Marketing Final ch. 20

A retailer of Real Dry deodorant prices it at $2.00; it costs the retailer $1.40. What is the approximate markup as a percentage of selling price?

30%

Kohl's pays $16.50 for a six-ounce bottle of cologne and sells it for $25.95. Its markup as a percentage of cost is approximately ____% for this product.

57

Which of the following pricing objectives sets prices to recover cash as quickly as possible?

Cash flow

Brian is shopping for a new coat at Stein Mart and finds a North Face down jacket that he really likes. He knows that the North Face brand is considered to be high quality and that it's usually very expensive. He's pleasantly surprised to see the price—the "suggested retail price" is $199 and Stein Mart's price is $99. Brian decides to purchase the coat even though it's a little more expensive than he originally thought he'd spend on the jacket. What type of pricing strategy is Stein Mart using to price the North Face jacket and other merchandise?

Comparison discounting

The manager at Target puts a sign up next to a Samsung audio system that reads, "Only $299.99! $60 less than at Best Buy." This is an example of what type of pricing strategy?

Comparison discounting

If PepsiCo sets its twelve-pack price to match the price charged by Coca-Cola, Pepsi is using which of the following pricing methods?

Competition-based

For custom-made equipment or commercial construction projects, which pricing method is most likely used?

Cost-plus

All for Fun is a retail store that offers a variety of board games, magic cards, and other collectible items and caters to teens and adults who enjoy strategy-based games. The store has over 20,000 magic cards and utilizes a sophisticated computer system to identify the value of each card. All for Fun determines the rarity of a given card and adjusts prices according to how much money customers are likely to pay for a particular card. Cards that are in limited production or considered "rare" are more expensive than cards that are widely available. Thus, the price for a single magic card might vary between $25 and $50 or more per card depending on the market. What type of pricing is All for Fun utilizing?

Demand-based pricing

After selecting a pricing strategy, what is the next step in the establishment of prices?

Determining a specific price

Department stores such as Kohl's and Macy's are interested in learning how much their competitors are charging for similar merchandise. Which of the following practices might these retailers utilize to identify competitors' prices?

Employing comparative shoppers who systematically collect data on prices at competing stores

Janet works at ITZ, a new makeup brand. Her company has decided that they want to lead the makeup industry in product quality. They have assessed the market and determined that women will associate higher-priced makeup with being higher in quality. What is the next step that Janet's company must do?

Evaluate competitors' prices

Which of the following characteristics is unique to pricing more so than other variables of the marketing mix?

Flexibility

Pfizer wants to price its newest medication product so that it earns a 35% return on investment. It chose this pricing objective because of the significant amount of resources it spent on research and development. What is one challenge of using return on investment as a pricing strategy?

It typically involves trial and error.

Aldi and Dollar General stores have been expanding their footprint across the United States, opening new locations and competing against traditional discount and grocery store chains, such as Walmart, Target, Kmart, Kroger, Jewel Osco, and Schnucks. Both Aldi and Dollar General hope to capture a large proportion of the dollars consumers spend on grocery and general merchandise items and have responded to consumer desires for value and convenience of a smaller store. What type of pricing objective are these stores utilizing?

Market share

Which of the following bases for pricing is most commonly used by retailers?

Markup pricing

In 2003 Frito-Lay introduced its Stax brand of potato chips. These chips were meant to compete directly against Pringles. The intent was to gain market share quickly. During the first few months they were on the market, Stax retailed for 69 cents. What type of pricing strategy is Frito-Lay likely using?

Penetration pricing

Which of the following would be used in setting the price of a new product if considerable competition is expected?

Penetration pricing

____________ is setting the price lower than competing brands in order to enter a market and quickly gain a significant share of the market.

Penetration pricing

Mindy is selling soda and lemonade at the local university's baseball game. She prices the soda at $4 a bottle and lemonade at $7 each. These are generally much higher prices than people would normally pay. What is likely to happen to demand?

People will be willing to pay to enhance their baseball game experience.

A product that has more features than those of its competition, or that is perceived to be of higher quality, warrants using which type of pricing strategy?

Premium pricing

Which of the following pricing strategies often results in a retailer losing money on the product?

Price leader

What type of pricing strategy is used in a situation where the seller has an ethical responsibility not to overcharge the client and the fees do not relate directly to the time and/or effort spent in specific cases?

Professional pricing

Target released a promotional campaign with the tagline, "Expect more. Pay less." Which of the following pricing strategies is Target most likely using?

Psychological pricing

A manager at Kohl's discovers that Macy's has reduced the price of its children's Levi's from $31.99 to $24.99, according to an advertisement in the Sunday newspaper. She immediately phones her store and instructs the salesperson on duty to put a sign up next to their children's Levi's that reads, "SALE: $24.99." This is an example of what pricing strategy?

