Marketing Management Chapter 11

When Delphi purchased her new cell phone, she was offered an opportunity to purchase a car charger and a cover together at a reduced price. The cell phone provider was using a________ strategy. A) product line pricing B) captive pricing C) price bundling D) reference pricing E) prestige pricing

C) price bundling

Marriott has branded its entire family of accommodations based on different value propositions, supported by clearly delineated pricing strategies. Its offerings include Ritz-Carlton and JW Marriott for the most discriminating patron, Marriott and Renaissance at the next level of full service, and an array of differentially positioned brands such Courtyard and Residence Inn. This is an example where________ can occur at a level much broader in scope than individual products. A) captive pricing B) auction pricing C) price lining D) reference pricing E) variable pricing

C) price lining

For most products, as long as the customer perceives the ratio of price and benefit to be at least equal, perceptions of________ will likely be favorable. A) market share B) quality C) value D) cost E) brand image

C) value

When shipping prices are based on the distance from the shipping location, it is considered________ pricing. A) free on board (FOB) B) uniform delivered C) zone D) target return E) psychological

C) zone

________ are typically expressed as greatly extended invoice due dates. A) Cash discounts B) Trade discounts C) Quantity discounts D) Seasonal discounts E) Promotional allowances

D) Seasonal discounts

________ can occur when a company purposefully makes pricing decisions to undercut one or more competitors and gain sales and net market share. A) Cost leadership B) A price war C) Price skimming D) Price discrimination E) Price elasticity of demand

B) A price war

________ is the amount of price increase that can be taken without affecting customer demand. A) Just noticeable difference (JND) B) Price skimming C) Return on investment (ROI) D) Reference pricing E) Free on board (FOB)

A) Just noticeable difference (JND)

________ is a critical component that plays into a customer's assessment of the value afforded by a firm and its offerings. A) Price B) Cost C) ROI D) Markup E) Skimming

A) Price

________ could result in overall higher prices for consumers since various competitors are all pricing the same to maximize their profits. A) Price-fixing B) Price discrimination C) Deceptive pricing D) Reference pricing E) Predatory pricing

A) Price-fixing

You should be careful when using________ pricing, as it is always possible that the quantity demanded will not match the marketing manager's forecast. A) cost-plus B) psychological C) value D) average-cost E) prestige

D) average-cost

Devon runs Uncommon Cakes, a gourmet cupcake bakery. To set prices for her cupcakes, Devon looks at the cost of making each cupcake and then adds an additional amount on top of that to arrive at her price. Devon is using A) cost-plus pricing. B) high/low pricing. C) markup on sales price. D) average-cost pricing. E) target return pricing.

A) cost-plus pricing.

In the past,________ allowed manufacturers to establish artificially high prices by limiting the ability of wholesalers and retailers to offer reduced or discounted prices. A) fair trade laws B) minimum markup laws C) the Robinson-Patman Act D) the Consumer Goods Pricing Act E) price discrimination

A) fair trade laws

To use target return pricing, one must first calculate total________ costs. A) fixed B) variable C) marginal D) minimum E) average

A) fixed

________ remit monies to purchasers after the fact. A) Allotments B) Coupons C) Offers D) Discounts E) Allowances

E) Allowances

Abilene is the manager of a cafe and is responsible for deciding the price of dishes included on the cafe's menu. The chef of the cafe introduced a new dish, which was initially priced at $20 by Abilene, but she increased its price slowly over a period of 6 months. In this scenario, Abilene utilized a________ strategy. A) penetration pricing B) price skimming C) target ROI D) competitor-based pricing E) value pricing

A) penetration pricing

Sometimes referred to as pricing for maximum market share,________ can create a market entry barrier for other firms. A) penetration pricing B) target ROI C) price skimming D) competitor-based pricing E) value pricing

A) penetration pricing

When a firm's objective is to gain as much market share as possible, a likely pricing strategy is________, sometimes also referred to as pricing for maximum marketing share. A) penetration pricing B) price skimming C) target ROI D) competitor-based pricing E) value pricing

A) penetration pricing

Suki is trying to explain to one of her ticket counter associates the differences in price associated with concert tickets. She explains that the lowest-priced tickets are for the least desirable seats and the highest-priced tickets are for the most desirable seats, with the rest of the ticket prices falling somewhere in between. Suki is describing________ pricing. A) product line B) captive C) odd/even D) reference E) prestige

