Ch 13 SMARTBOOK MAR3023
Place the steps of the price setting process in order. Note: The first step in the process should be the top item in your list.
1. Identify pricing objectives and constraints. 2. Estimate demand and revenue. 3. Determine cost, volume, and profit relationships. 4. Select an approximate price level. 5. Set list or quoted price. 6. Make special adjustments.
Order the types of competitive markets from most competitive to least competitive. NOTE: The most competitive market should be the top item in your list.
1. Pure competition. 2. Monopolistic competition. 3. Oligopoly. 4. Pure monopoly.
Which situation represents a consumer-driven pricing action? Consumers wait for teams to reduce ticket prices to a sporting event because the team wants to fill all remaining seats. A consumer goes to a store to examine a product then goes home an orders it online for a lower price. Consumers know that if they book an airline flight at the last minute, they might get a better deal.
A consumer goes to a store to examine a product then goes home an orders it online for a lower price.
According to the price equation, to find the actual price, you should do which two things to the list price? Add extra fees Subtract extra fees Subtract incentives and allowances Add incentives and allowances
Add extra fees Subtract incentives and allowances
What three tasks must be done before an approximate price level can be selected? Estimate demand and revenue Determine cost, volume, and profit relationships Identify pricing objectives and constraints Assess competitors' pricing Make special adjustments to list or quoted price
Estimate demand and revenue Determine cost, volume, and profit relationships Identify pricing objectives and constraints
______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
Match the type of competitive market to its correct description.
Pure competition-> Many sellers who follow the market price for identical, commodity products Monopolistic competition-> Many sellers who compete on nonprice factors Oligopoly-> Few sellers who are sensitive to each other's prices Pure monopoly-> One seller who sets the price for a unique product
The pricing objective known as unit volume is based on what? The volume needed to break even The quantity of product sold The size of the firm relative to the industry The change in consumer demand due to price changes
The quantity of product sold
What statement is accurate regarding variable costs? They vary relative to the state of the economy and costs of commodities. They are external costs, paid directly to other firms. They are the slope of the break-even curve. They are costs that change in direct relation with quantity produced and sold.
They are costs that change in direct relation with quantity produced and sold.
______ is the ratio of a product's perceived benefits and its price. Supply Demand Value Contribution margin
Value
Which factor causes movement along a demand curve? a change in consumer tastes a change in a competitor's product a change in price a change in macroenvironmental factors
a change in price
The typical relationship between price and demand is shown as ______. a horizontal demand curve an upward-sloping demand curve an exponential demand curve a downward-sloping demand curve
a downward-sloping demand curve
The typical relationship between price and demand is shown as ______. an exponential demand curve a downward-sloping demand curve an upward-sloping demand curve a horizontal demand curve
a downward-sloping demand curve
What is the demand curve? a graph of the relationship between demand and supply a way to calculate break-even point a graph relating quantity sold and price a marketing concept that recommends promotional strategies
a graph relating quantity sold and price
The slope of a typical demand curve shows that ______. as price increases, demand increases as price increases, demand decreases as price increases, demand stays constant
as price increases, demand decreases
Blake recently started a security system company. Blake gives Joe, a digital media consultant, a security system for his home if Joe will produce Facebook advertising for Blake's company. This is an example of ______. goodwill demand barter leasing
barter
What term refers to the practice of exchanging products and services for other products and services rather than for money? leasing barter demand buying
barter
The _________-_________ point is the quantity at which total revenue and total cost are equal. (one word each blank)
break-even
Compared to other company objectives, the sales objective ______. motivates marketers to reach a particular profit goal encourages more competitors to enter the market allows the targeting of a market segment that values a particular product benefit and setting prices high can be translated more easily into meaningful targets for marketing managers
can be translated more easily into meaningful targets for marketing managers
Small changes in price ______. can have comparably big effects on company profit are not noticed by consumers are the best way to improve profitability are preferred by consumers, rather than surcharges or fees
can have comparably big effects on company profit
The cost of changing prices is a pricing constraint; as a result, most firms ______. rarely, if ever, change product prices limit the number of customers with whom they interact to mitigate this problem change the prices of their products more often if they sell online sell products only with very large margins
