IBM 3012: SmartBook Chapter 11 - Pricing
As a tactic, predatory pricing is aimed mainly at _______.
competitors
As a pricing tactic, a marketer decides to add 10% to the price of the product to arrive at the final selling price. This is an example of _______ pricing
cost-plus
The central focus of determining what pricing tactic to use should be the _______.
customer
The most common examples of _______ pricing involve firms that falsely advertise wholesale pricing or promise a significant price reduction on an artificially high retail price.
deceptive
A retailer inflated the price of its dining room sets so that when it put them on sale, it appeared to customers that they were getting a better deal than they really were. In doing so, the retailer was engaged in _______.
deceptive pricing
The price-setting process begins with _____.
defining the pricing objectives
In the price-setting process, after demand has been evaluated, the next step is to _____.
determine the costs
A pricing tactic that involves selling a product at a price that causes the firm a financial loss is called _______.
loss-leader pricing
Firms using _______ hope that customers will buy other items in the store that are more profitable.
loss-leader pricing
Marketers typically prefer targeting international markets with _ (lower/higher) tariffs.
lower
Pricing objectives should be an extension of a firm's _ objectives
marketing
In an industry in which a small number of firms compete, firms will typically _______.
match the price of competitors
Price is the amount of something that a buyer exchanges with a seller to obtain a product. This exchange can be in the form of _______. (Check all that apply.)
money time effort
McDonald's prices its Extra Value Meals at $4.99. McDonald's is most likely using a(n) _ pricing tactic in this instance.
odd
Once a firm has estimated fixed and variable costs, it can incorporate them into a(n) _-_ analysis to determine how much it would need to sell to make the product profitable.
Blank 1: break Blank 2: even
What is the process of items shrinking in size or quantity while their price remains the same or increase?
Shrinkflation
Select the instances in which a consumer would most likely be price sensitive.
1. Mitch thought the package price that was being asked for his new cell phone and data plan was totally unreasonable. 2. Josyln was surprised to see the price of the prom dress she wanted was much higher than she thought it would be. 3. Quentin can only afford to spend a certain amount on a new car.
Lucy is the owner of a full-service pet grooming salon. For the month of May, she will pay $1,500 in rent, $3,200 in salaries, and $100 on advertising. A full-service pet grooming costs $30.00. Unit variable costs per grooming are $7.50. Approximately how many full-service pet groomings does Lucy need to perform to break-even for the month?
213
According to recent research, approximately what percentage of consumers search for and purchase a low-priced product using an in-store shopping app or online search engine?
40%
According to your text, one of the most common mistakes made when pricing products is to _______.
charge someone less than they are willing to pay
What type of agreement protects providers of goods and services should they encounter unreasonable financial hardship as a result of uncontrollable increases in the costs required to deliver products to consumers?
An escalator clause
_ _ is when two or more companies collude to set a product's price.
Blank 1: Price Blank 2: fixing
_ is the practice of charging someone less than they are willing to pay.
Blank 1: Underpricing
Technology has helped to shift the balance of power from _ to _.
companies customers
In terms of demand, prices are generally more _ in the early stages of the product life cycle and increasingly _ in the later stages of the product life cycle.
Blank 1: elastic Blank 2: inelastic
Calculating the total cost of a product begins with an understanding of the two major types of costs: _ and _.
Blank 1: fixed or fixed costs Blank 2: variable or variable costs
A firm that takes branded products and sells them through legal, but unauthorized, distribution channels is participating in the _ market.
Blank 1: gray or grey
Prestige pricing involves pricing a product _ than competitors.
Blank 1: higher, greater, or more
In order to encourage a greater volume of purchases, a volume maximization strategy sets prices _ to lower the level of involvement for the consumer.
Blank 1: low or lower
As an element of evaluating demand for a product, _ _ can be defined as the change in total cost that results from producing one additional unit of product.
Blank 1: marginal Blank 2: cost
The degree to which the price of a product affects consumers' purchasing behavior is referred to as _ _.
Blank 1: price Blank 2: sensitivity
While shopping for cable television services, Brett found that if he ordered the package that included basic cable, HBO, Showtime, Redzone, and the MLB Network he could get a better price than if he just ordered basic cable alone. This strategy of packaging products together and selling them at a single price is called _ _.
Blank 1: price or bundled Blank 2: bundling or pricing
Regardless of the type of product, the _ of a product typically factors into a consumer's decision on what to purchase and is part of almost every consumer decision a person makes.
Blank 1: price, cost, or pricing
As a pricing objective, _ _ assumes that customers value a product's differentiating attributes and are willing to pay a higher price to take advantage of those attributes.
