Ch 14 SMARTBOOK MAR 3023

Which approach to pricing weighs factors underlying expected customer tastes and preferences more heavily than other factors? Demand Profit Competition Cost

Demand

What are two general methods for quoting prices related to transportation costs? Everyday low pricing FOB origin pricing Uniform delivered pricing Functional pricing

FOB origin pricing Uniform delivered pricing

Price fixing is made illegal by the ______. Federal Trade Commission Act Robinson-Patman Act Clayton Act Sherman Antitrust Act

Sherman Antitrust Act

If a firm sells the same product to different buyers at different prices, it may be considered ______. price discrimination price fixing deceptive pricing predatory pricing

price discrimination

A price ___________ involves successive price cutting by competitors to increase or maintain their unit sales or market share.

war

When using competition-oriented pricing approaches, price setters stress ______. what "the market" is doing what consumers are willing to pay, based on current preferences covering costs for producting or delivering a product a balance of revenues and costs to achieve a set target

what "the market" is doing

______-oriented approaches to pricing set the price to reflect the way the marketer wants consumers to interpret prices relative to competitor's offerings. Cost Competition Target Demand

Competition

What is a characteristic of bundle pricing? Price is discounted if buyer purchases larger volumes. Overuse of this approach has diluted is effectiveness. Consumers are dubious of the product quality if prices are reduced below a certain point. Consumer value is enhanced by not having to make separate purchases.

Consumer value is enhanced by not having to make separate purchases.

______ promises to reduce the average price to consumers while minimizing promotional allowances that cost manufacturers billions of dollars every year. Everyday low pricing Odd-even pricing Loss leader pricing Basing-point pricing

Everyday low pricing

______ are made by manufacturers to list prices to reflect the cost of transportation of the products from seller to buyer. Allowances Geographical adjustments Selling reductions Discounts

Geographical adjustments

How is target pricing executed? Manufacturers deliberately adjust the composition of a product to achieve the estimated price that consumers are willing to pay for it. Management charges different prices to maximize revenue for a set amount of capacity at any given time. Management marks up all products in a similar fashion since it is impossible to estimate demand for each. Management offers a line of products at a number of different specific pricing points.

Manufacturers deliberately adjust the composition of a product to achieve the estimated price that consumers are willing to pay for it.

How does a skimming pricing strategy approach price setting? Prices are set low initially and then gradually raised. Prices are set high initially and then lowered in a series of steps. A fixed percentage is added to the cost of all items in a product class. Different prices are charged in an effort to match demand and supply.

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

Match each type of discount with the motivation for offering it.

Quantity discounts-> To encourage customers to place larger orders. Seasonal discounts-> To encourage buyers to stock inventory earlier than their demand would require. Trade discounts-> To reward channel members for future marketing efforts. Cash discounts-> To encourage retailers to pay their bill quickly.

Organizations can be most effective using skimming pricing under which two conditions? Customers are very price sensitive. The customer understands and highly values the product. Production costs are increasing over time. The product is protected by patent.

The customer understands and highly values the product. The product is protected by patent.

In what way does the demand curve for prestige pricing differ from the typical demand curve? There is a point below which a reduced price reduces sales volume, resulting in a backwards C-shaped curve. Price is never changed, resulting in a horizontal line. Sales drop in a step-wise fashion as products cycle in and out, resulting in a stair-like curve. Customers are not price sensitive, so sales are unaffected by changes in price, resulting in a vertical line.

There is a point below which a reduced price reduces sales volume, resulting in a backwards C-shaped curve.