change the prices of their products more often if they sell online
A pricing constraint firms face is the price that its ______ are currently charging and likely to charge in the future. competitors sales representatives distributors retailers
competitors
Factors that limit the range of prices a firm may set are known as pricing ______. demands objectives limitations constraints
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 classifications objectives curves
constraints
What are the three factors that influence demand for a product? involvement of shareholders consumer tastes number and location of retail outlets price and availability of similar products consumer income
consumer tastes price and availability of similar products consumer income
Selling via the Internet reduces which pricing constraint? cost of producing the product cost of changing prices newness of the product demand for the product
cost of changing prices
In the long run, a firm's ______ and those of its distributors set a baseline for a product's price, allowing the firm to both survive and get its product to consumers. revenues competitors costs advertising
costs
In the long run, a firm's ______ and those of its distributors set a baseline for a product's price, allowing the firm to both survive and get its product to consumers. revenues costs competitors advertising
costs
When the New York Mets set higher ticket prices for games versus the popular New York Yankees than for those versus the less popular Pittsburgh Pirates, its pricing is based on ______. supply elasticity competition demand
demand
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 ______. break-even chart profit equation supply curve demand curve
demand curve
Generally, a seller can charge a higher price for a product when ______. demand for the product is high demand for the product is inconsistent the product is in the later stages of its life cycle the product has a lot of substitutes
demand for the product is high
A unit volume objectives for pricing should be used judiciously because higher volume goals can sometimes result in ______. dissatisfied customers that are looking for a more unique product drastic price cutting that drives down profits unfair proportions of retail price going to intermediaries a large drop in demand because of changes in the product
drastic price cutting that drives down profits
A manufacturer that uses coupons and other small price decreases to create large changes in demand is relying on a(n) ______ demand for the product strong inelastic elastic reactive
elastic
When a 1 percent decrease in price produces more than a 1 percent increase in quantity sold, the product or service is ______. inelastic elastic unaffected in high demand
elastic
Executive salaries are a good example of a(n) ______ cost. variable external fixed increasing
fixed
For a firm, rent and insurance are examples of ______ costs. variable reimbursed total fixed
fixed
Price is the one element in the marketing mix that ______. has a direct effect on profits generates the most costs does not require decision making is the least important
has a direct effect on profits
A demand curve enables a firm to examine prices ______. in terms of supply relative to its profits in terms of quantity sold relative to the costs to produce the product
in terms of quantity sold
According to the price equation, the actual price is the list price less ______, plus extra fees. incentives and allowances costs for special accessories shipping and destination charges financing charges
incentives and allowances
To increase customer value for a given price, the market must ______. reduce available attributes increase loyalty increase perceived benefits increase advertising
increase perceived benefits
Freeze Ice Cream Shop sells its specialty shakes for $3.50 each. In the summer months, the shop typically sells 200 shakes a day. The shop's owner thinks if he reduces the price to $3 he will increase sales significantly. However, when he reduced the price, he only sold about 15 more shakes per day. This represents demand that is ______. even elastic inelastic value-driven
inelastic
When a 1 percent decrease in price results in less than a 1 percent increase in quantity sold, demand for the product or service is ______. elastic unaffected flexible inelastic
inelastic
Pricing objectives involves specifying the role of price in what two areas of an organization? its strategic plans its mission statement its marketing plans its organizational culture
its strategic plans its marketing plans
Which product category is the best example of an oligopoly? a bio-pharmaceutical cancer drug, that is newly developed, patented and sold by only one firm large jetliners, which consists of just Boeing and Airbus corn, which within strains is identical, yet is sold by many producers peanut butter, which includes several national brands and dozens of regional and private brands
large jetliners, which consists of just Boeing and Airbus
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? environmental stewardship managing for long-run profits maximizing current profit target return
managing for long-run profits
Many Japanese car firms 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 maximizing current profit unit volume maximization target return
managing for long-run profits
Firms often pursue ______ as a pricing objective when industry sales are relatively flat or declining. marginal revenue unitary demand monopolistic competition market share
