marketing ch. 20

Setting prices below those of competing brands to penetrate a market and gain a significant market share quickly

Penetration Pricing

Temporary reduction of prices on a patterned or systematic basis

Periodic Discounting

Charging the highest possible price that buyers who most desire the product will pay

Price Skimming

Goals that describe what a firm wants to achieve through pricing

Pricing Objectives

Establishing and adjusting prices of multiple products within a product line

Product-Line Pricing

A pricing strategy should yield a certain price or range of prices, which is the final step in the pricing process. True False

True

Packaging together two or more identical products and selling them at a single price

Multiple-Unit Pricing

Establishing a final price through bargaining between the seller and the customer

Negotiated Pricing

Ending the price with certain numbers to influence buyers' perceptions of the price or product

Odd-Even Pricing

Pricing the highest-quality or most versatile products higher than other models in the product line

Premium Pricing

Setting prices at an artificially high level to convey prestige or a quality image

Prestige Pricing

Pricing a product at a moderate level and displaying it next to a more expensive model or brand

Reference Pricing

Setting one price for the primary target market and a different price for another market

Secondary-Market Pricing

Advertised sales or price cutting linked to a holiday, a season, or an event

Special-Event Pricing

Marketers can employ one or multiple pricing objectives. True False

True

Spirit Airlines is a relatively new entrant to the no-frills, value-oriented airline segment and hopes to capture a large proportion of the dollars consumers spend on air travel in the value segment over the next year by taking customers away from other airlines such as Southwest, Frontier, and Allegiant. What type of pricing objective is Spirit Airlines utilizing? a. Market share b. Profit c. Survival d. Return on investment

a. Market share

AMC Theaters has recently noticed a decline in movie theater attendance due to consumers' shifting media habits, such as streaming movies via Netflix, Hulu, and Amazon Prime. The theater chain is setting prices low to attract more sales and motivate consumers to return to the cinema for newly released movies. What type of pricing objective is AMC Theaters utilizing? a. Survival b. Profit c. Return on investment d. Market share

a. Survival (Survival pricing objective includes the adjustment of pricing levels, so the firm can increase sales volume to match organizational expenses. It generally involves a temporary establishment of low prices even below costs in order to attract more sales.)

Companies such as airlines utilize _______ pricing where they charge higher prices for airline fares during peak travel periods such as holidays when a large number of consumers will likely be traveling. However, they price fares lower during off-peak days. a. demand-based b. cost-plus c. markup d. competition-based

a. demand-based

Blue Ribbon Farms is a family-owned farm and sells its seasonal produce, meat, eggs, and bakery items at several farmers' markets within a 60-mile radius of the farm. The owners utilize a Square payment system for credit cards, which is conveniently attached to a digital device such as an iPhone or iPad; however, the farm is charged a credit card fee of 8% of the retail price to process each credit card transaction. In order to encourage shoppers to pay with cash, Blue Ribbon Farms offers a 10% discount on purchases for consumers who pay by cash or check. Blue Ribbon Farms is utilizing a _______ pricing strategy. a. differential b. penetration c. premium d. random discounting

a. differential

Juno Chang is the owner of a local upscale, fine dining restaurant and typically sets prices in order to achieve a 50% return on sales revenues. This is an example of a _______ pricing objective. a. profit b. status quo c. cash flow d. market share

a. profit

Value is a combination of price and _______. a. quality b. functionality c. consistency d. aesthetics e. elasticity

a. quality

Marketers at Stouffer's have assessed their target market's evaluation of price and evaluated their competitors' prices. Their next step in establishing prices will be to _______. a. select a basis for pricing b. determine a specific price c. select a pricing strategy d. develop pricing objectives

a. select a basis for pricing

One downside for customers to cost-plus pricing is _______. a. sellers may increase stated costs to gain a larger profit b. the final price is not given up front c. price fluctuates based on current demand d. customers often receive products made from low-grade materials

a. sellers may increase stated costs to gain a larger profit

Professionals such as accountants and attorneys typically use a _______ pricing objective where nonprice competition occurs since pricing is not utilized as a competitive tool. a. status quo b. survival c. profit d. quality

a. status quo

Many fashion or trendy products are expected to have a relatively short product life cycle and managers seek to recover cash as quickly as possible. Which pricing objective would be most appropriate for fashion or trendy products? a. Profit b. Cash flow c. Status quo d. Quality

b. Cash flow (The cash flow pricing objective is often utilized to encourage rapid sales and recover cash as quickly as possible and may be appropriate when a short product life cycle is anticipated.)

Many consumers love shopping at discount stores like T.J. Maxx, HomeGoods, or Marshall's. Cindy and Tamra were recently shopping at HomeGoods and saw some dining room chairs they really liked. The price tag had a retail price of $79.95 with additional detail of manufacturer's suggested retail price of $129.95. They thought this was a great discount and decided to purchase two chairs for their apartment. What type of pricing strategy does HomeGoods utilize in pricing the chairs and other merchandise? a. Price leaders b. Comparison discounting c. Odd-even pricing d. Special-event pricing

b. Comparison discounting

Lorenzo noticed on a recent shopping trip to Walmart that many of the items in the store had prices with an $0.88 ending. For example, a household multi-surface cleaner was priced at $2.88. Walmart is utilizing which pricing strategy? a. Price skimming b. Odd-even pricing c. Reference pricing d. Customary pricing

b. Odd-even pricing

_______ combines price and quality attributes, which consumers use to differentiate among competing brands. a. Market share b. Value c. Perceived differentiation d. Image

b. Value

Bounty paper towels likes to set its prices for the value pack of six paper towels slightly lower than Scott paper towels to attract more consumers to purchase the Bounty brand. This is an example of _______ pricing. a. demand-based b. competition-based c. cost-based d. status quo

b. competition-based

The formula to calculate the markup as a percentage of cost places _______ in the denominator. a. markup b. cost c. quantity d. profit

b. cost

Rohit and Kushi recently retired to South Carolina and discovered a fine art furniture maker with whom they contracted to build a custom walnut dining table for their new home. The contractor utilized _______ pricing by multiplying 150% times the cost of the lumber and materials to build the table to arrive at the purchase price. a. markup b. cost-plus c. demand-based d. competition-based

b. cost-plus (Projects involving custom-made products such as a dining table employ cost-plus pricing where a percentage is applied to the costs of materials to determine the price.)

