Ch. 11

Profit formula

(unit price * quantity sold) - (fixed cost + variable)

Common approaches to pricing are oriented around which 4 elements?

1. competition 2. profit 3. cost 4. demand

match the following pricing issues that have legal implications to the correct description 1. price fixing 2. price discrimination 3. deceptive pricing 4. predatory pricing

1. conspiracy among firms to set prices 2. charging different prices to different buyers for goods of like grade and quality 3. price deals that mislead consumers 4. charging a very low price for a product with the intent of driving competitors out of business

Select all of the following that are common approaches to setting an approximate price level for a product

1. demand-oriented 2. cost-oriented 3. competition-oriented

pricing objectives involves specifying the role of price in what two areas of organization?

1. its marketing plans 2. its strategic plans

Organizations choosing competitor-oriented approaches to set prices might use which two pricing strategies?

1. loss-leader pricing 2. customary pricing

current profit _____ and target _____ are two strategies used by firms that are pursuing a profit pricing objective

1. maximization 2. return

what two strategies can be used as part of a firms profit objectives

1. maximizing current profits 2. target return

Pricing _____ frequently reflect corporate goals, while pricing ____ often relate to conditions existing in the marketplace

1. objectives 2. constraints

cost-oriented approaches to pricing consider which three things in the setting of a products price

1. profit 2. overhead 3. production costs

price elasticity of demand is expressed as percentage change in ____ divided by the percentage change in ____

1. quantity demanded 2. price

Which 2 are profit-oriented approaches to setting a price?

1. target return pricing 2. target profit pricing

What four factors must be taken into consideration to determine the 'right' price for a product?

1. will it generate enough sales dollars to pay for the marketing of the product? 2. What are customers willing to pay for the product? 3. Will the product provide a profit for the company? 4. Will enough money be made to pay for the development and production of the product?

____ - oriented pricing approaches weigh factors underlying expected customer tastes and preferences more heavily than other factors

Demand

demand-oriented, cost-oriented, profit-oriented, and competition-oriented are four approaches to set ____

approximate price levels

Break-even analysis analyzes the relationship between total revenue and total cost to determine profitability ________

at various levels of output

A used car dealer advertises a $5,000 SUV for sale in the local paper. When prospective customers arrive at the dealership they are told that the $5,000 SUV is sold and are offered a $15,000 SUV instead. This is an example of ______.

bait and switch

When a buyer arrives at a retail location and is told that the product she saw in a promotion is out of stock and no rainchecks are available, the retailer might be accused of _____

bait and switch

small changes in price _____

can have comparably big effects on company profit

If firms set prices with specific consideration of firms challenging them directly for customers, they have adopted a ___ approach to pricing.

competition - oriented

A pricing constraint firms face is the price that its ____ are currently charging and likely to charge in the future

competitors

a pricing constraint firms face is the price that its ____ are currently charging and likely to charge in the future.

competitors

Factors that limit the range of prices a firm may set are known as pricing ____

constraints

legal and regulatory issues and consumer demand are pricing ___ that limit what a company can charge for its product

constraints

the demand for a product class, a product, or a brand, or the newness of a product can act as pricing ____ to limit a firm's options

constraints

which of the following is a characteristic of bundle pricing?

consumer value is enhanced by not having to make separate purchases

Pricing approaches that consider the production and marketing costs and then add enough to cover direct expenses, overhead, and profit are known as _____ approaches

cost-oriented

pricing approaches that consider the production and marketing costs and then add enough to cover direct expenses, overhead, and profit are known as ____ approaches

cost-oriented

price deals that mislead consumers fall into the category of ____ pricing

deceptive

The chart that shows how many units of a product or service consumers will demand during a specific period of time at different prices is known as the ____

demand curve

that chart that shows how many units of a product or service consumers will demand during a specific period of time at different prices is known as the _____

demand curve

Generally, a seller can charge a higher price for a product when ____

demand for the product is high

demand-oriented pricing approaches weigh which factors most heavily?

expected customer tastes and preferences

____ cost is the sum of the expenses of the firm that are stable and do not change with the quantity of a product that is produced and sold.

fixed

price fixing, predatory pricing, and price discrimination are

legally prohibited

a demand curve is derived by measuring how many units of a product are sold at various _____

levels of price

if a firm prices its products relatively low compared to the cost to develop, with the prospect of gaining a high market share, it is utilizing which profit-oriented pricing objective?

managing for long run profits

many south korean HDTV manufactures are willing to give up immediate profits for long-term penetration of the market. This is a pricing objective known as _____

managing for long run profits

if a firm prices its products relatively low compared to the cost to develop, with the prospect of gaining a high market share, it is utilizing which profit-oriented pricing objective?

managing for long-run profits

American firms are sometimes criticized for using which profit-oriented pricing objective, because it results in a short-term orientation?

maximizing current profit

which profit-oriented pricing objective is common in many firms because the targets can be set and performance measured quickly?

maximizing current profits

a marketing manager considers pricing objectives and constraints to ____

narrow the range of choices among the variety of pricing strategies

Marketing managers may identify profit, market share, social responsibility or even survival as pricing _____

objectives

Pricing ____ involve specifying the role of price in an organization's marketing and strategic plans

objectives

A ____ policy is also known as fixed pricing

one-price

Organizations using ____ pricing set the initial price low for the introduction of the new product to appeal immediately to the mass market

penetration

Value is defined as ____

perceived benefits divided by price

when using ____ pricing, a firm sets a very low price for one or more of its products with the specific intent to drive its competition out of business

predatory

Marketers who use ____ to signal the quality of an item, must be careful not to drop the price of the product below the point where customers become skeptical of its quality and refuse to purchase it.

prestige pricing

the money or other consideration (including other products and services) exchanged for the ownership or use of a product is known as ______

price

the percentage change in quantity demanded relative to a percentage change in price is known as

price elasticity of demand

the practice of colluding with other firms to set prices is called ____

price fixing

a firm must know its competitor's ______ in order to best set its own

prices

How does a skimming pricing strategy approach price setting?

prices are set high initially and then lowered in a series of steps

By focusing on target profit pricing or target return pricing, a firm is using a _____ pricing approach

profit-oriented

a price reduction offered to channel members for featuring the manufacturer's product in their advertising or selling activities is called a(n) ____ allowance

promotional

customers are encouraged to buy a larger number of a single product when a firm offers ____

quantity discounts

fixed costs ____

remain at the same level despite changes in production

total ____ is equal to the unit price for a product times the quantity of it sold.

revenue

a firm's goal in offering a trade discount is to

reward wholesalers and retailers for marketing functions

it what pricing strategy are prices lowered in a series of steps with the demand by those who really desire the product being satisfied at the highest prices?

skimming pricing

Bundle pricing refers to ...

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

Price is defined as

the money or other considerations exchanged for the ownership or use of a product

what is a marketer most likely trying to convey about a product if it is using prestige pricing?

the product is of high quality

unit price times quantity sold is ____

total revenue

according to the profit equation, profit is...

total revenue minus total cost

The relationship, or ratio, between a product's perceived benefits and the consumer's costs is known as its _____

value

the ratio of perceived benefits to price is a product's _____.

value

When using competition-oriented pricing approaches, price setters stress ____

what "the market" is doing