Blank 1: profit or price Blank 2: maximization or skimming
According to traditional economic theory, setting price is as simple as finding the point at which marginal _ equals marginal
Blank 1: revenues or revenue Blank 2: costs or cost
Dynamic pricing helps marketers emphasize _ _, which is a strategy for maximizing revenue even when a firm has only a fixed amount of goods or services.
Blank 1: yield Blank 2: management
For marketers, which of the following are advantages of a price bundling strategy? (Check all that apply.)
Bundled packages can be sold for a higher price. Bundled packaging can lead to reduced advertising costs. Bundled packaging can lead to reduced selling costs.
_ pricing tactics can lead to price confusion, where customers have difficulty discerning what they are actually paying because they have been misled by price promotions.
Deceptive
In the second quarter of the year, the motorcycle dealer sold 50 bikes at $15,000 each. For the third quarter, the dealer reduced the price to $13,750 and sold 53 units. Which of the following statements is accurate regarding this situation?
Demand is inelastic and total revenue fell in the third quarter.
In which of the following strategies would companies most likely use data management systems to provide marketers with more data and enhanced ways of estimating price elasticity?
Dynamic pricing
Which pricing tactic has grown explosively due to improving and readily available technological tools that facilitate the ease with which prices can be updated to reflect changes in supply, demand, or market conditions?
Dynamic pricing
True or false: Survival pricing is applicable for use as a permanent pricing strategy.
False
According to your text, which of the following are considered variable costs for a firm? (Check all that apply.)
Insurance Salaries Rent // Sales commissions Delivery costs Raw material
What is the biggest disadvantage to using markup pricing?
It is not effective at maximizing profits.
According to your text, what has been the outcome for marketers pricing products now that consumers have access to mobile applications while shopping?
Marketers must aggressively review the prices of online stores when setting the initial price of an item.
When it comes to setting prices, which of the following stakeholders would be most interested in setting prices high across all product lines in order to increase profits for the firm?
Marketing executives
What pricing tactic involves adding a certain amount to the cost of a product to set the final selling price?
Markup pricing
_ pricing is a strategy in which a firm prices a product a few cents below the next dollar amount.
Odd
Which of the following factors affect price sensitivity? (Check all that apply.)
Perceived risk Price-quality perceptions Size of the expenditure
_ pricing is the practice of first setting prices low with the intention of pushing competitors out of the market or keeping new competitors from entering the market, and then raising prices to normal levels.
Predatory
Because it directly impacts the financial viability of both organizations and individuals, activities related to which marketing mix element are watched and regulated most closely?
Price
Which element of the marketing mix is directly related to the value a product delivers to consumers, as well as the value it captures for the firm in terms of revenue and profits?
Price
Which of the following are ethical issues marketers may face as they seek to set prices for their products? (Check all that apply.)
Price fixing Predatory pricing Price discrimination
How should pricing strategies be addressed during the product life cycle?
Pricing strategies evolve and should be reevaluated throughout the product life cycle.
_____ prices are the prices that consumers consider reasonable and fair for a product.
Reference
_______ are price reductions given to customers purchasing goods or services out of season.
Seasonal discounts
Your text cites that there are only two ways to increase revenue. Which of the following are those two ways? (Check all that apply.)
Sell products at a higher price Sell more products
What takes place in an unbundling strategy?
Separating out the individual goods that make up a product and pricing each one separately
_ are taxes on imports and exports between countries.
Tariffs
What factors have made global pricing more transparent and, in many cases, more competitive in recent times? (Check all that apply.)
Technological advancements Growing Internet access
Which of the following exemplifies the fact that technology has shifted the balance of power from companies to consumers?
The Internet has made it possible for customers to comparison shop for products from companies all over the world.
What considerations should marketers take into account when determining which pricing tactic to use? (Check all that apply.)
The customers' ability to pay How customers' intend to use the product The value customers perceive the product to have
In addition to technological and economic factors, which of the following are unique challenges related to global pricing for firms seeking to increase their revenue and profits? (Check all that apply.)
The gray market Dumping Tariffs
What is being measured by the price elasticity of demand?
The percentage change in quantity demanded in response to a percentage change in price
When identifying reference prices, which of the following would provide marketers with the best information regarding the price sensitivity of customers?
The sales staff
What is the goal for marketers in determining the cost of a product?
To make sure they will not lose money by pricing the product too low
A product used to refinish wood surfaces contains a stripping agent, a primer, the wood stain, and a sealer. These are normally sold as a complete set containing all four products. If the company decided to sell each item individually, it would be an example of which pricing strategy?
Unbundling
Which of the following factors influencing price are often overlooked? (Check all that apply.)
Underpricing Reference prices
_ costs are costs that can change depending on the number of units produced or sold.