The belief behind _______ is that it is better to take a lower profit margin on a sale than no revenue at all. a. survival pricing b. demand-based pricing c. markup pricing d. cost-plus pricing

b. demand-based pricing

Chevrolet's Presidents' Day sales are an example of _______. a. negotiated pricing b. periodic discounting c. secondary-market pricing d. penetration pricing e. price skimming

b. periodic discounting

AutoZone recently placed a newspaper and Facebook advertisement for a sale on tires that included the statement "up to 40 percent off" on certain brands such as Pirelli, Michelin, and Yokohama. This added statement is an example of _______ pricing. a. bait b. tensile c. penetration d. captive

b. tensile

Firefly Space Shuttles is using a strategy of maximizing revenues by making numerous price changes in response to demand, competitors' prices, or environmental conditions. This is best described as _______. a. cost-based pricing b. yield management c. competition-based pricing d. cost-plus pricing e. markup pricing

b. yield management

Assume a retailer purchases a can of premium dog food at $2.25 and adds 75 cents to the cost, making the price $3. What is the markup as a percentage of selling price? a. 33% b. 100% c. 25% d. 50% e. 5%

c. 25%

Beats by Dr. Dre headphones are sold at Target for $159.00, and Target is able to purchase them for $90. What is the markup percentage of cost that Target is using on this product? a. 43.3% b. 52.4% c. 76.7% d. 48.6%

c. 76.7% (The markup percentage of cost is calculated by dividing the dollar markup ($69) by the cost ($90). Therefore, $69/$90 = 76.7%.)

Which of the following descriptions is most appropriate for price lining? a. This strategy tends to build market share quickly to encourage product trial. b. This strategy may generate customer resentment if customers believe the retailer is setting artificially low prices in order to entice customers to the store in order to sell them higher-priced merchandise. c. Consumer demand for products is relatively inelastic and consumers tend to concentrate their purchases without responding to slight changes in price. d. Marketers utilize this approach in order to appeal to price-sensitive shoppers.

c. Consumer demand for products is relatively inelastic and consumers tend to concentrate their purchases without responding to slight changes in price.

Which of the following product-line pricing strategies is NOT generally used for business products? a. Bait pricing b. Captive pricing c. Psychological pricing d. Price lining e. Premium pricing

c. Psychological pricing

The electronics manager at Best Buy just saw an advertisement for Walmart on the iPad mini 4 for $349 and up. He contacted the regional manager for Best Buy and got approval to meet the price on the product at his Best Buy store location. What type of pricing strategy does this represent? a. Demand-based pricing b. Secondary-market pricing c. Random discounting d. Status quo pricing

c. Random discounting

The Casey's General Store chain typically operates in smaller markets and provides grocery items, liquor, pizza, and gasoline. Their prices of most grocery items, such as milk, eggs, juice, and bread, are typically priced higher than a grocery store because consumers are willing to pay more for the convenience. However, because Casey's General Store is often competing with several gas stations within a short radius of each location, it monitors the price of gas at various local outlets and adjusts prices daily to be at the same price or just under a competitor's price for gasoline. Casey's General Store is applying the _______ pricing basis. a. demand-based b. cost-plus c. competition-based d. markup

c. competition-based (In competition-based pricing, an organization considers costs to be secondary to competitors' prices.)

A temporary reduction of prices on an unsystematic basis is called _______. a. haphazard pricing b. special-event pricing c. random discounting d. differential pricing

c. random discounting

Which of the following pricing strategies sets the basic product in a product line low, but the price on the items required to operate or enhance it are higher? a. Reference pricing b. Bait pricing c. Price lining d. Captive pricing e. Premium pricing

d. Captive pricing

What type of pricing is typically utilized by defense contractors when placing bids for projects with the government? a. Demand-based b. Competition-based c. Markup d. Cost-plus

d. Cost-plus (Cost-plus pricing applies a specific dollar amount or percentage of the cost that is added to the seller's cost to establish the final price of a product or service. This type of pricing is frequently utilized in government and defense contracts.)

Cinemark Theatres charges $10 per person (on average) for movie tickets on Friday and Saturday nights after 6 p.m. but offers matinee prices of $7 per person for tickets at all other times during the week and before 6 p.m. on Fridays and Saturdays. What type of pricing is Cinemark using? a. Competition-based b. Discount c. Markup d. Demand-based

d. Demand-based

Which of the following is NOT a technique affiliated with promotional pricing? a. Comparison discounting b. Price leaders c. Special-event pricing d. Odd-even pricing

d. Odd-even pricing

Jeremy is considering purchasing a new vehicle and is comparing the costs of a car that has the "Basic" package versus the "Sports" package. The "Sports" package includes a larger set of wheels and tires, stiffer suspension, and specially designed seating for the driver and passenger. Jeremy likes the "Basic" package fine but would prefer the car with the larger wheels and tires.He's looked at prices of wheels and tires on TireRack.com and notices that the vehicle with the "Sports" package would be priced comparably to buying the "Basic" package plus just the wheels and tires from TireRack. Eventually, Jeremy decides that purchasing the vehicle with the "Sports Package" makes the most sense even though he's indifferent to the seating or suspension options. This is an example of _______ pricing. a. prestige b. comparison c. customary d. bundle

d. bundle

Kroger grocery stores often use _______ pricing to encourage customers to purchase more units of a single product and take advantage of lower, per-unit prices. Thus, customers save money when purchasing multiple items of the same product at one time versus buying only one item at different points in time. a. bulk b. cooperative c. bundle d. multiple-unit

d. multiple-unit (Multiple-unit pricing, popular in supermarkets, is setting a single price for two or more units of a product, such as two cans for 99 cents, rather than 50 cents per can.)

The price of Lenovo laptop computers is typically higher than competitive brands, such as Toshiba and Dell. Consumers often consider the Lenovo brand to be better than other brands and it's likely that Lenovo is using a _______ pricing objective. a. profit b. cash flow c. status quo d. product quality

d. product quality

Which of the following pricing objectives can reduce a firm's risks by helping to stabilize demand for its products? a. Product quality b. Cash flow c. Profit d. Market share e. Status quo

e. Status quo

The Federal Trade Commission has established guidelines for _______. If the higher price against which the comparison is made is the price formerly charged for the product, the seller must have made the previous price available to customers for a reasonable time period. a. bait pricing b. special-event pricing c. reference pricing d. price leaders e. comparison discounting

e. comparison discounting

Differential pricing is effective mainly when focusing on only one market segment. True False

False

The objective of maintaining or increasing market share depends on growth in industry sales. True False

False (Maintaining or increasing market share need not depend on growth in industry sales. An organization can increase its market share even if sales for the total industry are flat or decreasing.)