market share
Current profit ______ and target ______ are two strategies used by firms that are pursuing a profit pricing objective. return; identification maximization; marketing eligibility; maximization maximization; return
maximization; return
American firms are sometimes criticized for using which profit-oriented pricing objective, because it results in a short-term orientation? unit volume maximization maximizing current profit target return managing for long-run profits
maximizing current profit
Which profit-oriented pricing objective is common in many firms because the targets can be set and performance measured quickly? unit volume maximization target return maximizing current profit managing for long-run profits
maximizing current profit
What two strategies can be used as part of a firm's profit objectives? unit volume competitive parity maximizing current profits target return
maximizing current profits target return
Pricing ______ involve specifying the role of price in an organization's marketing and strategic plans. constraints demands objectives estimates
objectives
Pricing ______ frequently reflect corporate goals, while pricing ______often relate to conditions existing in the marketplace. objectives; constraints opportunities; objectives strategies; demands constraints; opportunities
objectives; constraints
What type of competition exists when only a few firms dominate a market? pure competition a monopoly monopolistic competition oligopolistic competition
oligopolistic competition
The unit variable cost is usually expressed ______. as a percentage of sales on a per unit basis as a percentage of fixed cost as a ratio to revenue
on a per unit basis
Which product is likely to be price inelastic? a sweater an airline ticket open-heart surgery a car
open-heart surgery
According the the value equation, an increase or a decrease in ______ will affect value. supply perceived benefits product preferences demand
perceived benefits
What element of the marketing mix has a unique role in that it is the place where all other business decisions come together? price promotion product place
price
What term refers to money or other considerations (including other products and services) exchanged for the ownership or use of a product or service? barter value offer price
price
Which element of the marketing mix is part of the profit equation and therefore, has a direct effect on a firm's profits? product purchase price promotion
price
What two elements are shown on a demand curve? total costs break-even point price quantity sold
price quantity sold
The percentage change in quantity demanded relative to a percentage change in price is known as ______. price elasticity of demand the contribution margin the profit equation the demand curve
price elasticity of demand
The percentage change in quantity demanded relative to a percentage change in price is known as ______. the profit equation the demand curve the contribution margin price elasticity of demand
price elasticity of demand
A consumer's near-instantaneous access to competitors' prices for the same offering through the use of websites, apps, and smartphones is known as ______. price transparency price elasticity marginal analysis value-pricing
price transparency
Break-even analysis can help evaluate the impact of changes in ______ and ______ on ______. price; consumer tastes; profit consumer tastes; consumer income; demand price; consumer tastes; demand price; costs; profit
price; costs; profit
A firm must know its competitors' ______ in order to best set its own. supply chain demand prices revenues
prices
Patents and limited competition reduce ______, making high prices possible for technology products early in their life cycles. differentiation pricing constraints monopolies customer interest
pricing constraints
Price elasticity of demand is expressed as percentage change in ______ divided by the percentage change in ______. price; quantity demanded quantity demanded; price quantity demanded; total revenue total revenue; quantity demanded
quantity demanded; price
A pricing objective of increasing sales can have the disadvantage of leading to price cuts that may ______. create new pricing constraints encourage other firms to enter the market reduce the revenues of related products in the firm's line increase the market share of competitors
reduce the revenues of related products in the firm's line
Fixed costs ______. are not important to setting prices for products and services go up and down regardless of changes in production remain at the same level despite changes in production are only as fixed as production volume
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. (one word)
revenue
A firm with a sales objective will set prices at a level that generates more ______. sales of related products in the company's line revenues customer satisfaction brand awareness
revenues
Firms that set ______ objectives believe that increased revenues will in turn lead to increases in market share and profit. unit volume survival sales competitor
sales
A target return objective can be described as ______. setting a specific profit goal, say 20 percent setting the quantity produced or sold as a pricing objective a target set for a short period of time, say one year giving up immediate profits for long-term gain
setting a specific profit goal, say 20 percent
