Marketing final

When firms set prices similar to those of competitors, they are following a strategy of

competitive parity

A reference price is

the price against which buyers compare the actual selling price.

Kyle estimates that the fixed costs associated with opening a new bank branch are $500,000. He expects the branch to attract 1,000 new customer accounts in the first year, each of which will cost $50 per year to service. He also expects to generate $100,000 per year in revenue. For Kyle, the total cost of opening the new branch and remaining open for one year will be

550,000

Samson rents rooms in his hotel for an average of $100 per night. The variable cost per rented room is $20, to cover maid service and utilities. His fixed costs are $100,000 and his profit last year was $20,000. For Samson, the contribution per unit is

80

Price advertisements should never

Price advertisements should never

When CarMax promises a "no-haggle" pricing structure, it exhibits ________ because it provides additional value to potential used car buyers by making the process simple and easy.

a customer orientation

The saying "leaving money on the table" is associated with

a penetration pricing strategy when there is an opportunity for price skimming.

A pricing tactic is

a short-term approach that is often in response to a competitive threat.

A useful technique that enables managers to examine the relationships among cost, price, revenue, and profit over different levels of production and sales is called

break-even analysis

Variable costs change with

changes in the quantity being produced.

When Ursula decides how to price new products in her gift store, she measures the value of her product offerings against those of the other stores in her area. Ursula uses a ________ pricing strategy.

competitor-oriented

Dana owns a bakery where she sells cupcakes. Two blocks down there is another bakery, Sweet's Bakery, that sells cupcakes for $1 less than Dana. Dana decides to lower her price and match Sweet's Bakery prices. What type of pricing strategy is Dana implementing?

competitor-oriented pricing

How can a company find its way out of a market characterized by pure competition?

differentiate the product in some way, even by packaging, so customers will see it as distinct

The ________ occurs when unit cost drops as the quantity sold increases.

experience curve effect

A study found that, among addicted smokers, a 10 percent increase in the price of cigarettes resulted in a 2 percent decrease in quantity demanded. For these consumers, cigarettes have a(n) ________ price elasticity demand.

inelastic

A strategy of setting prices based on how customers develop their perceptions of value can often be the most effective pricing strategy, especially if the strategy

is supported by consistent advertising and distribution strategies.

One of the limitations associated with break-even analysis is that

it assumes that there is only one price.

One of the difficulties associated with value-based pricing is that

it necessitates a great deal of consumer research to be implemented successfully.

When a new product is not being sold at the rate originally forecasted, the retailer may reduce the price in order to reduce the inventory of the product. This reduction is known as a

markdown

There is often only one provider of cable television services in each region of the country: Time Warner is in New York, Comcast is in most of New England, and so forth. When Comcast recently proposed a plan to buy Time Warner, the purchase ultimately could not be completed, mostly due to concerns that it would have caused Comcast to become an overly large ________ with too much power.

monopolist

In a market with ________ there are many firms providing differentiated products.

monopolistic competition

What type of competition occurs when there are many firms competing for customers in a given market, but their products are differentiated?

monopolistic competition

For which of the following is demand likely to be least sensitive to price increases?

prescription drugs

If a 1 percent decrease in price results in less than a 1 percent increase in the quantity demanded, demand is

price inelastic

The contribution per unit is

price minus variable cost per unit.

What price competitive level would be indicated when the price is usually set according to the laws of supply and demand?

pure competition

Historically, prices were

rarely changed except in response to radical shifts in market conditions.

Ozzie is the marketing manager for an automobile dealership. His boss tells him the firm's primary goal is to increase its local market share from 15 to 30 percent. His firm is using a ________ orientation.

sales

Abdul's firm has set corporate direction to become one of the leaders in each of its significant market segments. It was Abdul's job to examine the firm's pricing strategy to determine how to maximize market share, even at the expense of profits in the short run. What kind of company objective would guide Abdul's effort?

sales-oriented

Price lining is

setting a price floor and a price ceiling for a line of products and then setting price points in between to represent differences in quality.

The most common form of a quantity discount for consumers is a

size discount

Fees paid to retailers simply to get new products into stores or to gain more or better shelf space for their products are called ________ allowances.

slotting

Which of the following markets is most likely to be characterized by oligopolistic competition in the United States?

smartphone service providers

Which of the following is most likely to be characterized by pure competition in the United States?

soybeans

According to a typical demand curve, the higher the price,

the lower the quantity consumers will buy.

The more substitutes that exist in a market,

the more sensitive consumers will be to changes in the price of a particular product.

A reference price might be considered deceptive if

the reference price has been inflated or is fictitious.