Adding to the cost of the product a predetermined percentage of that cost

Markup Pricing

Products priced near or even below cost

Price Leaders

Setting a limited number of prices for selected groups or lines of merchandise

Price Lining

Fees set by people with great skill or experience in a particular field

Professional Pricing

Pricing that attempts to influence a customer's perception of price to make a product's price more attractive

Psychological Pricing

Daniel always likes to purchase popcorn when he goes to the movies. Popcorn is marked up 1,275 percent. However, Daniel is willing to pay this price. For Daniel the ____________ is impacting his view of price.

Purchase Situation

Temporary reduction of prices on an unsystematic basis

Random Discounting

The importance of price depends on the type of product, the type of target market, and the purchase situation. True False

True

Yield management is a strategy of maximizing revenues by making numerous changes in response to demand, competitors' prices, or environmental conditions. True False

True

Which new product pricing strategy builds market share quickly to encourage product trial? a. Penetration pricing b. Product-line pricing c. Captive pricing d. Price skimming

a. Penetration pricing

Occasionally, firms may utilize a _______ pricing objective by temporarily setting prices low even below costs in order to generate higher levels of sales. a. survival b. cash flow c. return on investment d. status quo

a. survival

Mike is pricing a new couch. This couch is higher-quality and expected to last longer than your traditional couch. Mike prices the couch high because he knows that consumers anticipate paying more for longer-lasting products. What stage of the pricing process is Mike currently? a. Developing pricing objectives b. Assessing the target market's evaluation of price c. Choosing a basis for setting prices d. Determining the final price e. Evaluating competitors' prices

b. Assessing the target market's evaluation of price

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? a. Competition-based b. Cost-plus c. Demand-based d. Markup

b. Cost-plus (When production costs are difficult to predict, cost-plus pricing is appropriate. Projects involving custom-made equipment (like Steinway products) and commercial construction are often priced using this technique.)

Kara Thrace operates a service business that engages in systematically collecting data on brands and prices at competitors' stores. For which stage of the price establishment process would this service be most appropriate? a. Selecting a pricing strategy b. Evaluating competitors' prices c. Selecting a basis for pricing d. Assessing the target market's evaluation of price e. Developing pricing objectives

b. Evaluating competitors' prices

The use of comparative shoppers would generally occur during which step of the pricing process? a. Developing pricing objectives b. Evaluating competitors' prices c. Choosing a basis for setting prices d. Determining the final price e. Assessing the target market's evaluation of price

b. Evaluating competitors' prices

_______ pricing is often employed by marketers such as cell phone companies including Verizon and AT&T who attempt to influence a customer's perception of price to make a product's price more attractive or evoke a customer's emotions in the purchase decision. a. Bait b. Psychological c. Captive d. Premium

b. Psychological

Dallas owns a pet grooming business called Pawsatively Perfect. He only works weekdays between 8 a.m. and 5 p.m. He has loyal customers and enjoys all of the pets he grooms. Dallas is happy with the amount of business he currently has and would like to maintain his current work load. Dallas would likely employ which type of pricing objective? a. Survival b. Status quo c. Cash flow d. Product quality

b. Status quo (In status quo pricing, firms identify price levels that help stabilize demand and sales. Dallas is happy with the amount of business he currently has and wants to maintain his current work load. He would likely use status quo pricing.)

The _______ pricing objective is utilized to recover research and development expenses and create the impression that its products may last longer, are more durable, and are better than competitors' products. a. market share b. product quality c. status quo d. survival

b. product quality

Walgreens offers a variety of over-the-counter medication for allergies, colds, and flu symptoms such as Zyrtec, Tylenol Cold & Flu, and Robitussin cough syrup. The store has a private label brand and typically places the private label or store brand right next to the major brand of the same product and prominently displays the product's price with a shelf tag. Walgreens believes this approach will result in a great proportion of sales for its private label brand that produces higher profit margins for the store and is using a _______ pricing approach. a. customary b. reference c. private label d. prestige

b. reference (Pricing a product at a moderate level and physically positioning it next to a more expensive model or brand in the hope that the customer will use the higher price as a comparison is known as reference pricing.)

The Guiliani family desperately needed a new stove as theirs had only two working burners. They decided to wait just a few more weeks until Home Depot had their Labor Day sale, which usually resulted in 40% off appliances. The Labor Day sale is an example of _______. a. price leading b. special-event pricing c. random discounting d. comparison discounting

b. special-event pricing

Which of the following methods is utilized to gather data about competitive prices? a. Incorporating it as a regular part of marketing research b. Employing comparative shoppers who gather data at competitors' stores c. All of the answer choices are ways to gather data about competitive prices d. Purchasing syndicated marketing research services

c. All of the answer choices are ways to gather data about competitive prices

Which of the following best describes circumstances under which competition-based pricing should be utilized? a. Commonly utilized when competing products are heterogeneous b. Commonly utilized when varying levels of demand are present in the marketplace c. Commonly utilized among producers of relatively homogeneous products when consumers are sensitive to price d. Commonly utilized among producers of customized products

c. Commonly utilized among producers of relatively homogeneous products when consumers are sensitive to price

Stones Custom Choppers is a motorcycle repair and maintenance shop specializing in customizing and restoring motorcycles to its customers' specifications. Rebuilds and custom bikes typically cost $20,000 and up, and each one is unique to the customer's size, interest, and personality. What type of pricing is most appropriate for the company? a. Markup b. Demand-based c. Cost-plus d. Competition-based

c. Cost-plus (Projects involving custom-made products such as a custom motorcycle would most likely employ cost-plus pricing where a percentage is applied to the costs of materials to determine the price.)

Which of the following is true about assumptions related to a price skimming strategy? a. It should only be used with high quality products. b. Demand for the product has unitary elasticity c. Demand for the product is inelastic. d. Competitors will be unlikely to enter the market.

c. Demand for the product is inelastic.

Alamo Rent A Car uses _______ depending on the number of reservations it has, how many cars are on the lot, and how many cars it expects to be returned. It can change its prices based on these factors several times throughout the day. a. markup pricing b. status quo pricing c. dynamic pricing d. cost-plus pricing

c. dynamic pricing (Dynamic pricing is used by many service industries. Dynamic pricing is an attempt to balance supply and demand. It is a type of demand-based pricing.)