______ discounts are also known as functional discounts. Trade Quantity Seasonal Cash

Trade

Under what two circumstances is it legal to charge different prices to different customers? When the price difference allows a superior reseller to gain an advantage When the price differences do not lessen competition When the price differences are due to changing market conditions Never; this practice is always illegal

When the price differences do not lessen competition When the price differences are due to changing market conditions

A cash discount expressed in the form "3/10" on an invoice means that ______. a 10 percent discount is available if the order is tripled a 3 percent discount is available if the invoice is paid in 10 days A 0.3 percent discount is available if the invoice is paid on time the retailer gets a 3 percent discount and the wholesaler gets a 10 percent discount

a 3 percent discount is available if the invoice is paid in 10 days

Which is an example of deceptive pricing? charging a very low price for a product with the intention of destroying a competitor a bait and switch to lure customers into the store to sell them a higher priced product meeting with the management of a competitor to agree on an increased base price for a product when a manufacturer prices differentially based on changing market conditions

a bait and switch to lure customers into the store to sell them a higher priced product

Yield management pricing is =______. = estimating the price a consumer would pay for a product, and working backward with anticipated markups to set the price for wholesalers setting a price a few cents or a few dollars below an even number to increase demand a complex approach that continually matches demand and supply to customize the price for a service setting a high price so that quality- or status-conscious consumers will be attracted to the product and buy it

a complex approach that continually matches demand and supply to customize the price for a service

A reduction from the list price that a seller gives a buyer as a reward for some activity of the buyer that is favorable to the seller is referred to as ______. an allowance a rebate a trade-in a discount

a discount

Vertical price fixing might occur between ______. a manufacturer and a customer buying its product two competitors selling similar products two customers competing for the opportunity to purchase a product a manufacturer and a retailer in the same channel

a manufacturer and a retailer in the same channel

Successive price cutting by competitors to increase or maintain their unit sales or market share is known as ______. competitive devaluation a price war competitive rivalry a pricing struggle

a price war

Rolex takes pride in emphasizing that it makes one of the most expensive watches you can buy, which is an example of _____. target return pricing above-market pricing target profit pricing skimming pricing

above-market pricing

When an organization deliberately prices a product above the prices set for competing products, to entice those customers for whom pricing doesn't matter, the firm is engaging in ______. target return pricing penetration pricing target profit pricing above-market pricing

above-market pricing

Standard markup pricing entails ______. setting a price at a certain level based on factors like tradition or a standardized channel of distribution adding a fixed percentage to the cost of all items in a specific product class selling a product below its customary price to attract attention to it reducing prices in a systematic way over time based on the learning effect

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

Select the three special adjustments that are often made to the list or quoted price. allowances price fixing discounts warranties and rebates geographical adjustments

allowances discounts geographical adjustments

Demand-oriented, cost-oriented, profit-oriented, and competition-oriented are four approaches used to set ______. promotional allowances approximate price levels production objectives target markets

approximate price levels

The purpose of using low prices in a loss-leader pricing strategy is to ______. drive competitors out of business attract customers that will hopefully buy other products too, at higher margins develop a discount brand perception that may linger beyond the sale of this product drive heavy sales of expiring merchandise

attract customers that will hopefully buy other products too, at higher margins

A characteristic feature of a prestige demand curve is that as price is lowered, the curve turns back to the left toward its initial level. Why is this so? because of an increase in quantity because price and quantity become equal because of an increase in costs because of reduced demand

because of reduced demand

Common approaches to pricing are oriented around which four elements? production cost service demand profit competition

cost demand profit competition

Pricing approaches that consider the production and marketing costs and then add enough to cover direct expenses, overhead, and profit are ______ approaches. demand-oriented profit-oriented margin-oriented cost-oriented

cost-oriented

Adding a fixed percentage or fixed fee to the total costs for a product is known as ______ pricing. cost-plus price lining target experience curve

cost-plus

Hershey changes the amount of chocolate in its candy bars depending on the price of raw chocolate rather than changing the price of the product because this product is sold with ______ pricing. standard markup customary experience curve target

customary

Penetration, price lining, and bundle pricing are all types of what pricing approach? demand-oriented competition-oriented profit-oriented cost-oriented

demand-oriented

Under the Robinson-Patman Act, promotional allowances can be legally offered to buyers when the seller ______. receives a binding contract from the buyer for a specified quantity of product offers cash discounts or geographical adjustments as well does so on an equal basis to all buyers distributing the seller's product makes sure that the allowance is cumulative rather than noncumulative