Random discounting

_____________ is pricing a product at a moderate level and positioning it next to a more expensive model or brand.

Reference pricing

A Macy's manager designs the casual clothing department such that one of Macy's private label pairs of jeans, priced at $24.99, is positioned next to a national brand of jeans, such as Levis, priced at $39.99. What is the manager attempting to accomplish?

Reference pricing strategy

What type of pricing objective would an organization use if it were in a favorable position and desired nothing more?

Status quo

Which pricing objective de-emphasizes price and can lead to a climate of nonprice competition in an industry?

Status quo

Which type of pricing objective can reduce a firm's risk by helping to stabilize demand for its products?

Status quo

Gavin is trying to come up with a pricing strategy for his store. He greatly admires Walmart and is considering adopting an everyday low price strategy. However, he is concerned because he believes that consumers might then view his products as being of low quality. At what stage of the process is Gavin currently at as he is trying to establish prices?

Step 2: Assessment of the target market's evaluation of price

You are head of sales and marketing for your firm, and you are meeting with the CEO to establish pricing objectives for the upcoming product year. Which of the following factors are you going to consider as you establish your firm's pricing objectives?

The firm's survival

Which of the following is true about the target market's evaluation of price?

The importance of price depends on the type of product.

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

The objectives should be explicitly stated.

Which of the following statements about markup pricing is correct?

The use of similar markups reduces price competition.

Which of the following is true about the evaluation of competitors' prices?

This is done in stage three of the price-setting process.

Which of the following statements is true about the determination of a specific price for a product?

When no government controls exist, pricing is a flexible way to adjust the marketing mix.

If Kroger food stores advertise 2-liter bottles of Pepsi for 89 cents to generate store traffic so that shoppers will purchase other items at regular prices, the grocer is using

a price leader.

Odd-even pricing is

a psychological pricing strategy.

When Gabriella logs on to Dell's website, she sees a notebook model priced well below $1,000. As she continues through the site to view the other options, she realizes the first one she saw was the cheapest model available, but she of course wants more features. Dell is utilizing

bait pricing.

Tiffany and John recently purchased a 25-year-old home and are currently immersed in a kitchen remodel, which includes replacing countertops, cabinets, and kitchen appliances. They are shopping for appliances and visited several retailers to compare prices and determine which brands best met their requirements. One retailer is offering the GE brand refrigerator, cook top, built-in oven, dishwasher, and warming drawer for $3,999, while another retailer has a set of LG appliances that includes a larger refrigerator, range/oven combination, dishwasher, and wine cooler for $3,450. Tiffany and John are meeting with their kitchen designer to finalize their plans for the kitchen and think that either one of these packages will fit their requirements. The appliance retailers are utilizing a ______ pricing strategy.

bundle

When Mia and Shane are planning their honeymoon, their travel agent tells them that if they buy a special package, their trip to Paris will include meals, tickets to the theater, and a rental car in addition to airfare and a hotel. This is an example of the use of

bundle pricing.

Some grocery stores collect data on competitive prices

by using full-time comparison shoppers.

Maintaining or increasing market share

can be achieved even if industry sales are flat or decreasing.

A market share objective

can be used effectively whether total industry sales are rising or falling.

Lexmark sells some of its color printers for about $100, but the refill cartridges cost over $30 each. Lexmark's pricing strategy would be best labeled as

captive pricing.

Pricing the basic product in a product line low while pricing related items at a higher level is called

captive pricing.

Gambrell Designs thinks its new product, the Automatic Dog Walker, will have a short product life cycle; therefore, its marketing department sets its primary pricing objective as

cash flow.

Showing a product's price along with its previous price, the price of a competing brand, or the price at another retail outlet is called

comparison discounting.

Theatergoers in the Midwest were pleasantly surprised when they arrived at the cinema to see the latest release and learned that a price reduction had just gone into effect. The Wehrenberg Theater chain, which is the oldest theater company and operates in 15 Midwest locations, decided to drop matinee prices from $7.75 to $4.50 per person and reduce evening prices from $9.75 to $7.50 per person. The price decrease is a result of decreased traffic at the theater and a trend for consumers to use Netflix or Hulu to watch movies. The Starplex Cinemas operating in the same communities as Wehrenberg followed suit and reduced their prices to attract consumers as well. The two movie theater chains are utilizing the ______ pricing basis.

competition-based

When products in an industry are relatively homogeneous and price is a key purchase consideration,

competition-based pricing becomes more important.

If local Shell gasoline stations look at BP stations' prices as the primary method of determining its own prices, Shell is using

competition-based pricing, which considers costs to be less important than competitor's prices.