In the absence of government controls, pricing is a(n) _______ and _______ way to adjust the marketing mix. a. ethical; convenient b. flexible; challenging c. flexible; convenient d. flexible; ill-timed e. rigid; convenient

c. flexible; convenient

The Farmhouse Restaurant has been struggling to attract customers for its lunch service and decides to utilize a _______ pricing objective where it prices its lunch specials below costs at $5.99 per person to attract customers to the restaurant. The restaurant hopes this is a short-term strategy that will increase revenue and create more loyal customers who will return to the restaurant even if the lunch special price is increased. a. profit b. market share c. survival d. return on investment

c. survival

When consumers are making do with less expensive products and shopping more selectively, manufacturers and retailers must focus on the _______ of their products. a. quality b. availability c. value d. price

c. value

Which of the following includes the various bases for pricing? a. Profit, status quo, and survival b. Markup, cost, and cost-plus c. Variable, competitive, and cost d. Demand-based, competition-based, and cost-based

d. Demand-based, competition-based, and cost-based

When marketers are developing pricing objectives, they should ensure that the objectives are _______. a. stated in broad and general terms b. easily achieved c. consistent with the competition and industry standards d. consistent with the firm's marketing and overall objectives

d. consistent with the firm's marketing and overall objectives

Nabisco Foods has noticed a decline in sales for its various brands of cookies, and sales for cookies in general are declining. However, Nabisco still hopes that its Oreo cookies can achieve a higher percentage of sales compared to competing cookie brands. This is an example of a _______ pricing objective. a. profit b. survival c. status quo d. market share

d. market share (Market share is a product's sales in relation to total industry sales, and organizations can increase their market share even if sales for the total industry are flat or declining.)

Pricing is a unique component to the marketing mix because _______. a. of its ability to create relationships with consumers b. it is the only thing that marketers can control c. it is often the first thing that consumers notice about a product d. of its flexibility

d. of its flexibility

Anthony works at a firm that wants to develop a new pricing strategy for one of its products. The company has decided that its main objective for this product is to increase the product's sales in relation to industry sales. Anthony has obtained a list of prices that tell him how much similar products are being sold for. Anthony is particularly interested in the industry's top competitor because it has so much market share. After determining the price of its major competitor, Anthony decided to undercut their price by several dollars. He believes putting a sign in their stores that features his company's discounted price next to the price of their major competitor for the same product will show consumers that Anthony's company offers them a much better deal. However, he knows that he has to be careful not to misrepresent the competitor's price in the process. Which of the following pricing strategies is Anthony planning to adopt? a. Bait pricing b. Pricing lining c. Special-event pricing d. Customary pricing e. Comparison discounting

e. Comparison discounting

Which of the following price bases is mostly likely to be used for commercial construction projects or custom-made equipment? a. Markup pricing b. Competition-based pricing c. Yield management d. Demand-based pricing e. Cost-plus pricing

e. Cost-plus pricing

What is the first step in establishing prices? a. Development of pricing objectives b. Determining a basis for pricing c. Evaluating competitors' prices d. Determination of a specific price

a. Development of pricing objectives

Disney is implementing a new type of pricing. When demand increases and more customers visit the parks, the price will increase. When demand dips during the slow season, prices will decrease. This is a way to help balance out supply and demand. What is another name for the type of pricing that Disney is using? a. Dynamic pricing b. Cost-based pricing c. Competition-based pricing d. Cost-plus pricing e. Markup pricing

a. Dynamic pricing

Anthony works at a firm that wants to develop a new pricing strategy for one of its products. The company has decided that its main objective for this product is to increase the product's sales in relation to industry sales. Anthony has obtained a list of prices that tell him how much similar products are being sold for. Anthony is particularly interested in the industry's top competitor because it has so much market share. After determining the price of its major competitor, Anthony decided to undercut their price by several dollars. He believes putting a sign in their stores that features his company's discounted price next to the price of their major competitor for the same product will show consumers that Anthony's company offers them a much better deal. However, he knows that he has to be careful not to misrepresent the competitor's price in the process. When Anthony is examining the list of prices, he is most likely in which of the following stages? a. Evaluating competitors' prices b. Choosing a basis for setting prices c. Developing pricing objectives d. Determining the final price e. Assessing the target market's evaluation of price

a. Evaluating competitors' prices

Aldi, normally the low-price leader in grocery stores, is starting to become concerned with the increasing number of Lidl stores in the United States. To maintain its leader status, which of the following methods will Aldi most likely employ? a. Hire comparison shoppers to purchase a typical basket of goods from Lidl and compare prices b. Ignore competitors' prices and keep current prices c. Raise prices on most items and compete on quality and services d. Lower prices below cost on all items to draw shoppers into stores

a. Hire comparison shoppers to purchase a typical basket of goods from Lidl and compare prices (Marketers are in a better position to establish prices when they know the prices charged for competing brands. One way to collect data on prices at competitors' stores is to hire comparison shoppers.)

_______ pricing is often utilized to discourage competitors from entering the market. a. Penetration b. Product-line c. Bundle d. Captive

a. Penetration

Which of the following is NOT a technique associated with psychological pricing? a. Penetration pricing b. Bundle pricing c. Multiple-unit pricing d. Reference pricing

a. Penetration pricing

Budweiser has a variety of different beers that it offers using the Budweiser name and prices the highest-quality beers such as its Platinum beverage at a higher price than other products in the line. What type of product-line pricing strategy is Budweiser implementing? a. Premium b. Captive c. Bait d. Penetration

a. Premium (Premium pricing is utilized by marketers as a product-line pricing strategy and is implemented by charging the highest price for products that are the most versatile and most desirable version of a product.)

Jennifer Sloan was recently hired by IBM as a solutions sales representative upon graduation from college and after working with the company for two years, now earns a base salary of $90,000 as well as commissions on sales and bonuses for exceeding her quarterly sales quotas. Jennifer is a fashionista and enjoys purchasing the latest styles and fashions from high-end designers such as Chanel, Dolce Gabbana, and her favorite red-soled shoes from Christian Louboutin that cost $500 or more per pair.Jennifer realizes that comparable products from other brands are priced much lower but enjoys the added luxury of these designer labels and feels that the quality is much better. In addition, Jennifer meets regularly with senior executives including vice presidents and presidents of companies and believes her image is related to her success as a sales representative. What type of pricing strategy do Christian Louboutin, Chanel, and Dolce Gabbana most likely utilize? a. Prestige b. Odd-even c. Reference d. Customary

a. Prestige

Bert's company is about to release a new electronics product. The electronics product is estimated to have a short life cycle before it is replaced by an upgraded one. The company would like to recover the capital spent to produce the product. It therefore decides to charge the highest possible price for the product upon release. Bert's firm recognizes this might provide an advantage to competitors who may release the product at a lower price, but it believes customers will feel that the higher price signals higher quality. What type of pricing strategy is Bert's company using for this product? a. Price skimming b. Price lining c. Captive pricing d. Bait pricing e. Penetration pricing

a. Price skimming

Which of the following objectives is likely to be more expensive for a firm as the cost of materials and research and development may be greater? a. Product quality b. Profit c. Status quo d. Cash flow e. Market share