does so on an equal basis to all buyers distributing the seller's product

When using predatory pricing, a firm sets a very low price for one or more of its products in order to drive its competition out of business force manufacturers to lower their suggested retail pricing limits increase store traffic, so the customers will buy products with higher profit margins increase sales volume of a product or a product line

drive its competition out of business

Online marketers that use clickstream data to monitor customers' shopping habits and then adjust their pricing according to that behavior would most likely be using a ______ pricing policy. penetration fixed dynamic skimming

dynamic

Yield management pricing is a form of a ______ pricing policy because prices vary by an individual buyer's purchase situation, company cost considerations, and competitive conditions. suggested retail penetration dynamic skimming

dynamic

Setting different prices for products depending on individual buyers and purchase situations is called a ______ policy. temporary-price variable-price suggested retail price dynamic-price

dynamic-price

What are the two options when choosing a price policy? dynamic-price regional-price permanent-price fixed-price

dynamic-price fixed-price

The firm's goal in offering a cash discount is to ______. encourage customers to pay their bills quickly reward wholesalers and retailers for marketing functions encourage buyers to stock inventory earlier than their normal demand would require encourage customers to buy larger quantities

encourage customers to pay their bills quickly

The practice of replacing promotional allowances with lower manufacturer list prices is known as ______ pricing. uniform delivered hi-lo odd-even everyday low

everyday low

Assuming that unit costs for a good or service will drop by some predictable percentage as production increases, and passing these savings along to the consumer in the form of reduced prices is known as ______ pricing. experience curve target price lining cost-plus

experience curve

When two or more competitors explicitly or implicitly set prices, this practice is called ______ price fixing. vertical horizontal primary functional

horizontal

Despite the Sherman Act and its implications for price fixing, a "manufacturer's suggested retail price" (MSRP) is legal but not recommended because it results in the loss of sales. legally prohibited. legal when used as a discount, but illegal if used as an allowance. illegal only when enforced through coercion.

illegal only when enforced through coercion.

Rocco's operates a take-out pizza shop on campus. The cost of a slice of pizza and a soft drink normally costs $4.99; however, if students show their school ID, they will only be charged $3.99. This is an example of ______. illegal price fixing legal price discrimination legal skimming pricing illegal price lining

legal price discrimination

For a special promotion, retail stores may deliberately sell a product below its customary price to attract customers, in hopes that they buy other items with large markups, in an approach known as ______ pricing. standard markdown penetration below-market loss-leader

loss-leader

In penetration pricing, the initial price of the product is set ______. high, to appeal to those who most desire the product equal to what similar products are priced low, to appeal to the mass market with a standard markup to recoup costs

low, to appeal to the mass market

Price deals that ______ fall into the category of deceptive pricing. offer quantity discounts mislead consumers decrease competition involve collusion of competitors

mislead consumers

A ______ quantity discount is based on the amount purchased in a single order, and encourages a large individual purchase. seasonal functional noncumulative per purchase

noncumulative

FedEx encourages companies to ship a large number of packages at one time by offering a ______ quantity discount. noncumulative functional seasonal per purchase

noncumulative

In ______ pricing, an organization sets a price a few dollars or cents under an even number, such as at $3.99. loss leader odd-even target yield management

odd-even

Sears offers a Craftsman radial saw for $499.99 rather than $500, using a(n) ______ pricing approach. target yield management odd-even loss leader

odd-even

A ______ policy is also known as fixed pricing. permanent-price standing-price suggested retail price one-price

one-price

Setting a price with no variation for product buyers is called a ______ policy. permanent-price one-price suggested retail price standing-price

one-price

Organizations using ______ pricing set the initial price low for the introduction of the new product to appeal immediately to the mass market. standard markup skimming loss leader penetration

penetration

The ability to attract price sensitive customers and discourage competitors from entering a market make which pricing strategy appealing? prestige target penetration skimming

penetration

Fixed-price and dynamic-price are the two options when choosing a price ______. list quote policy orientation

