Chapter 11 Quiz

at-market pricing.

a reference price for competitors that use above- and below-market pricing.

Standard markup pricing refers to

adding a fixed percentage to the cost of all items in a specific product class.

Companies use a "__________" to assess whether its products and brands are above, at, or below the market.

price premium

Setting the highest initial price that customers really desiring the product are willing to pay when introducing a new or innovative product is referred to as a

skimming strategy.

Which of the following is a cost-oriented pricing method?

standard markup pricing

According to the price equation, final price equals __________ minus incentives and allowances plus extra fees.

list price

Netflix used to charge $14.99 per month for its movie rental service. However, when Blockbuster introduced the same service at $13.99, Netflix then dropped its price to $13.99. Netflix most likely made this price reduction in an attempt to

maintain market share

Bundle pricing refers to

marketing two or more products in a single package price.

Rather than emphasize demand, cost, or profit factors, a price setter can stress what __________ is (are) doing.

"the market" or competitors

Suppose you want to get "plugged in" and buy a Tesla Roadster Sport (see the photo above), the world's leading all-electric, zero-emission car that has a 245-mile range and can be recharged in three hours. The Tesla Roadster Sport has a list price of $110,000, but you want several options (leather interior, carbon fiber hard top, electronics upgrade, metallic paint, performance wheels, and others) that will cost $20,000. An extended warranty will add an additional $5,000. However, if you put $50,000 down now and finance the balance over the next year, you will receive a dealer rebate of $3,500 off the list price. The dealer will give you a $4,000 trade-in allowance for your 2005 Honda Civic DX four-door sedan. In addition, you will have to pay a state sales tax of $10,000, an auto registration fee of $500 to the state, and a $500 destination charge to ship the car. But because the Tesla Roadster Sport is an alternative energy vehicle, you qualify for a $2,500 state rebate and a $7,500 federal tax credit! Finally, your total finance charge is $2,500. Applying the price equation, what is your final price for the Tesla Roadster Sport?

$131,000

A company that manages apartments decides to buy 15 new dishwashers at a list price of $550 each as replacements for old dishwashers in a small apartment complex it owns. Because the company is buying more than 10 dishwashers, it is eligible for a $150-per-unit quantity discount. Financing charges total $20 per unit. The company gets $10 per dishwasher for the 15 dishwashers traded in. What is the final price the company will pay for each dishwasher (not the total cost)?

$410

Forever Quilting is a small company that makes quilting kits priced at $120 each. There is no quantity discount. The costs of the materials that go into each kit are $45. It costs $5 in labor to assemble a kit. The company has monthly expenses of $1,000 for rent and insurance, $200 for heat and electricity, $500 for advertising, and $4,500 for the monthly salary of its owner. Last month the company sold 150 kits. Forever Quilting's total revenue for the month was

120x150 = 18,000 $18,000.

Rents, executive salaries, and insurance are typical examples of

Fixed costs

In response to Duracell's introduction of the Duracell Ultra battery, Energizer introduced an Advanced Formula battery. But unlike Duracell, Energizer priced its batteries at a low initial price to attract the mass market. Was Energizer's pricing strategy to take market share from Duracell a success?

No, because consumers were unable to perceive the improved quality due to the low price.

penetration pricing.

Setting a low initial price on a new product to appeal immediately to the mall market.

Which of the following statements about the price-setting process is most accurate?

Sometimes pricing strategies overlap, and a seasoned marketer will consider several strategies when choosing an approximate price level.

A firm's profit equation equals

Total revenue ? Total cost or [ (Unit price × Quantity sold) ? (Fixed cost + Variable cost)].

Southern gardeners normally pay $5 for a 2-cubit-foot bag of pine bark mulch that they buy at their local gardening-supply and home-improvement stores to keep the weeds down in their gardens. If the price being charged by a retailer is not within a narrow range that gardeners feel is appropriate, they will use substitutions-newspaper, grass clippings, or some other kind of ground covering. When pricing pine bark mulch, a garden-supply or home-improvement retailer should use

customary pricing.

Demand-oriented approaches weigh factors that underlie expected __________ more heavily than such factors as cost, profit, and competition when selecting a price level.

customer tastes

Several companies produce latex gloves that are used in a variety of different industries. If one of the glove manufacturers decreases its price by just a few percentage points, it will result in a significant increase in quantity demanded. The demand for latex gloves is

elastic.

Which term describes factors that limit the range of prices a firm may set?

pricing constraints

In some cases, penetration pricing may follow skimming pricing. The skimming pricing would help __________ and the penetration pricing would help__________.

recoup initial research and development costs; increase market share

Marketing executives must translate estimates of customer demand into estimates of

revenues the firm expects to receive.

Prestige pricing refers to

setting a high price so that quality- or status-conscious consumers will be attracted to the product and buy it.

Penetration pricing refers to

setting a low initial price on a new product to appeal immediately to the mass market.

Target return-on-investment pricing refers to

setting a price to achieve an annual target ROI.

bundle pricing.

the marketing of two or more products in a single package price.

Price refers to

the money or other considerations (including other products and services) exchanged for the ownership or use of a product or service.

Barter refers to

the practice of exchanging products and services for other products and services rather than for money.

Variable cost refers to

the sum of the expenses of the firm that vary directly with the quantity of a product that is produced and sold.

loss-leader pricing.

to attract customers in hopes they will buy other products as well, particularly the discretionary items with large markups.

customary pricing.

tradition, a standardized channel of distribution, or other competitive factors dictate the price.

While consumer tastes and price and availability of similar products determine what consumers want to buy, consumer income determines

what they can buy.