a. Product quality

A Perfect Pair is a designer clothing boutique featuring fresh fashions for women who like to dress in up-to-the-minute fashions and have high levels of discretionary income to spend on clothing. The store does not offer very many discounts on clothing since it purchases in small amounts and frequently sells all that it orders. However, A Perfect Pair does price reductions on a nonsystematic basis, so customers are sometimes surprised to visit the store and notice items have been reduced from regular price. What pricing strategy is A Perfect Pair utilizing? a. Random discounting b. Penetration pricing c. Product-line pricing d. Captive pricing

a. Random discounting

_______ pricing objectives generally require some amount of trial and error since not all data and inputs are available when first setting prices. a. Return on investment b. Status quo c. Profit d. Market share

a. Return on investment

Procter & Gamble's (P&G) Bounty paper towels are a cash cow for P&G. Assume that Procter & Gamble is adjusting the prices of Bounty paper towels sold in the United States. Viewing the United States as a saturated market, the marketing manager of Bounty believes that P&G should adopt a pricing strategy that will serve to maintain their current market share. What type of objective is this manager adopting? a. Status quo b. Product quality c. Survival d. Cash flow e. Profit

a. Status quo

Which of the following is the best definition of value? a. Value combines price with quality attributes and is often used by consumers to differentiate among competing brands. b. Value is considered the amount of money that consumers pay for a good or service. c. Generally, consumers are not concerned with the value they receive for their money. d. Consumers do not consider trade-offs when making purchasing decisions.

a. Value combines price with quality attributes and is often used by consumers to differentiate among competing brands.

Carnival Cruise lines has several cruise ships that port near Orlando, Florida, and they often run specials on last minute sailings to customers who reside in Florida. Carnival is seeking to generate a higher percentage of occupancy on its sailings by attracting local customers at discounted rates. Carnival Cruise lines does not advertise these special prices in any other geographic market. This is an example of _______ pricing. a. secondary market b. captive c. premium d. price lining

a. secondary market (Secondary market pricing means setting one price for the primary target market and a different price for another market. Often the price charged in the secondary market is lower.)

Marketers improve their ability to establish prices appropriately when _______. a. they know prices charged for competing brands b. their products are of better quality than the competition's c. the main objective is image building d. there is nonprice competition

a. they know prices charged for competing brands

In industries where price competition prevails, a firm should always price its products much lower than competitors. a. True b. False

b. False

If Wrigley set its pricing objective as attaining 38% of the chewing gum market, what else would be needed to make this a true pricing objective? a. Breakeven analysis b. Identification of a time period for accomplishment c. Identification of cost structure d. Statement of demand elasticities

b. Identification of a time period for accomplishment (Pricing objectives must be stated explicitly, in measurable terms, and include a time frame for accomplishing them. Wrigley's needs a time frame.)

Stephen King is the owner of a 100-seat capacity restaurant in a mid-sized city and has significant restaurant experience but often struggles with decisions about pricing. Over the years however, he's developed a simple method where he applies a straight 35% to the cost of an item as his retail price. Stephen always knows the various cost elements of his entrees, side dishes, and beverages and simply multiplies the 35% times the cost to arrive at the final price to charge guests. What type of pricing is Stephen utilizing? a. Demand-based pricing b. Markup pricing c. Competition-based pricing d. Cost-plus pricing

b. Markup pricing

Which of the following pricing strategies is NOT utilized when establishing prices for a product line? a. Captive pricing b. Price skimming c. Premium pricing d. Bait pricing

b. Price skimming (Marketers have several strategies from which to choose when employing product-line pricing: captive pricing, premium pricing, bait pricing, and price lining.)

Demand-based pricing is best used when the company has _______. a. heterogeneous products that are difficult to value b. a fixed amount of available resources that are perishable c. a product line with great diversity in quality d. a large amount of variable costs for product development e. different products that can be substituted for one another

b. a fixed amount of available resources that are perishable

Mattress Doctor utilizes direct mail and social media advertising on Facebook to promote its special offers such as a Beauty Rest mattress set for $499. Lucy and Dan visited the store thinking they would purchase the set for $499 but realized after trying out different models of Simmons mattresses that they would have to spend considerably more money for a mattress set that they liked and found comfortable. The Mattress Doctor is using _______ pricing to attract customers to the store. a. penetration b. bait c. captive d. premium

b. bait (In bait pricing, marketers may put a low price on one item in the product line with the intention of selling a higher-priced item in the line.)

Demand-based pricing would be appropriate for all of the following, except _______. a. theater performances b. food trucks c. hotels d. airlines

b. food trucks

Anthony works at a firm that wants to develop a new pricing strategy for one of its products. The company has decided that its main objective for this product is to increase the product's sales in relation to industry sales. Anthony has obtained a list of prices that tell him how much similar products are being sold for. Anthony is particularly interested in the industry's top competitor because it has so much market share. After determining the price of its major competitor, Anthony decided to undercut their price by several dollars. He believes putting a sign in their stores that features his company's discounted price next to the price of their major competitor for the same product will show consumers that Anthony's company offers them a much better deal. However, he knows that he has to be careful not to misrepresent the competitor's price in the process. Anthony's firm has adopted a _______ pricing objective. a. status quo b. market share c. cash flow d. profit e. return on investment

b. market share

The Black Friday sale is highly anticipated by shoppers and many online and brick-and-mortar retail stores offer extreme discounts on items ranging from laptop computers to televisions to attract consumers to its stores. Some consumers even arrive at the retail location several hours before the store opens to wait in line and be one of the first shoppers allowed in the store. The Black Friday sale is an example of a _______ pricing strategy. a. random discounting b. periodic discounting c. bait d. price lining

b. periodic discounting

Fernando had already passed through airport security and was sitting at the Delta terminal when he realized he forgot to pack the charging cable for his cell phone. He located the nearest CNBC News & Gifts store in the terminal and purchased a new cable. He was appalled at the inflated price for the cable, and normally wouldn't pay that much, but he felt he couldn't make it through his whole trip without one. Fernando was influenced by _______. a. the target market b. the purchase situation c. the level of quality d. the type of product

b. the purchase situation

Mai has a dilemma. She works for a chocolate company and the price of chocolate is going up. The most logical solution would be to raise the price. However, Mai knows from her history in the business that their loyal customers would not look favorably on a price increase. For customers, candy bars are one of those items where the price rarely changes. Mai's firm has sold its candy bars for $0.99 for the past two decades. Mai feels that the next best solution to absorbing the extra costs is to make the candy bars slightly smaller without lowering the price. Mai's company is most likely using which of the following pricing strategies? a. Product-line b. Bait c. Customary d. Price leader e. Everyday low price

c. Customary

Recently Walmart utilized a commercial showing employees using a big pair of scissors to cut prices and stated "low price guarantee." Walmart also utilizes signage throughout the store on various items that say, "Low Prices" or "Low Price Guarantee." What type of pricing strategy is Walmart utilizing? a. Customary pricing b. Bundle pricing c. Everyday low pricing (EDLP) d. Odd-even pricing

c. Everyday low pricing (EDLP)

