CHAPTER 15
The saying "leaving money on the table" is associated with
a market penetration strategy when there is an opportunity for price skimming
What type of pricing tactic is being used when several airlines agree to charge the same fare for a single route
horizontal price fixing
Marketers advertising an artificially high "regular price" are unethically attempting to influence consumers' __________ perceptions.
reference price
When Walmart communicates to consumers that, for any given group of often-purchased items, its prices will tend to be lower than that of any other competitor, Walmart is exhibiting what type of pricing strategy?
EDLP
It is important to Joanne to get value for her money, but she does not want to spend time comparison shopping. Joanne will likely respond to _______ pricing, but not to _______ pricing
EDLP; high/low
A noncumulative quantity discount usually involves several transactions.
FALSE
A pricing strategy and a pricing tactic are essentially the same thing.
FALSE
Firm A has set very low prices for its products in an attempt to drive its competitor, Firm B, out of business. This is known as monopolistic pricing
FALSE
For market penetration pricing to work, the product or service must be perceived as breaking new ground in some way.
FALSE
It is best if firms choose one pricing strategy to use for all its products rather than use different methods for pricing.
FALSE
Proving that a company has engaged in the deceptive bait and switch practice is easy.
FALSE
Sellers using an EDLP pricing strategy often communicate their strategy through the creative use of a reference price.
FALSE
Slotting allowances are used to get retailers to feature a manufacturer's product in their advertising and promotional efforts.
FALSE
The expression "3/10, n/30" means that a business must pay 3 percent of the total invoice amount in 10 days, with the remainder due in 30 days
FALSE
The improvement value method and the cost of ownership method are both cost-based pricing methods
FALSE
The three different methods that can help develop pricing strategies are cost based, competitor based, and profit based
FALSE
When Sony released its PlayStation 3 game machines, it charged a high price, attracting the most avid game players. This was a market penetration pricing strategy
FALSE
What is one of the drawbacks of using a price skimming strategy?
Firms must consider the high costs associated with producing a small volume of product.
__________ price fixing occurs when competitors collude to control prices, and __________ price fixing occurs within a marketing channel to control prices passed on to consumers.
Horizontal; vertical
Cheryl wants to quickly establish a dominant market share for her new line of ergonomic pens. To do this, she will likely use a market penetration pricing strategy.
TRUE
What makes a high/low pricing strategy appealing to sellers
It attracts two distinct market segments
Cost-based methods do not recognize the role that consumers or competitors' prices play in the marketplace.
TRUE
__________ pricing tactics lower the price of a product below the store's cost.
Loss leader
__________ is the practice of colluding with other firms to control prices
Price fixing
Coupons may annoy or confuse customers and therefore do little to increase store loyalty.
TRUE
A high/low pricing strategy relies on the promotion of sales, during which prices are temporarily reduced to encourage purchases
TRUE
Kristina sells sports equipment and wants to get customers into her store. She knows from past experience that sales generate customer traffic, particularly when she puts children's baseball equipment on sale. Kristina may consider a leader pricing strategy.
TRUE
Price lining is setting a price floor and a price ceiling for a line of products and then setting price points in between to represent differences in quality.
TRUE
The Robinson-Patman Act does not apply to end consumers, at which point many forms of price discrimination occur
TRUE
When a retail store rarely sells deeply discounted or sale products, it is known as "everyday low pricing
TRUE
What is the difference between a coupon and a rebate
The retailer handles coupons while manufacturers handle most rebates.
_______ occurs when members of the marketing channel collude to control the prices passed on to consumers.
Vertical price fixing
The expression "3/10, n/30" means
a 3 percent discount if paid in full within 10 days, or the net amount is due in 30 days.
A pricing strategy is
a long-term approach to setting prices in a companywide integrated effort
Yurgen is opening a financial consulting service for high-income retirees in his area. This target market is used to paying for quality and associates high quality with high prices. In this instance, Yurgen should probably not use a market penetration pricing strategy because
a low price might signal low quality
A pricing tactic is
a short-term approach that is often in response to a competitive threat.
A noncumulative B2B quantity discount is
based only on the amount purchased in a single order.
Value-based pricing methods include approaches to setting prices that focus on the overall value of the product offering
as perceived by the consumer.
An everyday low pricing strategy stresses the continuity of retail prices
at a level between the regular price and the deep-discount sale prices of competitors
Bill desperately needed tires for his car, and he found an ad with an incredibly low price. When he got there, he found out that those had supposedly been sold out, and he was pressured into buying tires that were more expensive than he wanted. Bill found out later that Marcelo had the same experience at the store a few weeks earlier. It's quite possible that both Bill and Marcelo had become the victim of a deceptive pricing tactic known as
bait and switch.
