Marketing 351: ch 21 Setting Prices
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 percent
J.C. Penny'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 ___ percent for this product
57
Which of the following pricing objectives sets prices to recover cash as quickly as possible?
Cash flow
The manager at Best Buy puts a sign up next to a Pioneer audio system that reads, "Only $199.99! $60 less than Circuit City." This is an example of what type of pricing strategy?
Comparison Discounting
If PepsiCo sets its 12-pack at $3.99 to match the price charged by Coca-Cola, Pepsi is using which pricing method?
Competition-based
If Wrigley set its pricing objective as attaining 38 percent of the chewing gum market, what else would be needed to make this a true pricing objective?
Identification of a time period for accomplishment
A firm establishes which of the following pricing objectives to maintain or increase its product's sales in relation to total industry sales?
Market share
Which of the following would be used in setting price of a new product if considerable competition is expected? -psychological pricing -penetration pricing -odd-even pricing -price skimming -prestige pricing
Penetration pricing
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
A manager at JC Penney discovers that Sears 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
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 $39.99What is the manager attempting to accomplish?
Reference pricing strategy
Which of the following statements about markup pricing is correct?
The use of similar markups reduces price competition
If Kroger Food Stores advertises 2-liter bottles of Pepsi for $0.89 to generate store traffic that will purchase other items at regular prices, the grocer is using
a price leader
Odd-even pricing is
a psychological printing strategy
When Gabriella logs on to Dell's website, she sees a notebook model priced will 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
When a company prices one item in a line low with the intention of selling a higher-priced item in the same line, it is using
bait pricing
When Mia and Shane are planning their honeymoon, their travel agent tells them that if they buy a special package, their trip to Paris includes 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 cover 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
Companies that focus on particular product categories and rely on everyday low pricing to acquire a large market share through aggressive and competitive pricing strategies are often referred to as
category killers
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
When products in an industry are relatively homogeneous and price is a key purchase consideration,
competition based-pricing becomes more important
If General Mills looks at Kellogg's cereal prices as the primary method of determining its own prices, General Mills is using
competition-based pricing
When determining markup as a percentage of cost, divide the markup amount by
cost
For custom-made equipment or commercial construction projects, which pricing method is most likely used?
cost-plus
Steinway produces concert grand pianos, often using the custom materials and designs desired by a specific customer. The average price of these pianos runs about $50,000 depending on the exact piano. What type of pricing does Steinway most likely use for these pianos?
cost-plus
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 specified percentage or dollar amount is added to the cost to establish a price, an organization is using ___ pricing.
cost-plus
Goods that are priced primarily based on the way they have always been priced are examples of
customary pricing
The three primary bases for developing prices are
demand, competition, and cost
Amtrak prices its tickets so that it is less expensive to travel on weekends than during the week when there is heavy business travel. This illustrates ___ pricing
demand-based
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 S.C., 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
When establishing prices, a marketer's first step is to:
develop pricing objectives
Executives in Japan decided to price Lexus luxury cars in the US at $55,000 while pricing them at $66,000 in their own country. This is an example of
differential
The fact that senior citizens are charged a lower price at movie theatres than younger adults is an example of ___ pricing
differential
Sony management decided to use skimming as a pricing strategy for its newest line of HDTV sets. It should be aware that this strategy does NOT
discourage competitors from entering the market
The decision of Macy's to use even prices such as $60 for a Ralph Lauren Polo shirt is an application of odd-even pricing, and even prices are often used to
give a product an upscale or exclusive image
Pricing strategies and methods
help direct and structure the selection of a final price
A penetration pricing strategy is particularly appropriate when demand is
highly elastic
Competitors' prices, along with the marketing variables they emphasize, are determining factors in
how important price will be to customers
A product is a price leader when
it is sold at less than cost in the hope that sales of other products will increase
A cost-based pricing method commonly used in retail is called
mark-up prices
If Nabisco had established a pricing objective of selling one out of every three crackers consumed in the world, it would have established an objective based on
market share
Products such as light bulbs, canned soft drinks, and ice cream sandwiches are usually priced using
multiple-unit pricing
Marketers at organization engaged in nonprice competition
need competitive price information to make sure that their products are priced at approximately the same levels 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
Price skimming and penetration pricing are both strategies used for
new-product pricing
Marketers must take steps to make sure that the pricing objectives they set are consistent with the organization's ___ objectives and ___ objectives
overall; marketing
The management at Allied Electronics is having difficulty in raising the introductory price on system components to cover the increased costs of producing the sensing devices for home security systems. Apparently, Allied using a(n) ___ strategy in pricing these components
penetration
All of the following are pricing strategies used by companies establishing prices of multiple products within a product line except: -premium pricing -price lining -captive pricing -bait pricing -penetration pricing
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
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
A product that has more features than those of its competition, or that is perceived to be higher quality, warrants using which type of pricing strategy?
premium pricing
If REVO sets the price for its sunglasses at $240, it is using psychological pricing to convey
prestige
Which of the following pricing strategies often results in a retailer losing money on the product?
price leader
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
When an organization sets a number of prices for selected groups of merchandise, this is commonly referred to as
price limiting
The pricing strategy that assumes that demand is relatively inelastic over certain price ranges is called
price lining
All of the following are psychological techniques except -customary pricing -prestige pricing -reference pricing -odd-even pricing -price skimming
price skimming
If Norelco introduced a new electric razor that sonically removes hair and priced is 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
When business charge the highest possible price that customers who really want the new product will pay, they are using
price skimming
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
Research indicates that both market share and ___ are good indicators of profitability
product quality
The pricing of Clinique make up 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
What type of pricing strategy is used in situation where demand for a product is price inelastic and the seller has an ethical responsibility not to overcharge the client
professional pricing
Westin Inc. has an objective of achieving a 25 percent 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 company attempts to influence a consumer's perception of price to make a product's price more attractive and reduce "sticker shock," it is using a ___ pricing strategy.
psychological
For customers, value is 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 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
Markup is measured either as a percentage of ___ or a percentage of ___
selling price; cost
A sale at The Bon Marche the day after Thanksgiving to kick off the Christmas season would be considered
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
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
Running a bike 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
When a company adjusts price levels so that it can increase sales volume to levels that match the organization's expenses, it is said to employ a ___ objective
survival
A sale that advertised prices "up to 65% off" the original prices uses
tensile pricing
A price-skimming strategy assumes that
the initial demand is highly inelastic
Which of the following is a requirement for setting pricing objectives?
the objectives should be explicitly stated
Marketers improve their ability to establish prices appropriately when
they know prices charged for competing brands
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
When consumers are making do with less expensive products and shopping more selectively, manufacturers and retailers must focus on the ___ of their products
value