Which of the following is NOT one of the requirements for pricing objectives? a. Stated explicitly b. Include a time frame for accomplishment c. Include a comparison to the competition d. Include measurable terms

c. Include a comparison to the competition

_______ pricing, which is typically used by retailers such as Best Buy, calculates the retail price by adding a predetermined percentage of the cost to the cost of the product. a. Competition-based b. Demand-based c. Markup d. Cost-plus

c. Markup

Philip goes to a Toyota dealership looking for a new car. He finds a Toyota Corolla he really likes. The time has come to meet with the salesperson. What type of pricing strategy is the salesperson likely to adopt with Philip? a. Secondary-market pricing b. Professional pricing c. Negotiated pricing d. Penetration pricing e. Customary pricing

c. Negotiated pricing

Why might a competitor's price list not reflect the actual prices at which the competitive products are sold? a. Discounts are becoming more common. b. Prices are often different in secondary markets. c. Negotiation is often involved in the final selling price. d. It is impossible to determine competitors' prices.

c. Negotiation is often involved in the final selling price. (Even if a marketer has access to competitors' price lists, they may not reflect the actual prices at which competitive products sell because negotiation is involved.)

What are the two ways that markup percentage can be calculated? a. Percentage of revenue and percentage of profit b. Percentage of cost and percentage of revenue c. Percentage of cost and percentage of selling price d. Percentage of contribution margin and percentage of selling price

c. Percentage of cost and percentage of selling price

_______ pricing is utilized by marketers as a product-line pricing strategy and is implemented by charging the highest price for products that are the most versatile and most desirable version of a product. a. Penetration b. Bait c. Premium d. Captive

c. Premium

_______ is the strategy of selling products at certain predetermined prices that reflect explicit price breaks and is common for clothing and accessory products. This policy assumes that demand for various groups or sets of products is inelastic. a. Penetration pricing b. Bait pricing c. Price lining d. Captive pricing

c. Price lining

If Apple seeks to lead the electronics industry in innovation, what type of pricing objective will it most likely adopt? a. Cash flow b. Survival c. Product quality d. Return on investment e. Status quo

c. Product quality

_______ pricing is typically utilized by marketing consultants and accountants who have great skill or experience in their fields. Professional accountants may determine their pricing decisions by using a set fee for various types of services such as $99 for filing a simple tax return and $400 for filing an itemized return for a couple. a. Promotional b. Consultant c. Professional d. Preferred

c. Professional (Professional pricing is used by people who have great skill or experience in a particular field. Although costs are considered when setting prices, professionals often believe their fees should not relate directly to the time and/or effort spent in specific cases.)

Malcolm has decided that he wants to open up his own law practice. The time has come to establish prices for his services. Due to his extensive experience and legal background, he believes that his fees should not relate directly to the time or effort spent on specific cases. What type of pricing will Malcolm most likely choose? a. Price lining b. Price skimming c. Professional pricing d. Premium pricing e. Differential pricing

c. Professional pricing

The marketing manager for the BMW X5 is developing pricing objectives and sent the following objective statement to the Vice President for review, "Increase market share in the large SUV market to 22% and achieve a 15% return on investment." Which of the following statements is correct regarding this objective statement? a. The statement should include a comparison to the competition. b. The statement should be related to the price of the product. c. The statement should include a time frame for accomplishing the objective. d. The statement should be more general rather than specific.

c. The statement should include a time frame for accomplishing the objective.

A recent study by a consulting firm estimates a 11% annual growth rate for the gaming industry with revenues projected to reach $180.1 billion by 2021. Companies such as Microsoft and Sony fiercely compete for these dollars.In order to entice customers to purchase its system, Microsoft offers a variety of packages for their popular Xbox One console. Upon release of the Xbox One, Microsoft included the game console, a console controller, Kinect camera, HDMI cable, wired mono headset, and a 14-day trial for Microsoft Xbox Live Gold—all for $499. Shoppers could also purchase the Xbox One console without the Kinect camera (and all other accessories) for $399. The Kinect camera if purchased separately was priced at $149. Microsoft is utilizing a _______ pricing strategy. a. reference b. skimming c. bundle d. premium

c. bundle

ACME Corp. has a pricing objective to increase its primary product's sales relative to total industry sales. This is best described as a(n) _______. a. status quo objective b. return-on-investment objective c. market share objective d. cash flow objective e. product quality objective

c. market share objective

Nabisco is considering two pricing objectives. The first is to sell one out of every three crackers consumed in the world, an objective based on _______ ; the second is to meet, but not beat, competitors' prices of cookie products, which is a _______ objective. a. market share; cash flow b. survival; status quo c. market share; status quo d. cash flow; market share

c. market share; status quo (A market share pricing objective looks at the product's sales in relation to total industry sales. Nabisco's first objective is focused on market share. Status quo objectives can focus on several dimensions, such as maintaining a certain market share, meeting (but not beating) competitors' prices, etc. Nabisco's second objective clearly focuses on maintaining the status quo.)

Mitch Harris is an avid car collector and enjoys buying and selling British sports cars. He's currently on the market for a Lotus Evora and has seen them advertised between $42,000 and $65,000 depending upon the model year, options, and condition of the vehicle. Mitch is very interested in one particular advertisement and plans to contact the owner to discuss the vehicle. The owner is asking $54,500 for the vehicle, but Mitch believes he will be able to utilize _______ pricing to purchase the vehicle. a. premium b. bait c. negotiated d. penetration

c. negotiated

Understanding the consumers' expectations of _______ helps a marketer correctly assess the target market's evaluation of price. a. low prices b. price rebates c. value and quality d. reverse distribution

c. value and quality

The Nintendo Switch retails for $299 at GameStop and the cost to GameStop is $200. What is the markup as a percentage of selling price? a. 75% b. 66% c. 50% d. 33%

d. 33% (The markup as a percentage of selling price is calculated by dividing the dollar markup ($99) by the retail price ($299). Therefore, it is $99/$299 = 33%.)

Canon has several lines of digital cameras and often markets its Rebel DSLR camera body with a basic lens at an affordable price of $399. However, consumers who desire additional lenses might pay $400 or more for each additional lens. What type of pricing is Canon utilizing for its Rebel product line? a. Penetration b. Premium c. Bait d. Captive

d. Captive (Marketers may utilize captive pricing for items within a product line where the basic product is priced low but items that are required to operate or enhance the basic product are priced higher.)