In a __________ pricing tactic, sellers advertise very low prices and then aggressively pressure customers to purchase higher-priced versions of the product advertised with the low price
bait-and-switch
Firms using a(n) _______ pricing method set their prices relative to what other firms are charging.
competitor-based
When Greenbelt Construction Company began building houses in a large subdivision with many other builders, the company priced its homes slightly higher than its competitors and promoted the added quality features found in Greenbelt's homes. Greenbelt was using a(n) _______ pricing strategy.
competitor-based
In determining the price for his company's new personal computer photography printer, Raymond is assessing the total cost of owning his printer as compared to alternative products available in the market. Raymond is using _______ pricing
cost of ownership
Milton owns a lawncare business. From experience, Milton has found that John Deere equipment lasts almost twice as long as competitors' machines. For John Deere, Milton's perception about its products makes _______ pricing a logical choice.
cost of ownership
The pricing method that considers what consumers may be willing to pay for a particular product based on the value received over the product's entire lifetime is the _______ pricing method.
cost of ownership
Compared with other methods used to set prices, _______ pricing is relatively simple.
cost-based
Yvonne estimates the average cost of her floral arrangements is $14 regardless of whether she is making 5 or 20 arrangements that day. She adds a standard markup to the $14 estimate to determine her price. Yvonne is using a(n) _______ pricing method
cost-based
Many stores now e-mail codes to their customers that can be used on their websites or printed and brought into the store to receive discounts for products purchased. In this instance, the customer is using a _______ to receive the discount.
coupon
Retailers use _____ because they believe their use will induce customers to try new products, convert first-time users to regular users, increase purchases, and protect market share
coupons
Price advertisements should never
deceive customers to the point of doing harm.
A weakness associated with cost-based pricing methods is that they
do not recognize the role consumers or competitors' prices play in the marketplace.
Production of the DeLorean car, made famous in the film Back to the Future, never got above 25,000 units during its lifetime. Automobile industry analysts estimate that production of this car needed to reach around 300,000 units to achieve the __________, which refers to a decrease in unit cost as product volume increases.
experience curve effect
The __________ occurs when unit cost drops as the quantity sold increases.
experience curve effect
Dan is especially price sensitive. He has been known to line up on "Black Friday" (the day after Thanksgiving) at 4 a.m. to be among the first to buy sale items. Dan would likely respond to a _______ pricing strategy
high/low
In a(n) _______ pricing strategy, marketers rely on the promotion of sales, during which prices are temporarily reduced to encourage purchases
high/low
If all three grocery stores in town decide to charge the same price for a gallon of milk, what type of pricing tactic is being used?
horizontal price fixing
Each generation of cell phones has provided greater clarity, range, security, and multifunctionality. If marketers of cell phones use these features as a basis for pricing, they would be using _______ pricing
improvement value
In determining the price of his company's new small-business accounting software, Raymond is assessing how much better his company's software is as compared to alternative products available in the market. Raymond is using _______ pricing.
improvement value
Price skimming focuses on selling products to __________ and __________ in the consumer adoption process model.
innovators; early adopters
One reason marketers of new, innovative products often start out with a price skimming strategy rather than a market penetration strategy is that
it is easier to lower prices than to raise them.
One of the difficulties associated with value-based pricing is that
it necessitates a great deal of consumer research to be implemented successfully.
Supermarkets often offer great deals on milk or eggs to get customers into their stores, knowing that many customers will also purchase items that have higher markups for the store. These supermarkets are using a _______ pricing tactic.
leader
In which of the following tactics does a consumer pay a fee to purchase the right to use a product for a specific amount of time?
lease
The primary reasons manufacturers offer seasonal discounts to retailers are to more easily plan production schedules and to
lessen inventories of finished goods
Which of the following is not a common business-to-business pricing tactic
loss leader pricing
For marketers using a price skimming strategy, once the initial demand is met for new and innovative products, they will likely
lower the price to capture the next most sensitive market segment.
When a new product is not being sold at the rate originally forecasted, the retailer may reduce the price in order to reduce the inventory of the product. This reduction is known as a
markdown.
Retailers use _______ to get rid of slow-moving or obsolete merchandise
markdowns
Mario is the first retailer in town to sell games for Sony's new PlayStation 4 machine. Mario wants to quickly capture as much of the market for the new games as possible. Mario will likely use a __________ pricing strategy
market penetration
With a __________ pricing strategy, marketers set a low initial price for the introduction of a new product or service.
market penetration
It is the responsibility of __________ to determine the ethical approach to setting prices so consumers find value and the firm can make a profit
marketers themselves
If a telecommunications company drastically cuts the price for cellular phone service in order to eliminate local competitors, the company could be charged with
predatory pricing.
