ch 14

Standard markup pricing refers to

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

Yield management pricing is a form of

dynamic pricing

A skimming pricing policy is likely to be most effective when

(1) customers are willing to buy the product immediately at the high initial price to ensure profitability; (2) the high initial price will not attract competitors; (3) lowering the price has only a minor effect on increasing sales volume and reducing unit costs; and (4) customers interpret high price as signifying high quality.

Five pricing practices have received the most scrutiny:

(1) price fixing; (2) price discrimination; (3) deceptive pricing; (4) geographical pricing; and (5) predatory pricing.

Which of the following statements about geographical pricing is most accurate?

FOB origin pricing is legal.

Which of the following statements regarding odd-even pricing is most accurate?

Overuse of odd-ending prices tends to mute its effect on demand.

The assumption that demand is elastic at a number of price points but is inelastic between these price points leads to which pricing approach?

Price lining

Which of the following statements about the legal and regulatory aspect of pricing is most accurate?

The Federal Trade Commission Act deals with predatory pricing, deceptive pricing, and geographical pricing issues.

Predatory pricing is

The practice of charging a very low price for a product with the intent of driving competitors out of business.

FOB origin pricing refers to

a method of pricing where the price the seller quotes includes only the cost of loading the product onto the vehicle and specifies the name of the location where the loading is to occur (the seller's warehouse or factory, for example) is referred to as

Vizio's long-term goal for the next 20 to 30 years is to

be the next Sony.

Tendollars.com offers thousands of gifts, all priced at $10. This is an example of two pricing methods working in tandem. The firm is MOST LIKELY using a(n) __________ and a(n) __________.

below-market pricing approach; one-price policy

When Sherman bought gas, he noticed the convenience store offered him a 2 percent reduction in price if he paid cash rather than if he used his credit card to pay for his purchase. The convenience store was offering him a

cash discount

Bundle pricing refers to

marketing two or more products in a single package price.

Often a firm that is selling not just a single product but a line of products may price them at a number of different specific pricing points, which is called

price lining

The Robinson-Patman Act covers promotional allowances as well as discounts. To legally offer promotional allowances to buyers, the seller must do so on a(n) __________ to all buyers businesses distributing the seller's products.

proportionally equal basis

Basing-point pricing refers to

selecting one or more geographical locations from which the list price for products plus freight expenses are charged to the buyer.

Target profit pricing refers to

setting an annual target of a specific dollar volume of profit.

According to the Geographical Pricing Map A above, if the plant in Denver charges $20 to ship its products to all of the identified cities, it is most likely using which type of pricing?

single-zone pricing

(1) "A"—identify pricing objectives and constraints; (2) "B"—estimate demand and revenue; (3) "C"—determine cost, volume, and profit relationships; (4) "D"—select an approximate price level; (5) "E"—set list or quoted price; and (6) "F"—make special adjustments to list or quoted price. During Step 5 ("E"), a firm would establish a one price or flexible price policy, assess company, customer, and competitive effects on price, and balance incremental costs and revenues.

six steps in setting price:

Setting a price to achieve an annual target return-on-investment (ROI) is referred to as

target return-on-investment pricing.

The practice of offering a bargain that is conditional on the purchase of other products may exist when a buyer is offered the "1-Cent Sale," the "Buy 1, Get 1 Free," or the "Get 2 for the Price of 1" deal. Such pricing is legal only if

the first items are sold at the regular price, not a price inflated for the offer

Geographical adjustments are made by manufacturers or wholesalers to reflect

transportation costs.