Chapter 17

Some producers give _____ to retailers to pass on to the retailers' salesclerks in return for aggressively selling particular items or lines.

"push money" allowances

Which of the following statements about geographic pricing policies is true?

-F.O.B. shipping point pricing simplifies the seller's pricing—but it may narrow the market. -Uniform delivered pricing is more practical when transportation costs are relatively low. -Zone pricing reduces the wide variation in delivered prices that results from an F.O.B. shipping point pricing policy. -Freight-absorption pricing may increase the size of market territories.

Basic Points About Pricing

-Price gets least amount of attention of 4 Ps! -Small businesses don't have marketing departments! -Seen as financial decision -Can be done easily! --Standard industry markups --Pricing according to their competitors (aka Status Quo Pricing) --Cost-plus pricing

Price Penetration

-Start low to get much of the market -Best used for products that are common and/or can be easily duplicated

Price Skimming

-Start price high to target the top of the demand curve -Reduce price as competition enters to attract more segments of the market -Usually best used for products that are innovative, unique and/or have patent protection -High profit margin in beginning

Which of the following statements is true of a cumulative quantity discount?

A cumulative quantity discount encourages a customer to consolidate buying from a single supplier.

Which of the following statements is true of a one-price policy?

A one-price policy makes pricing easier.

Which of the following statements is true of rebates?

A rebate is a refund paid to a consumer after a purchase.

Which of the following is a disadvantage of a rigid one-price policy?

It allows competitors to undercut one's price.

Pricing Flexibility

One Price Fits All versus Negotiable Pricing -Cars are usually price-negotiated! -Jewelry store purchases are all over the place! -Mattress retailers are inconsistent as well! -But not grocery stores!

The amount of money that is charged for "something" of value, or _____, is one of the four major strategy decision variables that a marketing manager controls.

Price

A producer of sports equipment offers its retailers a 2 percent price reduction on all purchases if the dealer advertises its products locally. In this scenario, the producer is using a(n)

advertising allowance.

Frisky Flights is a regional airline based in El Paso. Frisky uses a computer system to set prices for its tickets. The price for any given flight changes over time based on demand for that and other similar flights, the predicted weather, and other factors. This is an example of

dynamic pricing.

Which of the following factors is most likely to impact the effective price of products sold across national borders?

exchange rates

Prices are "administered" when

firms consciously set their own prices.

In the United States, selling the same product to different buyers at different prices is

illegal if it injures competition.

Which of the following options is a type of sales oriented objective?

market share

A(n) _____ policy tries to sell the whole market at one low price and is typically used when a firm expects strong competition very soon after introduction.

penetration pricing

A major timber exporting firm meets with competing timber exporters where they agree to not sell below certain prices. These exporting firms are engaging in

price fixing.

Nora is the marketing manager for a pharmaceutical firm that has just been approved to sell a unique new drug that cures the common cold. Nora decides to set a low price, reasoning that if the price is too high then many potential customers will be unable to unwilling to purchase the drug. Which pricing objective is most likely to be guiding Nora's decision?

profit maximization

When Royal Blue Airlines began flying between Los Angeles and San Francisco, the airline offered individual travel agents a bonus of $5 each time they sold a Royal Blue ticket on the route. Royal Blue appears to be using a _____ allowance to encourage retail travel agents to promote its flights over the competition.

push money

Aster Co. has introduced a new product and set the price to help achieve "the 10% share we need to be in the game." This is an example of a

sales-oriented objective.

When a firm follows a value pricing policy, it attempts to

set a fair price level for a marketing mix that provides superior customer value.

Cellphones with unique new technology are usually released in the market at a high price since there is no immediate competition for the product. Gradually, the prices are reduced to capture more customers and to compete with competitors who copy the new technology. This type of pricing strategy is known as a _____ policy.

skimming price

Meeting competition and nonprice competition are types of _____ pricing objectives.

status quo-oriented

A(n) ________ is intended to reassure retailers or other intermediaries that they will make some profit on a new product even if consumers do not buy it, and thereby convince them to carry it.

stocking allowance

A marketing manager for a large company sets a specific amount of profit as an objective, which is stated as a percentage of sales. The manager compares the performance of each division of the firm against this objective and drops those divisions that are not yielding the specified profit. Which of the following pricing objectives is the marketing manager using in this scenario?

target return objective

Firms operating in monopolistic competition implies that

there are pricing options.

Mukesh is the marketing manager for a line of laundry products sold throughout the country. While there are many customers who are willing to pay the list price for his products, he wants to attract additional customers as well. What strategy would be most effective for Mukesh?

using coupons and rebates