Developing pricing strategies for __________ is one of the most challenging tasks a manager can undertake.
new products
Pricing _______ products is especially challenging because little or nothing is known about consumers' perceptions of its value.
new-to-the-world
For a price skimming strategy to work, the product or service must
offer consumers some new benefit currently unavailable in alternative products.
Everyday low pricing (EDLP) provides value to consumers by
reducing their search costs.
A major airline sells an aggressively low priced ticket compared to a new low-fare airline which is trying to enter the market. The airline may be accused of engaging in the unethical practice of
predatory pricing
Cosmetic manufacturers that sell shampoo and conditioner together as one package at a lower price rather than selling each item separately are using
price bundling.
The Clayton Act and the Robinson-Patman Act forbid certain types of
price discrimination.
When Toyota introduced its Scion line of cars, the lowest-price model was listed for $15,000 while the highest-priced model was listed for $21,000, with two other list prices in between. Each price point represented distinct differences in the features and quality of the cars. Toyota used a ______ pricing approach.
price lining
When marketers establish a price floor and a price ceiling for an entire line of similar products and then set price points in between for differences in quality among the products, they are using a _______ pricing approach
price lining
When Apple Computer Company introduced the iPhone—a combination phone, MP3 player, and Internet access device—in 2007, it was priced at $499, considerably higher than either the iPod or competing cell phones. Hoping to attract innovators and early adopters, Apple was most likely pursuing a __________ pricing strategy.
price skimming
Generally, a _______ represents either a short-term response to a competitive threat or a broadly accepted method of calculating a final price for the customer that is short term in nature.
pricing tactic
The major objectives associated with a market penetration pricing strategy are to
quickly build sales and market share
Mary decided to purchase an electronic toothbrush priced at $100 because of a special offer from the manufacturer. By sending proof of purchase and the receipt to the manufacturer, she could receive a $40 check in return, making the final price $60. This pricing tactic is known as a
rebate.
In determining the price for his company's new pocket digital camera, Matt determines what consumers consider the regular or original price for similar cameras available in the market. Matt is assessing the influence of __________ on pricing strategy.
reference prices
The advantage of zone pricing to the seller is the shipping charges typically
reflect more closely the cost of delivery.
For marketers to advertise a price as their __________ price, the Better Business Bureau recommends that at least 50 percent of the sales of a product occur at that price.
regular
When Toro offers its lawn mower dealers an additional discount if they place their orders and receive delivery before April 1, prior to the lawn mowing season, Toro is offering
seasonal discount
The local furniture store will purchase outdoor furniture only during the winter months because the manufacturer offers a better price to the furniture store. This type of pricing tactic is known as a
seasonal discount.
Price reductions offered on products and services to stimulate demand during off-peak seasons are referred to as
seasonal discounts.
Marlie designs and manufactures specialty furniture. She has a number of unique products but can only produce in limited quantities. Marlie will probably not use a market penetration strategy because
she could not meet a rapid rise in demand
The most common form of a quantity discount for consumers is a
size discount.
When Burroughs Wellcome introduced the first anti-AIDS drugs, it initially set the price at $10,000 for a year's supply. Burroughs Wellcome was probably pursuing a(n) __________ pricing strategy
skimming
Charging a relatively high price for new and innovative products to those consumers most willing and able to pay the high price is called price
skimming.
Fees paid to retailers simply to get new products into stores or to gain more or better shelf space for their products are called _______ allowances.
slotting
Some consumers make it a point to go shopping the day after Christmas to stock up on discounted wrapping paper and bows for the following year. These consumers are
taking advantage of seasonal discounts
Because market and operating conditions are different in each target market
the choice of a pricing strategy should be specific to the target market.
B2B quantity discounts are legal if
the discounts are available to all customers.
A reference price is
the price against which buyers compare the actual selling price.
A reference price might be considered deceptive if
the reference price has been inflated or is fictitious.
Manufacturers use cash discounts primarily because it allows them to benefit from
the time value of money.
Value-based pricing can be difficult to implement because
the way consumers perceive value constantly changes
One important reason manufacturers like rebates is that
their redemption rates are low.
If a market penetration pricing strategy results in lower per-unit cost, competitors might be discouraged from entering the market because
they would likely need to quickly produce a large volume in order to compete.
The improvement value method and the cost of ownership method are two approaches for setting prices that are _______ methods
value-based
One of the benefits of offering a size discount to consumers is they will purchase more of a marketer's product and
will be less likely to switch brands
Cost-based pricing assumes that costs
will not vary much for different levels of production.
Clark Manufactured Housing Company charges $500 for deliveries within 50 miles and $800 for deliveries 51 to 100 miles away from their factory. The company is using a _______ pricing tactic.
zone