When a board of directors determines a specific profit goal, marketing managers usually implement a(n) ______ objective. target return manage long-run profits status-quo pricing maximizing current profits
target return
How do a firm's channel members affect the price a firm can charge for its products? the channel members compete for business, which makes prices lower the more channel members there are, the less the price will be the channel members must earn a profit, which raises the price channel members dictate to firms the price that they are willing to sell the product for
the channel members must earn a profit, which raises the price
In an industry that has an oligopoly, price wars are likely to benefit only ______. the shareholders of the firms involved the largest firm the most established firm the consumer
the consumer
Market share can be measured as the ratio of ______ compared to the total industry units sold. a firm's unit price the average of competitors' unit price the firm's units sold the total competitors' units sold
the firm's units sold
The newer a product and the earlier it is in its life cycle, ______. the higher the price that can usually be charged the lower the price must realistically be the slower the demand will decrease the more competition it will face
the higher the price that can usually be charged
What is the definition of price? the money or other considerations exchanged for the ownership or use of a product. any factor that determines consumers' willingness and ability to pay for products and services. the practice of exchanging products and services for other products or services. a judgment by a consumer of the worth and desirability of a product or service relative to substitutes.
the money or other considerations exchanged for the ownership or use of a product.
The three factors influencing the demand curve are consumer tastes, consumer income, and ______. the availability and cost of promotion options the number and proximity of distribution outlets the price and availability of similar products the number and size of new target markets
the price and availability of similar products
Movement along a demand curve implies a change in ______. consumer income consumer tastes the number of substitutes the price charged
the price charged
A product is more likely to be price inelastic under which two circumstances? there are many alternatives to choose from the product is a necessity there are few substitutes the product is a frivolous purchase
the product is a necessity there are few substitutes
If a firm prices a product low, it may signal to a customer that ______. the product is of questionable quality the product is a brand new offering there is strong demand for the product that the product outperforms its competitors
the product is of questionable quality
To many consumers, price provides information about ______. the future success of a product the competition's strategy specific attributes of a product the quality of the product
the quality of the product
Why must a marketing manager consider pricing objectives and constraints? to reduce dependence on product revenues to narrow the range of choices among the variety of pricing strategies to determine what kinds of special adjustments to the list price will work best to estimate the changes to demand that will occur with a price increase
to narrow the range of choices among the variety of pricing strategies
The sum of fixed and variable costs is known as ______. marginal revenue marginal cost total cost variable revenue
total cost
Unit price times quantity sold equals ______. total revenue total profit total variable cost the break-even point
total revenue
According to the profit equation, profit equals ______. total cost minus variable cost total revenue minus total cost fixed cost minus variable cost unit price times quantity sold
total revenue minus total cost
According to the profit equation, profit equals ______. unit price times quantity sold total revenue minus total cost total cost minus variable cost fixed cost minus variable cost
total revenue minus total cost
In the profit equation, what is multiplied by quantity sold? unit price variable cost volume fixed cost
unit price
In the profit equation, what is multiplied by quantity sold? variable cost unit price volume fixed cost
unit price
The pricing objective based on the quantity of product sold by a firm is called ______. market share revenue unit volume sales
unit volume
The pricing objective known as ______ can be counterproductive if it is achieved by drastic price cutting that drives down profit. survival social responsibility unit volume unitary demand
unit volume
The ratio of perceived benefits to price is a product's ________
value
At McDonald's, you can get several items together as a meal, for less than purchasing those items separately. This is an example of ______. price skimming monopolistic competition pure competition value pricing
value pricing
Creative marketers engage in ______ when they increase product and service benefits while maintaining or decreasing price. price skimming break-even analysis pure competition value pricing
value pricing
Creative marketers engage in ______ when they increase product and service benefits while maintaining or decreasing price. pure competition value pricing break-even analysis price skimming
value pricing
Total cost represents ______. variable costs times fixed costs variable costs minus fixed costs variable costs plus fixed costs fixed costs divided by variable costs
variable costs plus fixed costs