A) product line

Creating a perception about price merely from the image the numbers provide the customer demonstrates________ pricing. A) psychological B) stability C) variable D) everyday low E) high/low

A) psychological

Martha runs a hardware store. She learned that customers process the price of $9.99 as significantly lower than the price of $10.00 because of the reduced digit count in the price point. Accordingly, she follows this rule to set up the prices for all products. Martha uses a________ strategy. A) psychological pricing B) one-price strategy C) variable pricing D) everyday low pricing (EDLP) E) high/low pricing

A) psychological pricing

A firm attempts to find a neutral set point for price that is neither low enough to raise the ire of competition nor high enough to put the value proposition at risk with customers. The firm is adopting a(n)________ pricing strategy. A) stability B) target ROI C) value D) average-cost E) product line

A) stability

Because price is a cue for developing customer perceptions of product quality, the________ may be reduced if a low price belies the product's actual quality attributes. A) value proposition B) target price C) target ROI D) competitor-based pricing E) customer satisfaction

A) value proposition

Firms and brands that continually attempt to operate in the________ quadrant of the generic price-quality positioning map may damage their relationships with customers and not survive. A) high price, high benefits B) high price, low benefits C) low price, high benefits D) low price, low benefits E) low price, no benefits

B) high price, low benefits

In proposing a________ strategy, the marketing manager usually is convinced that a strong price-quality relationship exists for the product. A) penetration pricing B) price skimming C) target ROI D) competitor-based pricing E) value pricing

B) price skimming

Marco's Imports is a high-quality Italian leather goods store in Manhattan. Marco also runs an internet site where people can buy his products and he will charge the same delivery fee to any location within the 48 contiguous states. Marco utilizes________ pricing. A) free on board (FOB) B) uniform delivered C) zone D) psychological E) product line

B) uniform delivered

Joachim purchased an alarm system for his car during a promotion. He considered the price during the promotion to be very attractive. However, he later learned that the firm set an artificially high reference price for the alarm system just before the promotion to make the advertised sale price more attractive. Joachim just experienced A) price-fixing. B) price discrimination. C) deceptive pricing. D) bait and switch. E) predatory pricing.

C) deceptive pricing.

Comcast cable company wants Mickey to buy the full gamut of entertainment products, and the more he buys—digital television, premium channels, downloadable movies, local and long-distance phone service, cellular service, high-speed internet—the better the deal becomes compared to the total of the individual prices of each product. Comcast is using a________ strategy. A) product line pricing B) captive pricing C) price bundling D) reference pricing E) prestige pricing

C) price bundling

________ could lead the marketing manager to decide to price at some market average price, or perhaps above or below it in the context of penetration or skimming objectives. A) Penetration pricing B) Price skimming C) Target ROI D) Competitor-based pricing E) Value pricing

D) Competitor-based pricing

________ are direct, immediate reductions in price provided to purchasers. A) Allotments B) Rebates C) Offers D) Discounts E) Allowances

D) Discounts

________ refers to products sold at prices below cost to attract shoppers to a store. A) Free on board (FOB) B) Bait and switch C) Price bundling D) Loss leader E) Prestige

D) Loss leader

The internet created a rise in________ as more and more people decided to meet online to sell products to the highest bidder. A) price elasticity of demand B) stability pricing C) prestige pricing D) auction pricing E) trade discounts

D) auction pricing

When a seller advertises an item at an unbelievably low price to lure customers into a store, and then tells customers that it doesn't have the advertised item and instead pushes a similar item with a higher price and margin, the seller is participating in the illegal practice of A) price-fixing. B) price discrimination. C) psychological pricing. D) bait and switch. E) predatory pricing.

D) bait and switch.

Mikio owns a driving range in a suburb of Chicago. He has taken notice of the three competitors who are located very close to his business. Mikio decides to look at the other driving ranges' pricing and then determine his best pricing strategy based on all of the information. In this scenario, Mikio is utilizing A) penetration pricing. B) price skimming. C) target ROI. D) competitor-based pricing. E) value pricing.

D) competitor-based pricing.

