Demand
demand-oriented, cost-oriented, profit-oriented, and competition-oriented are four approaches to set ____
approximate price levels
Break-even analysis analyzes the relationship between total revenue and total cost to determine profitability ________
at various levels of output
A used car dealer advertises a $5,000 SUV for sale in the local paper. When prospective customers arrive at the dealership they are told that the $5,000 SUV is sold and are offered a $15,000 SUV instead. This is an example of ______.
bait and switch
When a buyer arrives at a retail location and is told that the product she saw in a promotion is out of stock and no rainchecks are available, the retailer might be accused of _____
bait and switch
small changes in price _____
can have comparably big effects on company profit
If firms set prices with specific consideration of firms challenging them directly for customers, they have adopted a ___ approach to pricing.
competition - oriented
A pricing constraint firms face is the price that its ____ are currently charging and likely to charge in the future
competitors
a pricing constraint firms face is the price that its ____ are currently charging and likely to charge in the future.
competitors
Factors that limit the range of prices a firm may set are known as pricing ____
constraints
legal and regulatory issues and consumer demand are pricing ___ that limit what a company can charge for its product
constraints
the demand for a product class, a product, or a brand, or the newness of a product can act as pricing ____ to limit a firm's options
constraints
which of the following is a characteristic of bundle pricing?
consumer value is enhanced by not having to make separate purchases
Pricing approaches that consider the production and marketing costs and then add enough to cover direct expenses, overhead, and profit are known as _____ approaches
cost-oriented
pricing approaches that consider the production and marketing costs and then add enough to cover direct expenses, overhead, and profit are known as ____ approaches
cost-oriented
price deals that mislead consumers fall into the category of ____ pricing
deceptive
The chart that shows how many units of a product or service consumers will demand during a specific period of time at different prices is known as the ____
demand curve
that chart that shows how many units of a product or service consumers will demand during a specific period of time at different prices is known as the _____
demand curve
Generally, a seller can charge a higher price for a product when ____
demand for the product is high
demand-oriented pricing approaches weigh which factors most heavily?
expected customer tastes and preferences
____ cost is the sum of the expenses of the firm that are stable and do not change with the quantity of a product that is produced and sold.
fixed
price fixing, predatory pricing, and price discrimination are
legally prohibited
a demand curve is derived by measuring how many units of a product are sold at various _____
levels of price
if a firm prices its products relatively low compared to the cost to develop, with the prospect of gaining a high market share, it is utilizing which profit-oriented pricing objective?
managing for long run profits
many south korean HDTV manufactures are willing to give up immediate profits for long-term penetration of the market. This is a pricing objective known as _____
managing for long run profits
if a firm prices its products relatively low compared to the cost to develop, with the prospect of gaining a high market share, it is utilizing which profit-oriented pricing objective?
managing for long-run profits
American firms are sometimes criticized for using which profit-oriented pricing objective, because it results in a short-term orientation?
maximizing current profit
which profit-oriented pricing objective is common in many firms because the targets can be set and performance measured quickly?
maximizing current profits
a marketing manager considers pricing objectives and constraints to ____
narrow the range of choices among the variety of pricing strategies
Marketing managers may identify profit, market share, social responsibility or even survival as pricing _____
objectives
Pricing ____ involve specifying the role of price in an organization's marketing and strategic plans
objectives
A ____ policy is also known as fixed pricing
one-price
Organizations using ____ pricing set the initial price low for the introduction of the new product to appeal immediately to the mass market
penetration
Value is defined as ____
perceived benefits divided by price
when using ____ pricing, a firm sets a very low price for one or more of its products with the specific intent to drive its competition out of business
predatory
Marketers who use ____ to signal the quality of an item, must be careful not to drop the price of the product below the point where customers become skeptical of its quality and refuse to purchase it.
prestige pricing
the money or other consideration (including other products and services) exchanged for the ownership or use of a product is known as ______
price
the percentage change in quantity demanded relative to a percentage change in price is known as
price elasticity of demand
the practice of colluding with other firms to set prices is called ____
price fixing
a firm must know its competitor's ______ in order to best set its own
prices
How does a skimming pricing strategy approach price setting?
prices are set high initially and then lowered in a series of steps
By focusing on target profit pricing or target return pricing, a firm is using a _____ pricing approach
profit-oriented
a price reduction offered to channel members for featuring the manufacturer's product in their advertising or selling activities is called a(n) ____ allowance
promotional
customers are encouraged to buy a larger number of a single product when a firm offers ____
quantity discounts
fixed costs ____
remain at the same level despite changes in production
total ____ is equal to the unit price for a product times the quantity of it sold.
revenue
a firm's goal in offering a trade discount is to
reward wholesalers and retailers for marketing functions
it what pricing strategy are prices lowered in a series of steps with the demand by those who really desire the product being satisfied at the highest prices?
skimming pricing
Bundle pricing refers to ...
the marketing of two or more products in a single package price
Price is defined as
the money or other considerations exchanged for the ownership or use of a product
what is a marketer most likely trying to convey about a product if it is using prestige pricing?
the product is of high quality
unit price times quantity sold is ____
total revenue
according to the profit equation, profit is...
total revenue minus total cost
The relationship, or ratio, between a product's perceived benefits and the consumer's costs is known as its _____
value
the ratio of perceived benefits to price is a product's _____.
value
When using competition-oriented pricing approaches, price setters stress ____
what "the market" is doing