When determining markup as a percentage of cost, divide the markup amount by

cost

The federal government often uses ____ pricing when it grants defense contracts.

cost-plus

When a seller's costs are usually determined during or after a product is made and then a specified percentage or dollar amount is added to the cost to establish a price, an organization is using ____ pricing.

cost-plus

The three primary bases for developing prices are

demand, competition, and cost

If General Motors determines that it wants to sell 200,000 Chevrolet Acadias and sets the price at $29,500 because it knows that at that price it will reach that goal, the firm would be using a ____ pricing method.

demand-based

If a product is priced based on how many or how few people want it at a particular time and place, ____ pricing is being used.

demand-based

During July and August, Lakewood Links Golf Course, located in South Carolina, offers weekday rates of $13 for a round of golf with a cart. During the rest of the year, the weekday rates are between $25 and $35. This is an example of the use of

demand-based pricing.

Amtrak is considering two pricing strategies for its service. One is to price its train tickets so that it is less expensive to travel on weekends than during the week when there is heavy business travel, which illustrates _____ pricing. The second is to price its train tickets so that the further away the travel date, the greater the discount, which is best described as _____.

demand-based; differential pricing

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

develop pricing objectives.

The fact that senior citizens are charged a lower price at movie theaters than younger adults is an example of ____ pricing.

differential

Sony management decided to use skimming as a pricing strategy for its newest line of high-definition television (HDTV) sets. It should be aware that this strategy does not

discourage competitors from entering the market.

George is excited because he has obtained the price list of his company's major competitor. His supervisor, Homer, is also optimistic. However, he has much more experience in the industry than George and cautions him that just because they have access to their competitor's price list

doesn't mean they reflect the actual prices at which competitive products are sold.

Uber uses a pricing strategy based on real-time market conditions. It charges less in periods of low demand and more during periods of high demand. Sometimes these prices double or triple during periods of high demand. Uber argues that these higher prices motivate more drivers to pick up passengers, thus increasing the supply of drivers needed to handle the additional demand. This demand-based pricing strategy is an example of

dynamic pricing.

Pricing strategies and methods

help direct and structure the selection of a final price.

Competitors' prices, along with the marketing variables they emphasize, are determining factors in

how important price will be to customers.

Information about competitors' prices

is often a closely guarded secret.

A product is a price leader when

it is sold at less than cost in the hope that sales of other products will increase.

Under Armour is establishing a ______ pricing objective to maintain or increase its product's sales in relation to total industry sales.

market share

Wet Seal, a retailer of swimwear, employs a commonly used cost-based pricing method called

markup pricing.

Products such as light bulbs, canned soft drinks, and ice cream sandwiches are usually priced using ______, which usually results in a ______.

multiple-unit pricing; lower per unit price

Marketers at organizations engaged in nonprice competition

need competitive price information to make sure that their products are priced at approximately the same level as the prices of competing brands.

Maria recently put her house on the market at an asking price of $260,000. She realizes, however, that in order to sell the house, she may have to use

negotiated pricing.

The decision of Macy's to use even prices such as $60 for a Ralph Lauren Polo is an application of ____, where ____ prices are often used to _____.

odd-even pricing; even; give a product an upscale or exclusive image

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

overall; marketing

All of the following are pricing strategies used by companies establishing prices of multiple products within a product line except

penetration pricing.

If Nabisco wants to quickly gain a large market share with its new line of reduced-fat snack crackers, it should use

penetration pricing.

If Samsung uses _____ pricing for its newest version of laptops, it is probably most interested in obtaining market share; and it is assuming

penetration pricing; that other competitors could enter the market easily.

A problem associated with ____ is that consumers can predict when prices will be lowered and delay purchases until that time

periodic discounting

The "White Sale" that many department stores have every year a few weeks after Christmas is an example of

periodic discounting.

Breyer's produces a variety of ice cream flavors and lines of varying qualities. The higher quality ice cream varieties are priced higher than the basic ones. Breyer's is using ____ to price its ice cream.

premium pricing

Max and Tiffany are celebrating their 10th wedding anniversary and are dining at an exclusive French restaurant in a major city a few hours away from their home. They're reviewing the wine list and want to celebrate their anniversary with a bottle of champagne. Max and Tiffany are not very knowledgeable about the different brands of champagne but know that in order to be classified as champagne, the grapes must be grown in a particular region of France known as the champagne viticulture region. Other producers might have similar products, but they must use the phrase "sparkling wine" as they are prohibited from using the champagne name. As Max and Tiffany are reviewing the wine list, they see that a bottle of Cristal, which is a famous label, sells for $250 per bottle but a sparkling wine from the Anjou region of France is $50 per bottle. Since Max and Tiffany are not that knowledgeable about wine, they decide to order the $50 bottle of sparkling wine. What type of pricing strategy does Cristal most likely utilize?

prestige

To attract customers into a store, Safeway advertises its milk at less than cost, hoping that customers will purchase other groceries as well. This pricing strategy is called

price leader pricing.