The fundamental philosophy behind________ is to reduce investment in promotion and transfer part of the savings to lower price. A) price bundling B) target return on investment pricing C) variable pricing D) everyday low pricing E) reverse auctions

D) everyday low pricing

The rise of Walmart as one of the world's largest corporations has brought the concept of________ to the forefront of global consumer consciousness. A) reverse auctions B) target return on investment pricing C) price points D) everyday low pricing E) high/low pricing

D) everyday low pricing

Jimmy is trying to determine the best price for his new fishing poles and thus uses the sales price as a basis of calculating the markup percentage. He is using a(n)________ approach. A) markup on cost B) value price C) average-cost pricing D) markup on sales price E) cost-plus

D) markup on sales price

Companies that collude to set prices at a mutually beneficial high level are engaged in A) price discrimination. B) deceptive pricing. C) predatory pricing. D) price-fixing. E) bait and switch.

D) price-fixing.

It can be useful for customers to have some type of comparative price when considering a product purchase. Such a comparison is referred to as________ pricing, which in the case of price bundling is the total price of the components of the bundle if purchased separately versus the bundled price. A) product line B) captive C) odd/even D) reference E) prestige

D) reference

Beautiful Home is a discount furniture store. Most of the items in the store are overstock, so they tend to be more inexpensive than other furniture. Recently Beautiful Home started to display the manufacturers' suggested retail price next to the price it charges to show the savings. Beautiful Home is using a________ strategy. A) product line pricing B) captive pricing C) price bundling D) reference pricing E) prestige pricing

D) reference pricing

________ is used by firms that rely on periodic heavy promotional pricing, primarily communicated through advertising and sales promotion, to build traffic and sales volume. A) Psychological pricing B) One-price strategy C) Variable pricing D) Everyday low pricing (EDLP) E) High/low pricing

E) High/low pricing

A strategy to intentionally sell below cost to push a competitor out of a market, then raise prices to new highs, is called A) price-fixing. B) price discrimination. C) deceptive pricing. D) bait and switch. E) predatory pricing.

E) predatory pricing.

One rationale for establishing a price skimming objective is that________ lends status to a product or brand by virtue of a price relatively higher than the competition. A) product line pricing B) captive pricing C) price bundling D) reference pricing E) prestige pricing

E) prestige pricing

Pierre works at a ski shop. He has just gotten a shipment of new snowboards and realizes that the company has priced its snowboards higher than the rest of the boards in his shop. Since Pierre took a marketing class in college, he knows that the company is most likely using A) product line pricing. B) captive pricing. C) price bundling. D) reference pricing. E) prestige pricing.

E) prestige pricing.

Healthy Living will send retailers a check if the retailer successfully includes its vegetable-based smoothies in its promotional efforts. Healthy Living uses________ to incentivize retailers. A) cash discounts B) trade discounts C) quantity discounts D) seasonal discounts E) promotional allowances

E) promotional allowances

Besides the standard auction approach where buyers bid for a seller's offering, it is now very common for sellers to utilize________ to bid prices to capture a buyer's business. A) price elasticity of demand B) stability pricing C) online promotion D) channel discounts E) reverse auctions

E) reverse auctions

Pascal wants to buy a new car that is of good quality and available at an affordable price. After exploring the available options, Pascal decides to purchase a car made by a popular car manufacturer, which has a high retail price but offers very low operating and maintenance costs. In this scenario, the pricing strategy employed by the car manufacturer is A) penetration pricing. B) price skimming. C) target ROI. D) competitor-based pricing. E) value pricing.

E) value pricing.

________ costs are incurred over time, regardless of volume, whereas________ costs fluctuate with volume. A) Fixed; variable B) Variable; fixed C) Total; variable D) Variable; total E) Marginal; total

A) Fixed; variable

________ affords the marketing manager an opportunity to develop a rational pricing strategy across a complete line of related items. A) Product line pricing B) Captive pricing C) Price bundling D) Reference pricing E) Prestige pricing

A) Product line pricing

A countertop store will give customers a 10 percent discount if they pay their bills in full in 20 days; however, after 20 days they do not receive a discount. This is an example of a________. A) cash discount B) trade discount C) quantity discount D) seasonal discount E) promotional allowance

A) cash discount

A strategy of________ addresses the objective of entering a market at a relatively high price point. A) penetration pricing B) price skimming C) target ROI D) competitor-based pricing E) value pricing

B) price skimming

Maurice has just completed a new line of designer handbags. He wants the price to communicate to the customer that the handbags are high quality and exclusive, so he sets the price high. He knows that after this season, the price may need to decrease as the market evolves. Maurice is using a________ strategy. A) penetration pricing B) price skimming C) target ROI D) competitor-based pricing E) value pricing

B) price skimming

In markets where customers typically witness rapidly changing prices,________ can provide a source of competitive advantage. A) price elasticity of demand B) stability pricing C) price bundling D) auction pricing E) variable pricing

B) stability pricing

Moulin Red, a home decorating store, has fixed expenses for rent and fixtures, and variable expenses for payroll and utilities. Together, these comprise the store's________ costs. A) marginal B) total C) average D) minimum E) reduced

B) total

Massage Monthly offers a reduced rate for massages with a monthly membership that includes one massage or facial per month. During the service, the provider recommends products they are using, and that they sell in the store. The provider also asks if the customer would like to upgrade to an aromatherapy massage, at an extra cost. This is an example of A) product line pricing. B) two-part pricing. C) price bundling. D) reference pricing. E) prestige pricing.