policy

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

Rolls-Royce cars, Chanel perfume, and Tiffany jewelry would most likely benefit from which type of pricing? prestige penetration odd-even bundled

prestige

When Swiss watchmaker TAG Heuer increased the average price of its watches from $250 to $1,000, its sales volume jumped sevenfold. This is evidence that ______ pricing is important in this product category. luxury skimming prestige cost-plus

prestige

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. price lining bundle pricing odd-even pricing prestige pricing

prestige pricing

Charging different prices to different buyers for goods of like grade and quality is known as ______. price fixing deceptive pricing predatory pricing price discrimination

price discrimination

If a department store manager prices a line of shirts at $29, $49, and $69, the manager is using which pricing strategy? price lining even pricing price bundling price skimming

price lining

When Brooks Brothers prices its line of umbrellas at three price points, $58, $198, and $498 (or good, better, and best) it is using a ______ approach. target pricing price lining cost-plus pricing zone pricing

price lining

When a line of products is priced at a number of different specific pricing points, the ______ strategy is being used. price lining even pricing price bundling price skimming

price lining

When a manufacturer produces several products that are substitutes for one another and others that complement these products, it should use ______. yield management dynamic pricing price lining product-line pricing

product-line pricing

Select all of the benefits of a penetration pricing strategy. production costs drop with increased volume discourages competitors added perceptions of quality potential to gain market share

production costs drop with increased volume discourages competitors potential to gain market share

Cost-oriented approaches to pricing consider which three things in the setting of a product's price? consumer preferences profit product quality market share overhead production costs

profit overhead production costs

By focusing on target profit pricing or target return pricing, a firm is using a ______ pricing approach. competitor-oriented demand-oriented cost-oriented profit-oriented

profit-oriented

By focusing on target profit pricing or target return pricing, a firm is using a ______ pricing approach. demand-oriented cost-oriented competitor-oriented profit-oriented

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

When a manufacturer offers a grocery retailer an extra amount of free product for including this product in weekly advertising and in-store sales, this is considered a ______ allowance. promotional trade-in functional cash

promotional

Cumulative and noncumulative are the two general kinds of ______ discounts. trade seasonal quantity cash

quantity

Reductions in unit costs for a larger order are known as ______ discounts. functional trade quantity cash

quantity

Experience curve pricing entails ______. selling a product below its customary price to attract attention to it summing total units costs and adding a fixed percentage or fee to arrive at a price setting a price at a certain level based on factors like tradition or a standardized channel of distribution reducing prices in a systematic way over time based on the learning effect

reducing prices in a systematic way over time based on the learning effect

Geographic adjustments to prices are used to Blank______. provide discounts to retailers selling to under-served communities reflect the cost of transportation of products from seller to buyer account for tariff costs as products move across international borders reflect the differences in regional socioeconomics of the intended buyers of products

reflect the cost of transportation of products from seller to buyer

The firm's goal in offering a trade discount is to ______. encourage customers to pay their bills quickly encourage buyers to stock inventory earlier than their normal demand would require encourage customers to buy larger quantities reward wholesalers and retailers for marketing functions

reward wholesalers and retailers for marketing functions

A manufacturer that wants to smooth out manufacturing peaks and valleys throughout the year in order to have more efficient production, would most likely use ______ discounts. seasonal off market trade functional

seasonal

_________ discounts are price reductions offered on products to stimulate purchasing during times of low consumer demand, allowing a manufacturer to smooth out manufacturing highs and lows.

seasonal

What are four important types of discounts used in marketing strategy? seasonal discounts functional quantity discounts uniform discounts cash discounts

seasonal discounts functional quantity discounts cash discounts

Which is the best example of loss-leader pricing? using a "no haggle" sales price offering a discount during "off season" promoting an expensive product as top-of-the-line in quality selling a carton of eggs for $0.99 which is way below cost

selling a carton of eggs for $0.99 which is way below cost

A marketing manager uses price lining when he ______. markets two or more products in a single package price finds it impossible to estimate demand for each product, and therefore marks each up the same way sells several groups of the same type of product, with each group priced at different specific pricing points deliberately sells products below its customary price to attract attention to it

sells several groups of the same type of product, with each group priced at different specific pricing points