The pricing strategy that assumes that demand is relatively inelastic over certain price ranges is called

price lining.

When an organization sets a number of prices for selected groups of merchandise, this is commonly referred to as

price lining.

All of the following are psychological techniques except

price skimming.

If Norelco introduced a new electric razor that sonically removes hair and priced it first at $175 and then at $150 before reducing the price to $100, the firm's initial pricing strategy is known as

price skimming.

When Sharp first introduced its line of graphing calculators, it set the price quite high; it has lowered the price as competitors have entered the market. The pricing strategy initially used by Sharp is called

price skimming.

The newest version of a product like Bose headphones is likely to use _____, while the new version of Red Bull is likely to use _____ .

price skimming; penetration pricing

Reference pricing is

pricing a product at a moderate level and positioning it next to a more expensive model or brand.

If an organization sets prices to recover research and development expenses and establish a premium quality image for its product, it would be using a ____ pricing objective.

product quality

The pricing of Clinique makeup, which is considerably higher than brands such as Cover Girl, Revlon, and Maybelline, is used to communicate ____, which is the company's primary pricing objective.

product quality

Services that are performed by lawyers, dentists, or doctors are typically priced using ____; sometimes these prices are not based on the amount of time that is spent in each situation, but are based on a flat fee regardless of the difficulty involved.

professional pricing

Westin Hotels, Inc. has an objective of achieving a 25% return from its overall sales. This is an example of a ____ pricing objective.

profit

Price leaders, comparison discounting, and special-event pricing are applications of

promotional pricing.

When a satellite dish company uses bundling to combine phone, dish, and broadband Internet access prices, it is attempting to influence a consumer's perception of price to make a product's price more attractive and reduce "sticker shock." This is an example of using a ____ pricing strategy.

psychological

If REVO sets the price for its sunglasses at $240, it is most likely using _____pricing to convey ______.

psychological; prestige

Kendra has been doing research for a smartphone manufacturing company. She has just been reviewing the results of several focus groups and has found that for customers, value is a function of the product's

quality attributes.

A marketer is most likely to set prices according to a cash-flow objective when a

quick return on investment is desired.

If a business decides to reduce its prices once in a while on an unsystematic basis, it is using

random discounting.

Most pricing objectives based on ____ are achieved by trial and error because not all cost and revenue data are available when prices are set.

return on investment

Executives in Japan decided to price Lexus luxury cars in the United States at $55,000 while pricing them at $66,000 in their own country. This is an example of

secondary-market pricing.

Markup is measured either as a percentage of ____ or a percentage of ____.

selling price; cost

Chris is planning three sales during the third quarter of the year at Toys "R" Us. The first is at the beginning of the school year, the second is the week before Halloween, and the third is Black Friday. These sales would be considered to be

special-event pricing.

Maintaining a certain market share, meeting competitors' prices, maintaining a favorable image, and achieving price stability are all associated with a ____ pricing objective.

status quo

In its advertisement, Timberland gives a close-up of one of its boots to show its fine craftsmanship. At the bottom of the advertisement is "Est. 1973," followed by the phrase "Best Then. Better Now." What type of pricing strategy is Timberland most likely to use with this ad?

survival

McDonald's restaurants have experienced declining sales recently due to consumers' increased interest in healthy eating and their preference for fast-casual restaurants such as Chipotle and Noodles. In order to attract more customers to McDonald's, the chain expanded the number of items they are offering on the $1 menu, and many of these items are priced below cost. McDonald's is most likely utilizing a _____ pricing objective.

survival

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

survival

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

survival.

A sale that advertised prices "up to 65% off" the original price uses

tensile pricing.

A price-skimming strategy assumes that

the initial demand is highly inelastic.

Bundle pricing may be perceived to be of value by customers because

they prefer buying a combination of bundled products in a single transaction, which saves time, effort, and perhaps money.

Competition-based pricing is

used when costs and revenues are secondary to competitors' prices.

Target has worked closely with suppliers such as Calphalon to offer customers a high-quality, branded product that is only available in Target stores. Due to these partnerships, Target has established a high level of perceived _______ among their customers since they provide a large range of brand-name merchandise at reasonable or below-competition prices.

value

Hotels try to price rooms to maximize resources by quickly adapting to changes in demand. Part of this involves anticipating consumer behavior and calculating a number of different factors, including demand for rooms at a particular time period, likely length of stay, types of rooms likely to be requested, etc. It wants to be able to sell rooms at the right price to the right people. This pricing strategy is an example of

yield management