B) two-part pricing.

Which free on board (FOB) pricing indicates that until the goods arrive at the purchaser's location, title doesn't change hands and freight charges are the responsibility of the seller? A) FOB-destination B) FOB-origin C) FOB-factory D) FOB-zone E) FOB-market

A) FOB-destination

________ require that a certain percentage markup be applied to all products. A) Fair trade laws B) Minimum markup laws C) Partnership laws D) State fair trade laws E) Criminal laws

B) Minimum markup laws

Kallie goes to a store to buy a new liquid soap dispenser. When she purchases a new dispenser from the store she gets two liquid soap refill packets for free, as part of a promotional offer, but she will need to purchase refills later. In this scenario, the pricing strategy used for the soap dispenser is________ pricing. A) product line B) captive C) variable D) reference E) prestige

B) captive

HP sells an inexpensive printer for an entry-level user, but the printer cartridges that need continual replacement are fairly expensive. This demonstrates the concept of A) product line pricing. B) captive pricing. C) price bundling. D) reference pricing. E) prestige pricing.

B) captive pricing.

A company's core cost advantages translate directly to an edge over its competitors based on much more flexibility in its________ as well as its ability to translate some of the cost savings to the bottom line. A) pricing strategies B) cost leadership C) value ratio D) service E) quality

B) cost leadership.

As with average-cost pricing, the effectiveness of________ pricing is highly dependent on the accuracy of the forecast. A) cost-plus B) psychological C) reference D) average-cost E) target return

E) target return

To better take into account the differential impact of fixed and variable costs, marketing managers can use________ pricing. A) cost-plus B) psychological C) odd/even D) average-cost E) target return

E) target return

Firms that have an objective of utilizing pricing to communicate positioning use a________ strategy. A) penetration pricing B) price skimming C) target ROI D) competitor-based pricing E) value pricing

E) value pricing

The internal processes at Southwest Airlines are highly efficient, giving it a competitive advantage over other airlines. Southwest has a very efficient maintenance process and also has a very simple process of booking passengers. Because of these efficiencies, the company is able to offer customers an appealing mileage-driven pricing structure while also increasing the airline's profit margin. According to Michael Porter, Southwest's competitive advantage is based on A) price perception. B) cost leadership. C) value ratio. D) service. E) quality.

B) cost leadership.

A grocery store chain charges less for a gallon of milk in some neighborhoods that it does in others to reduce competition. This practice is illegal under the A) Feingold-McCain Act. B) Sherman Antitrust Act. C) Robinson-Patman Act. D) Clayton Act. E) Consumer Goods Pricing Act.

C) Robinson-Patman Act.

________ provide an incentive to a channel member for performing some function in the channel that benefits the seller, such as stocking a product or performing a product service. A) Cash discounts B) Quantity discounts C) Trade discounts D) Seasonal discounts E) Promotional allowances

C) Trade discounts

Priceline.com is a firm that serves as a clearinghouse for extra capacity from airlines, hotels, and cruise lines. It is an example of a firm that uses a(n)________ strategy. A) cost-plus pricing B) price war C) reverse auction D) average-cost pricing E) target return pricing

C) reverse auction

Pricing objectives very frequently are designed to maximize profit, which necessitates a________ pricing strategy. A) penetration B) price skimming C) target return on investment (ROI) D) price war E) value

C) target return on investment (ROI)

Zelda is opening an appliance store. She has estimated a monthly profit goal based on her anticipated expenses and earnings goals and uses it to set product prices. Zelda is implementing a________ pricing strategy. A) penetration B) price skimming C) target return on investment (ROI) D) competitor-based E) value

C) target return on investment (ROI)

With________ pricing, customers are allowed—even encouraged—to haggle about prices. A) psychological B) captive C) variable D) odd/even E) high/low

C) variable