Because consumers are generally more sensitive to price increases than to price decreases, it is easier to lose current customers with a price increase than it is to gain new customers with a price decrease.

true

complimentary

________ products are products whose demands are positively related and as such, they rise or fall together.

Yury is opening a financial consulting service for high-income retirees in his area. This target market is used to paying for quality and associates high quality with high prices. In this instance, Yury should probably not use a penetration pricing strategy because

a low price might signal low quality.

Star Heating and Air Conditioning Company specializes in electric heat pumps. Francis keeps track of the price of natural gas, knowing that

an increase in the price of natural gas will increase demand for his electrical heating systems.

An everyday low pricing strategy stresses the continuity of retail prices

at a level between the regular price and the deep-discount sale prices of competitors.

Renata estimates the average cost of her floral arrangements is $12 regardless of whether she is making 5 or 25 arrangements that day. She adds a standard markup to the $12 estimate to determine her price. Renata is using a(n) ________ pricing method.

cost-based

Managers of Wendy's fast-food restaurants keep track of prices at competitors such as McDonald's, Burger King, and Arby's, knowing that a decrease in the prices at these other fast-food restaurants will

decrease demand for Wendy's products.

Marketers spend millions of dollars annually trying to create or reinforce brand loyalty. Brand loyalty changes the demand curve for the firm's products by

decreasing the price elasticity of demand

Customers must see value in a product or service before they are willing to exchange time or money to obtain it, but not all customers see the same value in a product. To analyze how many units will be sold at any given price point, marketers draw on

demand curve

The break-even point is estimated bydividing fixed costs by contribution per unit.

dividing fixed costs by contribution per unit.

Break-even analysis is useful because it allows managers to

estimate the quantity they will need to sell at a given price to break even.

A pricing strategy and a pricing tactic are essentially the same thing.

false

At the break-even point, profits are maximized.

false

Brands that have developed loyal customers have a higher price elasticity of demand.

false

Costs related to supply and costs related to demand are the two primary cost categories.

false

It is best if firms choose one pricing strategy to use for all its products rather than use different methods for pricing. Group starts

false

The demand curve for prestige products generally slopes downward due to higher prices.

false

When Sony released its PlayStation 4 game console, it charged a high price, attracting the most avid game players. This was a market penetration pricing strategy.

false

When a firm has a particular profit goal as its overriding concern, it will use target return pricing to meet the profit objective.

false

If all three grocery stores in town decide to charge the same price for a gallon of milk, what type of pricing tactic is being used?

horizontal price fixing

Ike manages a Shoney's restaurant. He is considering staying open later in the evening. For Ike, the variable costs associated with staying open longer hours will include

house worked by cooks

The commercial airline industry is considered what type of market?

oligopolistic competition

Consumers generally believe that ________ is one of the most important factors in their purchase decisions.

price

Juliannna wants her firm's gourmet snacks to be the leading brand in the U.S. market. When adopting a pricing strategy designed to gain market share, she should remember that

rarely is the lowest-price offering the dominant brand in a market.

Dante always buys and uses Bridgestone brand golf balls. If he finds a Titleist or Callaway ball in the rough, he gives it away. Brand-loyal golfers like Dante allow Bridgestone to charge a higher price and not lose many sales. By building a strong brand, Bridgestone has effectively

reduced the price elasticity of demand for its products.

A ________ strategy involves accurately measuring all the factors needed to predict sales and profits at various price levels, so that the price level that produces the highest return can be chosen.

target return

Annika operates on a pretty tight budget. She is a price-conscious shopper and usually buys store or generic brands to save money. Recently, however, Annika was given a pretty substantial raise. As such, she has altered her shopping patterns and now regularly buys more expensive, name-brand goods. This is an example of

the income effect

There are many options available to consumers when it comes to breakfast cereals. So, if Kellogg's significantly increases the price of Rice Krispies, consumers are more apt to buy alternate cereals instead. This illustrates which concept?

the substitution effect

One problem in relying on price elasticity and demand curves when setting prices is the way a product or service is marketed can have a profound impact on price elasticity

the way a product or service is marketed can have a profound impact on price elasticity.

Cost-based methods do not recognize the role that consumers' or competitors' prices play in the marketplace.

true

Coupons may annoy, alienate, and confuse consumers and therefore do little to increase store loyalty.

true

In U.S. markets, there are many substitute products for Lucky Charms cereal, suggesting the price elasticity of demand for Fruit Loops is high. Group starts

true

Pricing strategies should be aligned with a firm's overall goals and objectives.

true

The key to successful pricing is to match the product with the consumer's perception of value.

true

A customer orientation toward pricing implicitly invokes the concept of

value

Consider a bakery like Entenmann's: The majority of the ________ costs are the cost of the ingredients, primarily flour.

variable