Intro to marketing chapter 9

Wilkinson & Company sells plumbing supplies across the United States. Wilkinson uses Chicago as its central location for determining freight costs regardless of the city from which products are actually shipped. For example, a Dallas customer pays the freight cost from Chicago to Dallas even if the goods are shipped from Dallas. Wilkinson most likely uses ________ pricing.

basing-point

Establishing prices for razor blades that must be used with a razor blade system is known as ________ pricing.

captive-product

When a manufacturer offers a ________, a customer buys a product from a manufacturer's dealer within a specified time period, and the manufacturer then sends the customer a check.

cash rebate

The relationship between the price charged for a product and the resulting demand level can be shown in a(n) ________.

demand curve

Rent, electricity, and executive salaries that do not vary with production or sales level are referred to as ________ costs.

fixed

Retailers like Kohl's and JCPenney carry less-expensive versions of established brand name products or new lower-price lines. They have adopted a ________ pricing strategy.

good-value

Consumers rely less on price to judge the quality of a product when they ________.

have prior experience with the product

the national tree company offers resellers half-price reductions on artificial Christmas trees if they purchase them in july. this is an example of a ___

seasonal discount

Radox, a luxury watch brand, identifies a market segment that is willing to pay premium prices for its watches, and Radox managers select an ideal selling price. Managers then determine the costs to create watches that meet the ideal selling price. The company's pricing approach is referred to as ________.

target costing

The Fashion Store, a new startup, sets product prices so that revenues will equal manufacturing and marketing costs. The pricing strategy used by the company is referred to as ________ pricing.

target return

Costs that change directly with the level of production are referred to as ________ costs.

variable

________ pricing occurs when a seller states prices or price savings that mislead consumers or are not actually available to consumers.

deceptive

________ uses buyers' perceptions of what a product is worth as the key to pricing.

Customer value-based pricing

The Vitamin Shoppe sells natural vitamins and supplements. Product prices are adjusted frequently to meet the needs of individual customers. For example, long-time customers receive discounts. This strategy is most likely an example of ________ pricing.

Dynamic

An airline runs a 6-month promotional program where all baggage fees are waived. It is using a cost-based pricing strategy.

False

Break-even pricing involves setting prices based on competitors' strategies, costs, prices, and market offerings.

False

Captive-product pricing refers to setting prices across an entire product line.

False

Competitive pricing is a variation of break-even pricing.

False

Federal legislation on price-fixing states that sellers must set prices after talking to customers and competitors.

False

Freight-absorption pricing is used for market skimming and holding on to monopolistic markets.

False

If demand is elastic rather than inelastic, sellers typically consider increasing their prices.

False

In monopolistic competition, the market is dominated by one seller.

False

Market penetration makes sense when a product's quality and image must support its higher price.

False

Pricing strategies usually remain the same as a product passes through its life cycle.

False

The demand curve shows the number of units the market will buy in a given time period at similar prices.

False

There is no true substitute for coffee. If the price goes from $8 to $12 for a package of k-cups due to a coffee bean shortage, demand will remain relatively unchanged. This is an example of demand elasticity.

False

Unlike the other marketing mix elements, price plays a minor role in creating customer value and building customer relationships.

False

Each PC produced by HP involves a cost of computer chips, wires, plastic, packaging, and other inputs. Although these costs tend to be the same for each unit produced, they are called ________ costs because the total changes based on the number of units produced.

Fixed

________ is the sum of all the values that customers exchange for the benefits of having or using a product or service.

Price

Which of the following statements about break-even analysis is most likely true?

It fails to consider customer value and the relationship between price and demand.

With each new generation of Apple iPhone, iPad, or Mac computer, new models start at a high price then work their way down as newer models are introduced. Apple initially uses a ________ strategy.

Market-skimming

Under oligopolistic competition, the market consists of only a few large sellers.

True

________ pricing is an approach whereby a firm tries to determine the price at which it will break even or earn the profit it is seeking.

Target return

Which of the following conditions is most likely essential for implementing a successful market-penetration pricing strategy for a product?

The market for the product is highly price sensitive.

Which of the following conditions is most likely essential for implementing a successful market-skimming pricing strategy for a product?

The product's quality and image support its high price.

How do firms that use captive-product pricing make up for the low prices of their main products?

They set high markups on the captive products.

A break-even chart shows the total cost and total revenue expected at various sales volume levels of a product.

True

A firm considering a price change must worry about the reactions of its competitors as well as those of its customers.

True

An important consideration when determining what price to charge in a specific country is the nature of the wholesaling and retailing system in that country.

True

Dynamic pricing is particularly suitable for Internet-based companies like Amazon who want to be responsive to shoppers' desires and marketplace changes.

True

If consumers perceive less value relative to competing products, a company should attempt to change customer perceptions to justify a higher price.

True

Price bundling promotes the sales of products consumers might not otherwise buy, but the combined price must be low enough to get them to buy the bundle.

True

Price elasticity is a measure of the sensitivity of demand to changes in price.

True

Sellers are prohibited from using predatory pricing.

True

The Robinson-Patman Act seeks to prevent unfair price discrimination by ensuring that sellers offer the same price terms to customers at a given level of trade.

True

Universal Appliance prices its refrigerators at five distinct price levels based on finish, style, capacity, and features. They range from $799 to $9,500. This is an illustration of price steps.