Price fixing is the conspiracy among firms to ______. hide the true price of products from customers set prices for a product eliminate promotional allowances for resellers reduce prices successively in order to maintain market share

set prices for a product

Customary pricing entails ______. setting a price at a certain level based on factors like tradition or a standardized channel of distribution reducing prices in a systematic way over time based on the learning effect selling a product below the price of competitors to establish a perception of value summing total units costs and adding a fixed percentage or fee to arrive at a price

setting a price at a certain level based on factors like tradition or a standardized channel of distribution

For ______ pricing to be effective, there must be sufficient customers willing to buy the product at a high initial price, they should interpret the high price as signifying high quality, and the high price should not attract competition. skimming loss leader experience curve penetration

skimming

When a new product appeals to those segments of consumers who are willing to pay a high initial price to have an innovation first, marketers should use a ______ pricing strategy. target skimming penetration cost-plus

skimming

In 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? penetration pricing skimming pricing loss leader pricing experience curve pricing

skimming pricing

Which is an example of a demand-oriented approach to setting an approximate price? experience curve skimming pricing target return on sales loss leader

skimming pricing

For what reason has dynamic pricing grown in popularity? increase in "surge" pricing competitors sharing customer information reduced advertising and promotion costs sophisticated information technology

sophisticated information technology

Discounts, allowances, and geographic adjustments are considered ______ that affect the list or quoted price. special adjustments yield determinants channel promotions price differentials

special adjustments

Adding a fixed percentage to the cost of all items in a specific product class is known as ______ pricing. cost-plus standard markup price lining target

standard markup

For some products where tradition, a standardized channel of distribution, or other competitive factors dictate the price, ______ pricing is used. standard markup customary experience curve target

standard markup

Cost-plus pricing entails B______. setting a price at a certain level based on factors like tradition or a standardized channel of distribution reducing prices in a systematic way over time based on the learning effect summing total units costs and adding a fixed percentage or fee to arrive at a price selling a product above its customary price to attract status-conscious consumers

summing total units costs and adding a fixed percentage or fee to arrive at a price

In ______ pricing, an organization estimates what consumers are willing to pay for a product, and works backward, accounting for markups by retailers and wholesalers, to determine what it can charge for the product. yield management target standard markup cost-plus

target

What are two profit-oriented approaches to setting a price? target profit pricing customary pricing target return pricing cost-plus pricing skimming pricing

target profit pricing target return pricing

Bundle pricing refers to ______. charging different prices to maximize revenue for a set amount of capacity at any give time. the marketing of two or more products in a single package price. setting different prices for products and services in real time in response to supply and demand conditions. reduced pricing that is available for purchasing items in bulk, rather than in typical consumer volumes.

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

What is a marketer most likely trying to convey about a product if it is priced using prestige pricing? the product takes a lot of time to produce the product is of high quality the product appeals to mass markets the product has no other competitors

the product is of high quality

True or false: A "manufacturer's suggested retail price" is illegal only when a manufacturer enforces the practice by coercion. True false question.TrueFalse

true

Single-zone, multiple-zone, and basing-point pricing are all types of ______. vertical price fixing horizontal price fixing uniform delivered pricing FOB origin pricing

uniform delivered pricing

When a seller's quote includes all transportation costs and it retains title to the goods until they are delivered, it is called ______. vertical price fixing FOB origin pricing horizontal price fixing uniform delivered pricing

uniform delivered pricing

Price differentials under the Robinson-Patman act are legal under what two circumstances? when price differences result from changing market conditions when price differences attempt to meet competitors' prices and do not injure competition when price differences exceed the cost of delivery because different methods are used to deliver goods to buyers when price differences are implemented in order to secure a monopoly

when price differences result from changing market conditions when price differences attempt to meet competitors' prices and do not injure competition

Charging different prices for a product in order to maximize revenue for a set amount of capacity at any given time is known as ______ pricing. bundle yield management experience curve target

yield management