Anheuser-Busch, Inc often gathers market research information to determine the prices that MillerCoors, Heineken, and various craft breweries such as New Belgium Brewing Co. and Sierra Nevada Brewing Co. are charging for their products. Anheuser-Busch then attempts to set prices at a similar level as these other companies' products. What type of method is Budweiser utilizing? a. Status quo pricing b. Demand-based pricing c. Cost-plus pricing d. Competition-based pricing

d. Competition-based pricing

Which of the following best explains consumers' motivations to respond positively to bundle pricing? a. Consumers are able to compare the price of the items to the price charged at competing retailers. b. Consumers respond positively to pricing based on tradition and the price they expect to pay for certain items. c. Consumers associate the price with prestige products and believe they are receiving a higher quality product d. Consumers appreciate the opportunity to save time related to shopping and enjoy increased convenience.

d. Consumers appreciate the opportunity to save time related to shopping and enjoy increased convenience.

_______ pricing applies a specific dollar amount or percentage of the cost that is added to the seller's cost to establish the final price of a product or service. This type of pricing is frequently utilized in government and defense contracts. a. Demand-based b. Competition-based c. Markup d. Cost-plus

d. Cost-plus

Airlines will often change prices depending upon day of the week, time of day, and number of days before the flight. It is quite common that a person sitting next to you on a flight paid a much different price than you did. What type of pricing strategy are the airlines most likely using? a. Cost-plus pricing b. Fluctuating pricing c. Captive pricing d. Dynamic pricing

d. Dynamic pricing (Airlines are most likely using dynamic pricing. Dynamic pricing is an attempt to balance supply and demand. Ticket prices are adjusted based on real-time market conditions. It is a type of demand-based pricing.)

Apple has successfully introduced several new products utilizing a skimming approach where it charges the highest possible price during the introduction stage of the product life cycle. Which of the following is NOT one of the benefits of a skimming strategy? a. Helps keep demand consistent with production capabilities b. Protects the marketer from problems that arise when prices are set too low to cover costs c. Creates cash flow to offset the development costs associated with product creation d. May achieve lower levels of sales but still recoup developmental costs

d. May achieve lower levels of sales but still recoup developmental costs (A disadvantage of price skimming relates to risks related to misjudging demand and facing insufficient sales at the higher price point.)

The manufacturers of a tablet computer are planning to increase the price of the product above the price used during product launch to cover costs associated with product development and increased shipping costs related to overseas production. They are concerned that consumers will respond negatively to a price increase. What type of initial pricing strategy did the company most likely utilize? a. Captive pricing b. Product-line pricing c. Price skimming d. Penetration pricing

d. Penetration pricing (Penetration pricing is the strategy of setting a low price for a new product and its main purpose is to build market share quickly to encourage product trial.)

A company that identifies price and cost levels that allow the company to make the most amount of money possible would be utilizing which type of pricing objective? a. Market share b. Cash flow c. Return on investment d. Profit

d. Profit

Stepan is a global manufacturer of chemicals such as surfactants and polymers that are sold to manufacturers such as Procter & Gamble for use in its shampoos, laundry detergent, and soap products. Stepan competes with a variety of other chemical suppliers and knows that in general, it is a higher-priced and higher-quality supplier. However, Stepan doesn't know exactly how much its competitors charge for similar products. Which of the following practices should Stepan utilize to identify the prices competitors are charging for similar products? a. Pretending to be a buyer and soliciting pricing information from the competitor b. Stealing price lists from a display at a trade show c. Hiring sales representatives from competitors' companies and asking them to share price information d. Using consumer pricing surveys

d. Using consumer pricing surveys (The most ethical approach to obtaining pricing information is to use marketing research.)

Dollar Shave Club was founded on the idea that replacement razors are too expensive. Customers can buy a razor handle and a small number of blade cartridges for an affordable price, but replacement blade cartridges are priced very high. Companies like Gillette and Schick are using _______. a. prestige pricing b. price skimming c. bait pricing d. captive pricing

d. captive pricing (Captive pricing occurs when the basic product in a product line is priced low, while the related items are priced higher.)

Kellogg's strives to lead the cereal industry by obtaining a high market share across various types and varieties of cereal. In order to capture a large market share upon introduction of new products, Kellogg's should utilize _______. a. price skimming b. captive pricing c. product-line pricing d. penetration pricing

d. penetration pricing

A temporary reduction of prices on a patterned or systematic basis is known as _______. a. non-random discounting b. customary pricing c. everyday low pricing d. periodic discounting

d. periodic discounting

Xbox is releasing a new game system and will most likely utilize a _______ pricing strategy where they will charge the highest possible price they believe consumers will pay during the introductory stage of the product life cycle. However, when Frito Lay unveils a new product such as Tostitos Rolls, they utilize a _______ pricing strategy by setting a low price and build market share quickly as well as discourage competitors from entering the market. a. penetration; product-line b. product-line; price skimming c. captive; random discounting d. price skimming; penetration

d. price skimming; penetration

Shelly is undergoing the six-step process for establishing prices for a newly launched product. She has just finished assessing the target market's evaluation of possible prices. What is Shelly's next step? a. Determination of a specific price b. Selection of a basis for pricing c. Selection of a pricing strategy d. Development of pricing objectives e. Evaluation of competitors' prices

e. Evaluation of competitors' prices

Pricing influenced primarily by competitors' prices

Competition-Based Pricing

Pricing an item in a product line low with the intention of selling a higher-priced item in the line

Bait Pricing

Packaging together two or more complementary products and selling them at a single price

Bundle Pricing

Pricing the basic product in a product line low, while pricing related items higher

Captive Pricing

Setting a price at a specific level and comparing it with a higher price

Comparison Discounting

Pricing based on the level of demand for the product

Demand-Based Pricing

Charging different prices to different buyers for the same quality and quantity of product

Differential Pricing

Pricing products low on a consistent basis

Everyday Low Pricing (EDLP)

After marketers determine a specific price, it will not change. True False

False

Marketers that evaluate competitors' prices do so to set their own prices slightly below those of competitors. True False

False (Marketers evaluate competitors' prices because they are in a better position to establish prices when they know the prices charged for competing brands.)

____________ is unique to price in the marketing mix.

Flexibility

In the absence of _____________ , pricing remains a flexible and convenient way to adjust the marketing mix.

