BA343 Test 2 review
Conner Ash from research has provided you with the demand curve for the side table. At a price of $100, 1,500 tables could be sold. At a price of $125, 1,000 could be sold. What price point do you recommend to the product strategy team?
$100, for the price of the side table. demand curve at a price of 100 lead to higher revenue. 100 x 1500 tables = 150k revenue
break even pricing
(fix cost /volume)+ variable cost.
Sadie's Restaurant has listened to its customers over the years and is now able to offer the right combination of quality and good service at a fair price. Which pricing strategy is Sadie's using?
. Good-value pricing
Conner Ash from research tells you that, after his group did a market analysis, they found that there is little competition for this item. A series of focus groups with samples from the target market have indicated that an acceptable price range for the leather chair is $500 to $525. The product strategy team has indicated that markup pricing would be a good fit for this product item. If the total cost of producing the chair is $400 per chair, what markup will you recommend to the product strategy team?
30% markup for leather chair. lead to a price of 520, end between 500-525 acceptable price range. put in a higher revenue position.
Which of the following refers to setting prices based on buyers' perception of value rather than on the seller's cost?
Customer value-based pricing
If the company has selected its target market and positioning carefully, then its marketing mix strategy, including price, will be fairly straightforward. Of the following, which is NOT one of the common pricing objectives?
Grabbing international market share
Which of the following is true regarding the price-demand relationship?
If demand is elastic, sellers will consider lowering their prices.
When, if ever, is price discrimination allowed?
If the seller can prove that its costs are different when selling to different retailers, then it is legal.
Of the following, which is true about pricing?
Price competition is a core element of our free-market economy.
A variation of break-even pricing is ____________________, which uses the concept of a break-even chart that shows the total cost and total revenue expected at different sales volume levels.
Target return pricing
You ask Conner about expectations around this product. He says, "The bookshelf system is a popular item. I expect around 2,500 units to be sold this year." Production informs you that the variable costs are $50/unit. Fixed costs are $150,000. What price point do you recommend for the bookshelf system?
The break-even revenue is $275,000 [($50 × 2,500) + $150,000]. This price at the expected 2,500 units will surpass the break-even point, and put Fir-Niche in position to realize profits ($130 × 2,500 = $325,000).
Internal factors that affect pricing include _________________.
The company's overall marketing strategy, objectives, and marketing mix
Conner emails you a report that contains the following information to help you make your decision. Fixed costs $250,000 Projected units sold in one year 1,000 Average price target market will pay $550 What cost of material per unit (variable cost) do you recommend for the ornate writing desk?
Variable costs of $200 would give a break-even revenue of $450,000 ((200 × 1,000) + $250,000). If the price the target market is willing to pay is $550, Fir-Niche would make a profit on the writing desk ($550 × 1,000 = $550,000), while keeping the quality of materials relatively high.
________________________ is one major objective associated with a market-penetration pricing strategy.
Winning large market share
Roshika has been invited to a fancy dinner party and wants to bring a good bottle of wine as a gift for the host. Since she does not know much about wine, she will likely use the price of the wines as ________.
an indicator of quality
fixed cost
are represented by a horizontal line on the break-even chart. Fixed costs do not change with changes in quantity
dollar
are the label for the y-axis in the break-even chart.
The total cost per chair is now $450. Conner conducts a new round of focus groups with the target market and finds the acceptable price range for the armchair has shifted slightly to $525-$550. Remember, you originally recommended a markup of 30%. Given the new information, do you recommend increasing the markup, keeping the markup the same, or reducing the markup?
decrease the markeup. 30% and new cost 450. price of the leather chair is 585.. (525-550 acceptable range)
Continually adjusting prices to meet the characteristics and needs of individual customers and situations is known as _______________________.
dynamic pricing
The product strategy team advises you that they will continue to use the high-quality materials, even if it means Fir-Niche will have to raise the price to cover the increasing costs. Before moving forward, the product strategy team wants to get an idea of how sales will fluctuate if the price for the leather chair increases. In your opinion, is the demand for the leather chair elastic or inelastic
elastic as its more a luxury item. increase in price will cause buyer to purchase less, a drop in price, will cause buyer to purchase more.
break even point
is where total revenue equals total costs.
total cost
line combines both the fixed costs and the variable costs (which do vary with change in quantity). The total costs line intercept is at the level of fixed costs and typically sweeps from lower left to upper right.
total revenue
line typically starts at the chart origin and has a steeper slope than the total cost curve.
quantity
or sales units volume, is the label for the x-axis in the break-even chart.
The illegal practice of ______________________ is selling below cost with the intention of punishing a competitor or gaining higher long-run profits by putting competitors out of business.
predatory pricing
When Apple introduced its iPhone X, it priced the new product at nearly $1,000, considerably higher than competing smart phones. Apple was pursuing a ___________________ new product pricing strategy.
premium pricing
The Robinson-Patman Act seeks to ensure that sellers offer the same price terms to customers at a given level of trade to prevent ______________________.
price discrimination
Smashburger is investigating adding a half-pound burger to the menu at a lower price point. It has performed market-pricing experiments, with the new burger listed at either $4.29 or $3.99. The company has found little change in sales at the lower price. Based upon this finding, one could say that demand for the new burger is ___________.
price inelastic
Bath & Body Works uses _____________ pricing when the company offers "three-fer" deals on its products (such as soaps, lotions, and moisturizers).
product bundle
Many of Smashburger's competitors combine a burger, fries, and a drink offered at a reduced "combo" price. This practice is known as __________.
product bundle pricing
The Ford Mustang is offered in several different models. Ford uses __________ pricing to determine the price steps between the different models.
product line
A key element of Smashburger's pricing strategy is determining price steps between its quarter- pound, one-third pound, and half-pound hamburgers. The practice of setting prices for different products offered by a company within a single category is known as __________.
product line pricing
When a retailer temporarily prices a few select items below cost to create excitement and pull consumers into the store, it is practicing ___________________ pricing.
promotional
Smashburger is seeking to attract customers who eat out at casual dining restaurants, like P.F. Chang's and Applebee's. The average ticket price for customers at these restaurants is $13. For these customers, $13 is a __________ in considering the relative value of Smashburger's offerings.
reference price
Which of the following reverses the usual process of first designing a new product, determining its cost, and then asking, "Can we sell it for that?"
target costing
Markup Pricing Formula
unit cost/(1-desired return on sales)
According to the video, by offering an a la carte menu, premium ingredients, and gourmet side dishes, Smashburger is able to extract a price premium from its loyal customers. This type of pricing approach is referred to as __________ pricing.
value-added
UPS uses _________________, which charges different prices for shipping depending on an item's destination. The more distant the city where the package is being shipped, the higher the price UPS charges.
zone pricing
New, premium movie theaters offer features such as online reserved seating, high-backed leather executive chairs with armrests and footrests, the latest in digital sound, super-wide screens, and other amenities for which they charge a higher price. This is an example of which type of pricing?
Value-added pricing
Gillette charges a fairly low price for its razors (relative to costs) and a high price for razor blades. It is using a strategy of ___________ pricing.
captive-product
When a college or university charges more for out-of-state students than in-state students, it is practicing ______________________.
location-based pricing
A company has set a low price on a new product it introduced. It wants to maximize its market share and attract a large number of buyers quickly. Which new product pricing strategy should the company use?
market-penetration pricing
A car buyer can choose a base model at one price, or one with a premium sound and navigation system at a higher price. This is an example of _______ pricing.
optional-product
When sellers set prices in conjunction or collaboration with one another, this illegal practice is known as _______________.
price-fixing