True

When a manufacturer seeks a market for by-products and accepts a price that covers more than the cost of storing and delivering those by-products, the manufacturer is able to reduce the main product's price to make it more competitive.

True

Los Amigos, a new Mexican restaurant, has set up shop across the street from Hot Tamales and More. Which of the following pricing strategies will Los Amigos likely use?

competition-based

Which of the following sets the price ceiling for a product's pricing?

consumer perceptions of value

Which of the following would most likely trigger a price increase?

cost inflation

________ pricing involves setting prices based on the expenses involved in producing, distributing, and selling a product plus a fair rate of return for a company's effort and risk.

cost-based

Lovely Skin is establishing a pricing strategy for a new moisturizer. The total cost to produce each unit is $3.50. The company has decided to add a $1.50 markup, so the unit price to distributors will be $5. Lovely Skin is using a ________ approach to price the new moisturizer.

cost-plus

Metro Museum has different admission prices for students, adults, and seniors. All three groups are entitled to the same services. This form of pricing is called ________ pricing.

customer segment

When demand hardly changes with a small change in the price of a product, the demand for the product is best described as ________.

inelastic

Which of the following is an economic factor that affects the pricing decisions of a company?

interest rates

Busch Stadium in St. Louis charges different prices for seats in different areas of the ball park, even though each seat costs the same for the owners of the stadium. What is this form of pricing called?

location-based pricing

When establishing prices, it's important for a manager to understand that "good value" is not the same as ________.

low price

The first Target store opened in 1962. Its initial strategy was to set prices low to attract a large number of buyers quickly and win a large market share. This is referred to as ________.

market-penetration pricing

Posh Collections introduced a new watch to appeal to upscale consumers. The company will most likely use a(n) ________ strategy.

market-skimming pricing

The Sherman Act, Clayton Act, and Robinson-Patman Act are all federal laws that were initially adopted to curb the formation of ________.

monopolies

Under ________, the market consists of many buyers and sellers trading over a range of prices rather than a single market price.

monopolistic competition

________ prices are carried in buyers' minds and used when looking at a given product.

reference

Under ________, the market consists of a few large sellers who are highly sensitive to each other's pricing and marketing strategies.

oligopolistic competition

Computer World sells laptops separately from accessory products like docking stations, anti-virus software, and external hard drives. This is referred to as ________ pricing.

optional-product

________ pricing refers to selling below cost with the intention of punishing a competitor or gaining higher long-run profits by putting competitors out of business.

predatory

Penny Bank, a discount store, is highly competitive. When entering a new market, Penny Bank often cuts prices so deeply that it sells below costs, effectively pushing smaller retail stores with less purchasing power out of the market. In this case, Penny Bank is using ________.

predatory pricing

________ is the only element in the marketing mix that produces revenue.

price

Salon Du Jour offers special combination packages at a reduced price. Separately, a haircut is $30 and a conditioning treatment is $35. But the combo price is $50. This is referred to as ________ pricing.

product bundle

NerdHerd Electronics sells three different sizes of televisions at three different prices. In this case, the company's pricing strategy is referred to as ________ pricing.

product line

When Nabisco offers to cover half the cost of all local advertising for supermarkets that sell Oreo Cookies, the company is granting ________.

promotional allowances

What type of pricing is being used when a company temporarily prices its products below the list price to create buying excitement and urgency?

promotional pricing

Pricing a product based on consumers' reference prices is referred to as ________ pricing.

psychological

In ________, the market consists of many buyers and sellers trading in a uniform commodity, such as wheat, copper, or financial securities.

pure competition

There are more than 50 blueberry farmers in Shammonton, New Jersey, that grow, package, and distribute the same quality blueberries. An individual farmer cannot charge more than the going market price per unit without the risk of losing business to the other farmers. This is an example of ________.

pure competition

Movie theaters charge matinee pricing during the daytime, and resorts give weekend and seasonal discounts. This is illustrative of a ________ pricing strategy.

time based

________ costs refer to the sum of the fixed and variable costs for any given level of production.

total

Which group is most likely offered functional discounts by manufacturers?

trade-channel members that perform sales tasks

Vac "N" Sew, a consumer electronics outlet, offers a price reduction of $100 when customers bring in a used vacuum cleaner and exchange it for a new vacuum cleaner or sewing machine. This is an example of a ________.

trade-in allowance

Netcorp, an Internet service provider, charges its users a fixed rental fee for its basic package, which has a download limit. If a user exceeds this download limit, an additional fee is charged for every download. In this case, the firm's pricing strategy is referred to as ________ pricing.

two-part

Which of the following pricing strategies charges the same price plus freight to all customers, regardless of their location?

uniform delivered pricing

Which of the following pricing strategies is the opposite of FOB-origin pricing?

uniform delivered pricing

Providing extra amenities to differentiate and support high-priced products is referred to as ________ pricing.

value added

A ________ pricing strategy for an offering begins with an assessment of customer needs and perceptions. Then a target price is set based on customer perceptions of worth.

value-based

Computer Works is a computer accessories manufacturer based in Brazil. All customers in South America pay the same freight charge, $20, when they order products from the company. All customers in North America pay a freight charge of $50. The company's pricing strategy is referred to as ________ pricing.

zone