Government Controls

Value does not necessarily have to connote a low price. a. True b. False

a. True

A company that utilizes _______ pricing may choose to set their prices below competitors' prices or at the same level. a. demand-based b. competition-based c. cost-plus d. parity

b. competition-based

The Local Oak Restaurant offers dinner specials daily priced at $8 each and typically prepares 50 units of the special entrée. The restaurant knows that at $8 all 50 of the entrees will be sold and some customers who arrive later in the evening may not be able to get the special. What type of pricing is the Local Oak Restaurant implementing? a. Cost-plus b. Competition-based c. Demand-based d. Price lining

c. Demand-based

Which of the following is the final step in the process of establishing prices? a. Selection of a pricing strategy b. Selection of a basis for pricing c. Determination of a specific price d. Assessment of target market's evaluation of price

c. Determination of a specific price

Which of the following is often used by producers of relatively homogeneous products, especially when the target market considers price to be an important purchase consideration? a. Cost-plus pricing b. Markup pricing c. Cost-based pricing d. Competition-based pricing e. Demand-based pricing

d. Competition-based pricing

Malcolm has decided that he wants to open up his own law practice. The time has come to establish prices for his services. Due to his extensive experience and legal background, he believes that his fees should not relate directly to the time or effort spent on specific cases. Now that Malcolm has chosen the pricing strategy he wants to use, what is his next step? a. Developing pricing objectives b. Evaluating competitors' prices c. Assessing the target market's evaluation of price d. Determining the final price e. Choosing a basis for setting prices

d. Determining the final price

Which pricing strategy provides the most flexible introductory base price? a. Premium pricing b. Penetration pricing c. Captive pricing d. Periodic discounting e. Price skimming

e. Price skimming

Adding a dollar amount or percentage to the cost of the product

Cost-Based Pricing

Adding a specified dollar amount or percentage to the seller's cost

Cost-Plus Pricing

Pricing on the basis of tradition

Customary Pricing

Bert's company is about to release a new electronics product. The electronics product is estimated to have a short life cycle before it is replaced by an upgraded one. The company would like to recover the capital spent to produce the product. It therefore decides to charge the highest possible price for the product upon release. Bert's firm recognizes this might provide an advantage to competitors who may release the product at a lower price, but it believes customers will feel that the higher price signals higher quality. What type of pricing objective has Bert's firm adopted? a. Cash flow b. Product quality c. Status quo d. Profit e. Survival

a. Cash flow

Valerie is attempting to price a piece of custom-made equipment for a gym. The production costs of the equipment are hard to assess. She decides it would just be easier to add a specified dollar amount to the total cost. What type of pricing is Valerie using? a. Cost-plus b. Demand-based c. Markup d. Dynamic e. Yield management

a. Cost-plus

The Old Country Buffet charges $12 per person for its dinner buffet. However, consumers who dine at the restaurant between 4 p.m. and 6 p.m. are charged an "Early Bird" rate of $9 per person. What type of pricing is the Old Country Buffet utilizing? a. Demand-based b. Discount c. Cost-plus d. Competition-based

a. Demand-based (This is an example of demand-based pricing since a lower price is charged for an off-peak time of dining at the restaurant.)

A recent consumer trend has led grocery stores to expand their offering of organic produce, grass-fed beef, free-range chicken, and other products that consumers view as highly desirable given their attributes related to the use of pesticides, ethical treatment of animals, and environmental impact of the products. Consumers are willing to pay more for products that possess these positive attributes. What pricing concept best characterizes consumers' willingness to pay higher prices for products that possess desirable features or characteristics? a. Value b. Supply c. Competitive differentiation d. Demand

a. Value

The _______ pricing objective is often utilized to encourage rapid sales and recover cash as quickly as possible. a. cash flow b. market share c. survival d. profit

a. cash flow

Which of the following statements is true regarding market share pricing objectives? a. Market share pricing is typically stated in actual dollar amounts. b. An organization can increase its market share even if sales for the total industry are flat or declining. c. A firm's market share is unrelated to the level of growth in the overall market. d. Market share is a measure of a firm's profitability in achieving sales revenues.

b. An organization can increase its market share even if sales for the total industry are flat or declining.

Some retailers utilize _______ as a pricing strategy by offering discounts after Christmas or back-to-school offers to attract consumers to shop. However, this strategy may backfire as consumers may put off purchases in anticipation of a sale or reduced-price offer. a. captive pricing b. periodic discounting c. price lining d. random discounting

b. periodic discounting

When Nintendo first introduced the Wii, it set a very high price point and created a very high demand for the product during the introductory stage. This strategy is known as _______. a. bait pricing b. price skimming c. odd-even pricing d. prestige pricing

b. price skimming

Pricing a product at a moderate level and physically positioning it next to a more expensive model or brand in the hope that the customer will use the higher price as a comparison is known as _______. a. prestige pricing b. reference pricing c. customary pricing d. penetration pricing

b. reference pricing

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 used a(n) _______ strategy in pricing these components. a. skimming b. lining c. penetration d. odd-even

c. penetration (Penetration pricing is the strategy of setting a low price for a new product. A problem with this approach is that it is more difficult to raise prices significantly than to lower them, as Allied Electronics is learning.)

Many department store retailers traditionally plan a "White Sale" in mid-January to motivate shoppers to their store and encourage them to spend money after the holiday season. A traditional "White Sale" typically covers towels, sheets, and other staple items that consumers do not routinely purchase. The term was coined as sheets, pillowcases, and towels were traditionally white in color—hence the name, "White Sale." Over the years, shoppers have come to expect the traditional sale of household linens and delay their purchase until the early part of the year when they know these products' prices will be drastically reduced. The "White Sale" is an example of the _______ strategy. a. captive pricing b. bait pricing c. periodic discounting d. price lining

c. periodic discounting

The Dollar Store has most items priced at $1, but they do carry some items priced at $3, $5, and even $10. This is an example of _______. a. psychological pricing b. bait pricing c. price lining d. penetration pricing

c. price lining (In price lining, goods are sold at certain predetermined prices that reflect explicit price breaks. Pricing items at $1, $3, $5, and $10 is an example of price lining)

Marketers may utilize _______ pricing for items within a product line where the basic product is priced low but items that are required to operate or enhance the basic product are priced higher. a. penetration b. premium c. bait d. captive

d. captive

If a retailer purchases a can of soup for 60 cents and sells it for 99 cents, what is the markup as the percentage of cost? The percentage of selling price? a. 60%; 99% b. 99%; 60% c. 69%; 45.3% d. 39.4%; 65% e. 65%; 39.4%

e. 65%; 39.4%

Which of the following should be accomplished after developing pricing objectives? a. Determining a specific price b. Evaluating competitors' prices c. Selecting a basis for pricing d. Selecting a pricing strategy e. Assessing the target market's evaluation of price

e. Assessing the target market's evaluation of price