Chapter 20: pre-quiz

If a retailer purchases a can of soup for 60 cents and sells it for 99 cents, what is the markup as the percentage of cost? The percentage of selling price?

65%; 39.4%

Mike is pricing a new couch. This couch is higher-quality and expected to last longer than your traditional couch. Mike prices the couch high because he knows that consumers anticipate paying more for longer-lasting products. What stage of the pricing process is Mike currently?

Assessing the target market's evaluation of price

Scenario 20.2 Malcolm has decided that he wants to open up his own law practice. The time has come to establish prices for his services. Due to his extensive experience and legal background, he believes that his fees should not relate directly to the time or effort spent on specific cases. Refer to Scenario 20.2. Now that Malcolm has chosen the pricing strategy he wants to use, what is his next step?

Determining the final price

Scenario 20.3 Anthony works at a firm that wants to develop a new pricing strategy for one of its products. The company has decided that its main objective for this product is to increase the product's sales in relation to industry sales. Anthony has obtained a list of prices that tell him how much similar products are being sold for. Anthony is particularly interested in the industry's top competitor because it has so much market share. After determining the price of its major competitor, Anthony decided to undercut their price by several dollars. He believes putting a sign in their stores that features his company's discounted price next to the price of their major competitor for the same product will show consumers that Anthony's company offers them a much better deal. However, he knows that he has to be careful not to misrepresent the competitor's price in the process. Refer to Scenario 20.3. When Anthony is examining the list of prices, he is most likely in which of the following stages?

Evaluating competitors' prices

The use of comparative shoppers would generally occur during which step of the pricing process?

Evaluating competitors' prices

Shelly is undergoing the six-step process for establishing prices for a newly launched product. She has just finished assessing the target market's evaluation of possible prices. What is Shelly's next step?

Evaluation of competitors' prices

Scenario 20.3 Anthony works at a firm that wants to develop a new pricing strategy for one of its products. The company has decided that its main objective for this product is to increase the product's sales in relation to industry sales. Anthony has obtained a list of prices that tell him how much similar products are being sold for. Anthony is particularly interested in the industry's top competitor because it has so much market share. After determining the price of its major competitor, Anthony decided to undercut their price by several dollars. He believes putting a sign in their stores that features his company's discounted price next to the price of their major competitor for the same product will show consumers that Anthony's company offers them a much better deal. However, he knows that he has to be careful not to misrepresent the competitor's price in the process. Refer to Scenario 20.3. Anthony's firm has adopted a _______ pricing objective.

Market Share

Demand-based pricing is best used when the company has _______.

a fixed amount of available resources that are perishable

Sam Walton, founder of Walmart, was a retail genius. One thing he would do is advertise a product such as a microwave at a knock-down price. Consumers would come into the store to examine the low-priced microwave. Next to the low-cost microwaves, Walmart would position some better quality, higher-priced microwaves. The idea is that consumers will be attracted to the store due to the low-priced product but that they often upgrade and purchase a higher-priced product once they realize that it offers better quality. Such a method is completely legal as long as there are enough low-priced products available that consumers can choose from if they desire. Sam Walton used what type of pricing strategy?

bait pricing

Bert's company is about to release a new electronics product. The electronics product is estimated to have a short life cycle before it is replaced by an upgraded one. The company would like to recover the capital spent to produce the product. It therefore decides to charge the highest possible price for the product upon release. Bert's firm recognizes this might provide an advantage to competitors who may release the product at a lower price, but it believes customers will feel that the higher price signals higher quality. Refer to Scenario 20.1. What type of pricing objective has Bert's firm adopted?

cash flow

Scenario 20.3 Anthony works at a firm that wants to develop a new pricing strategy for one of its products. The company has decided that its main objective for this product is to increase the product's sales in relation to industry sales. Anthony has obtained a list of prices that tell him how much similar products are being sold for. Anthony is particularly interested in the industry's top competitor because it has so much market share. After determining the price of its major competitor, Anthony decided to undercut their price by several dollars. He believes putting a sign in their stores that features his company's discounted price next to the price of their major competitor for the same product will show consumers that Anthony's company offers them a much better deal. However, he knows that he has to be careful not to misrepresent the competitor's price in the process. Refer to Scenario 20.3. Which of the following pricing strategies is Anthony planning to adopt?

comparison discounting

Valerie is attempting to price a piece of custom-made equipment for a gym. The production costs of the equipment are hard to assess. She decides it would just be easier to add a specified dollar amount to the total cost. What type of pricing is Valerie using?

cost-plus

Mai has a dilemma. She works for a chocolate company and the price of chocolate is going up. The most logical solution would be to raise the price. However, Mai knows from her history in the business that their loyal customers would not look favorably on a price increase. For customers, candy bars are one of those items where the price rarely changes. Mai's firm has sold its candy bars for $0.99 for the past two decades. Mai feels that the next best solution to absorbing the extra costs is to make the candy bars slightly smaller without lowering the price. Mai's company is most likely using which of the following pricing strategies?

customary

When establishing prices, a marketer's first step is to

develop pricing objectives.

Disney is implementing a new type of pricing. When demand increases and more customers visit the parks, the price will increase. When demand dips during the slow season, prices will decrease. This is a way to help balance out supply and demand. What is another name for the type of pricing that Disney is using?

dynamic pricing

Philip goes to a Toyota dealership looking for a new car. He finds a Toyota Corolla he really likes. The time has come to meet with the salesperson. What type of pricing strategy is the salesperson likely to adopt with Philip?

negotiated pricing

Marketers must take steps to make sure that the pricing objectives they set are consistent with the organization's ____ objectives and ____ objectives.

overall; marketing

Scenario 20.1 Bert's company is about to release a new electronics product. The electronics product is estimated to have a short life cycle before it is replaced by an upgraded one. The company would like to recover the capital spent to produce the product. It therefore decides to charge the highest possible price for the product upon release. Bert's firm recognizes this might provide an advantage to competitors who may release the product at a lower price, but it believes customers will feel that the higher price signals higher quality. Refer to Scenario 20.1. What type of pricing strategy is Bert's company using for this product?

price skimming

If Apple seeks to lead the electronics industry in innovation, what type of pricing objective will it most likely adopt?

product quality

Malcolm has decided that he wants to open up his own law practice. The time has come to establish prices for his services. Due to his extensive experience and legal background, he believes that his fees should not relate directly to the time or effort spent on specific cases. Refer to Scenario 20.2 What type of pricing will Malcolm most likely choose?

professional pricing

Value is a combination of price and _______.

quality

Procter & Gamble's Bounty paper towels has the highest market share in the industry. It operates as a cash cow for P&G. Assume that Procter & Gamble is adjusting the prices of Bounty paper towels sold in the United States. Viewing the United States as a saturated market, the marketing manager of Bounty believes that P&G should adopt a pricing strategy that will serve to maintain their current market share. What type of objective is this manager adopting?

status quo

Paperclips is an office supplies company that has just adjusted its price levels so that it can increase its sales volume to match its expenses. Paperclips is most likely employing a____ objective.

survival

Running a big sale in order to generate enough cash to pay creditors can occur in a situation in which a firm's primary pricing objective is

survival

Which of the following is a requirement for setting pricing objectives?

the objectives should be explicitly stated