Chapter 9- Pricing

% change in sales=

((PS x (P2-P1))/P1

Company XYZ manufactures quality widgets but does not invest a significant effort in marketing the company or its widgets. If Company XYZ were to develop a ________, one of the benefits it would realize is the ability to charge premium prices.

(Brand)

Customers are shown products with various combinations of features and attributes, with price being one of them. The customers are asked, "Which combination do you prefer most?" and then, "Next most?" etc. What type of study is being done

(Conjoint analysis)

The idea that price is negotiated between the buyer and seller refers to which of the following terms

(Dynamic pricing)

What term refers to the "wiggle room" in the supply and demand curve?

(Elasticity)

A price's role as a cue is so strong that prices are known to contribute to the formation of ______ prior to a purchase

(Expectations)

The point of __________ is to find a solution to price wars by getting each player to think about the broader market, rather than only optimizing their own needs.

(Game theory)

Which of the following is true about competitive pricing?

(It is at a medium level, somewhere in between extremes, using competitors' prices as a starting point, and adjusting from there.)

profit max=

(MR=MC) i) MR= the extra money brought in by selling one more unit ii) MC= the extra cost by selling one more unit

Profit maximization occurs when marginal revenue equals ______.

(Marginal cost)

Big Time Products, Inc. sets high prices for its products, and the company seeks profit margin, not volume. In which strategy is Big Time Products engaged?

(Market skimming)

If your fixed costs (including marketing, advertising, R&D, depreciation, etc.) are high relative to variable costs (which include labor or unit components), the strategic objective is to:

(Maximize sales volume)

What type of consumer is represented by the left side of this figure?

(One who wants the brand, and is willing to pay more to get it)

elasticity=

(P1(Q2-Q1))/(Q1(P2-P1))

Profit=

(Price X Demand) - (Fixed costs) - (Variable costs X Demand)

In the marketing framework, the change in a product's ________ is easily measurable when compared to the other Ps. a. price b. promotion c. features d. place

a

Price sensitivity is greater when the product is a ________. a. luxury good b. necessity c. consumer durable good d. complementary good

a

A ________ is a means of figuring out how many units a manufacturer has to sell before recovering his costs. a. conjoint analysis b. Vals test c. breakeven analysis d. beta test

c

If the price of a product goes up, which of the following drives the demand for the same product? a. Large number of B2B substitute products b. Small number of complementary products c. Small number of substitute products d. Large number of complementary products

c

If a firm prices its brand too low, the volume of sales will pick up. a. True b. False

a

What is the marketing manager's favorite tool to study pricing?

(Conjoint)

break even analysis

=Fixed costs/ (price-variable costs)

Lee is the product manager for a software program sold by Company ABC. In evaluating the product, Lee determines that something just isn't right with how the software program is marketed to potential customers, and he feels a change is necessary. Which of the following marketing mix variables is easiest for Lee to change

(Price)

What does it mean for demand to be "unitary?"

(Prices go up and down but revenues remain about the same)

All the following are indicators of scanner data EXCEPT:

(Product advertising)

There is a segment of people who are not really interested in the product regardless of the price. What are their answers most likely to be?

(Q1=2 or 3, and Q2=1 or 2)

The point of indifference at which you say, "If you raise the price, forget it, I won't buy; if you drop the price, okay, I will," refers to which of the following terms?

(Reservation price)

National Product Company is indecisive about what prices it should charge for items in its new product line. The company wants the most accurate data on customers' willingness-to-pay for its products. By using ________, which can yield very precise estimates of demand and price sensitivities at numerous price points, National Product Company can gather the data it needs to set prices

(Scanner data)

Which of the following is NOT true about the price-sensitive segment?

(They'll buy our brand no matter what)

Which of the following formulas defines profit?

(price x demand) - (fixed costs) - (variable costs x demand)

ABC Company has several product models within its product line. The company charges different prices, which can reflect different _________ functionality.

(product)

Which of the following is the formula for cost-plus pricing?

(unit cost) / (1-X%)

cost plus pricing

=Unit costs/(1-x%)

target profit

[(Price-Variable costs) X Demand] - (fixed costs)

Which of the following explains the difference between elastic and inelastic demand? a. Elastic demand means product demand varies with a change in the product's price, while inelastic demand means the product demand remains static even with a change in the product's price. b. Elastic demand relates to intangible services, while inelastic demand relates to tangible goods. c. Elastic demand relates to the internal projects of a firm, while inelastic demand relates to the external projects of a firm. d. Elastic demand means the product demand depends on the segmentation process of a firm, while inelastic demand means the product demand depends on the targeting process of a firm.

a

If the unit cost of a product is $4 and the intended rate of return is 25%, determine the covering cost of the product using the cost-plus pricing model? a. $4.73 b. $5.33 c. $14.00 d. $4.23

b

In a(n) ________ study , customers are shown products with various combinations of features and attributes, with price being one of them. a. unit-margin b. conjoint c. break-even d. beta test

b

In the context of high pricing strategies for products, the equation used to determine the percent change in sales for a stable price sensitive product is: a. (Price sensitivity * Original Price) / (New Price - Original Price) b. Price sensitivity * ( New price - Original price) / Original price c. ( New Price - Original Price ) / (Price sensitivity * Original price ) d. Original Price * (New price - Original price ) / Price sensitivity

b

Dominic Inc., a pretzel manufacturer, introduced a new flavor of pretzels in the market. The fixed manufacturing costs came up to $5,000, and the cost of packaging materials for a box came up to $15. If a box of pretzels is priced at $25, what is the breakeven point of Dominic Inc.? a. 50 boxes b. 250 boxes c. 200 boxes d. 500 boxes

d

A two-part tariff is used in linear pricing. a. True b. False

false

An auction uses a static pricing strategy. a. True b. False

false

If a firm's variable costs are high relative to its fixed costs, the sales volume should be maximized. a. True b. False

false

In the context of pricing, brand loyal customers are elastic in nature. a. True b. False

false

Price sensitivity should decrease when price information is easily available to customers to compare across competing brands. a. True b. False

false