Variable
The _______ point is the point at which the costs of producing a product equal the revenue made from selling the product.
break-even
When a firm is trying to determine what sales volume is needed to achieve a profit of zero, it is engaged in _______.
break-even analysis
price _ is a strategy in which two or more products are packaged together and sold at a single price.
bundling
price _ is only illegal if it injures the competition.
discrimination
The biggest advantage of markup pricing is that it is _____.
easy
In April, a company priced its product at $59.95 and sold 10,000 units. In May, it priced the same product at $52.95 and sold 15,000 units, indicating that demand for the product is _______.
elastic
As a landlord, Jason wants to protect himself in the event that taxes on his apartment complex increase. To do so, he most likely will add a(n) _ clause to his rental agreements.
escalator
What are the two most common and effective strategies for raising prices?
escalator clauses unbundling
Firms that want to promote an image of _______ to customers would most likely pursue a strategy of prestige pricing.
exclusivity
In a market structure in which there are a large number of buyers and sellers, the pricing impact of any single firm will be _____.
fairly small
Viktor is a shop owner. Regardless of how much merchandise he sells, he must pay the rent each month as well as his employees' salaries. Because these costs remain constant and are not dependent on the amount of merchandise Viktor sells, they are referred to as _______.
fixed costs
Every year Walter travels to China where he legally buys large quantities of baseball caps related to MLB sports teams. He imports the caps back into the United States where he sells them for less than the normal market price at his storefront in New York City. The baseball caps are considered to be _______.
gray market goods
A situation in which demand is _ occurs when a specific change in price causes only a small change in the amount purchased.
inelastic
Tony sells hot dogs from a cart for $2.50 each. In the summer months, he typically sells 200 hot dogs a day. Tony thinks if he reduces the price to $2 he will increase sales significantly. However, when he reduced the price, he only sold about 15 more hot dogs per day. This represents demand that is
inelastic
After determining the costs and analyzing the competitive price environment, the next step in the price-setting process is to choose a(n)
price
Because it reflects the value a product delivers to consumers, as well as the value it captures for the firm, decisions involving _______ are considered one of the most important strategic decisions a firm faces.
price
The money, time, or effort that a buyer exchanges with a seller to obtain a product is referred to as _.
price
The price elasticity of demand looks at how demand is affected by a percentage change in _.
price
_______ is common in B2B settings in which different customers might be charged different rates due to the quantities they buy or the differing terms of a negotiated contract.
price discrimination
Used as a measure of price sensitivity, _______ gives the percentage change in quantity demanded in response to a percentage change in price.
price elasticity of demand
If the major airline companies colluded to make consumers pay an additional $50 to be able to carry on luggage, this would be an example of _______.
price fixing
The two major electronic dealers in town conspired together to set the price of new high definition televisions. In doing so, they are engaging in _______.
price fixing
If you were willing to pay $10 for a product, but the firm only charges you $8, the firm will most likely see a reduction in _______.
profit
a firm's _ is calculated by taking its revenue minus its total costs.
profit
Drake's company has just come out with a new product. When the firm launches the product, it intends to set the price relatively high for a while and then decreases the price to a more sustainable level for the long term. This is an example of a _____ pricing objective.
profit maximization
For years Darius has always purchased the same brand of coffee for which he normally pays $10.99 a can. He wants to try a new type of coffee that he saw advertised, but this new brand sells for $16.99 a can. Darius doesn't want to try the new brand because he thinks that $10.99 is a more reasonable price for coffee. For Darius, $10.99 represents his _ price.
reference
Yield management is a strategy for maximizing a firm's _______.
revenue
A hotel resort in Florida prices its rooms differently for different times of the year. In particular, it promotes the months of August and September as its "value" months where the room prices are at their lowest rates. It does this, in part, because the weather in Florida is not as favorable as it is at other times of the year. The pricing tactic the hotel is using to promote hotel stays during the "value" months is most likely ______.
seasonal discounts
Sosoft Company has increased the price of its hand soap, but sells it in a smaller bottle. This is an example of _.
shrinkflation
The effect that technology has had on pricing could be called _______.
significant
there are _ steps in the price-setting process.
six
Similar to a firm's marketing objectives, its pricing objectives should be _______. (check all that apply.)
specific measurable
Fred's Fish House has been hit especially hard by the economic recession. Realizing that people are struggling to afford dining out, Fred has decided to implement a(n) _____ pricing strategy where he will lower the cost of the menu items to the point where his revenue will just cover his costs, allowing him to survive until the economy picks back up again.
survival
When determining a pricing strategy for a firm that sells its goods internationally, the firm must take into account the potential taxes on imports and exports that foreign countries will place on its goods. These potential taxes are known as _______.
tariffs
As it relates to evaluating demand, marginal revenue can be defined as _______.
the change in total revenue that results from selling one additional unit of product
for a _ maximization strategy to work over the long term, the firm must have a significant cost or resource advantage over competitors.
volume
Whereas odd pricing often ends in "9," even pricing often ends in _______.
zero
