MKT 402 Final
When variable costs are not constant, the percent contribution margin may be calculated without being misled by _____.
$CM / price
Which of the following data collection strategies for estimating pricing elasticity offers the highest level of experimental control?
laboratory purchase experiments
What factor(s) will encourage aggressive price competition during the growth stage of a product's life cycle?
large production economies and a price-sensitive market
Measuring price sensitivity is important for pricing strategy development beyond setting prices because _____.
managers can learn more about their buyers
The formula for calculating %CM is _____.
(total contribution margin / sales revenue) x 100
Under which of the following conditions would the rewards justify a company's participation in aggressive pricing?
A company has a substantial incremental cost advantage using a low price strategy that competitors may not be able to match.
How might a company defend itself against a strong competitor that initiates a price change?
Adjust competitive strategies such that the competitor recognizes that pricing is a poor financial decision.
Which of the following is a common reason why pricing strategies are difficult if not impossible to adopt in a company?
Business groups in the company have conflicted incentives and motivations for sales and production.
Which of the following roles is ideal for a pricing organization in which business groups operate in different, fast-moving consumer markets but use similar types of data to make pricing decisions?
Expert resource role
The pricing organization serves as a _____ when it can make decisions about pricing but cannot enforce those decisions in the market.
Figurehead
What advantage is there in communicating a price increase to competitors?
It explains the industry's need for higher prices such that if other competitors do not buy in, the increase can be retracted.
Why might a new competitor see a competitive advantage in engaging in a price war?
Most of the competitor's costs are sunk and manufacturing costs are low enough that a sale at low prices is still a gain.
The means by which the right behaviors are encouraged in a company is referred to as _____.
Motivation
_____ uses robust or cost effective methods for markets in which competitors are volume sensitive and there is a clear perception of economic value of a product.
Neutral pricing
_____ sets initial prices for a target segment that are lower than the perceived value
Penetration pricing
_____ is the proportion of price that adds to profit or reduces loss.
Percent contribution margin
_____ is a strategic approach in a declining market in which the company liquidates assets and withdraws from its weakest markets to remain profitable in fewer shares of the market.
Retrenchment
_____ are used to analyze systematically the potential effects of competitor reactions and customer responses to a price change and provide information about risk and trade-offs of price increases.
Simulations
When might reacting to a price change by a competitor be an appropriate decision?
The reaction to a price change is cheaper than losing sales
In highly competitive markets, what is one way managers obtain pricing data from competitors?
They shop competitor stores and monitor their advertising.
In-store experiments designed to measure purchase behavior _____.
are controlled experiments that are often costly to implement in a real world setting
How are avoidable costs distinguished from sunk costs?
avoidable costs result from the cost of replacing inventory whereas sunk costs are historical costs of producing the product
Actual purchase studies measure _____ whereas preference-intention studies measure _____.
behavior; assertion of choice in a hypothetical purchase situation
Which of the following research techniques would best facilitate understanding of an acceptable price range for a new product or price sensitivity changes at different points in time?
buy-response surveys
For the purpose of setting a price ceiling, marketers should assess the value of a less differentiated product _____.
by using available data and past experience
An organizational pricing structure that is most effective in preventing rogue behavior in sales reps that can contribute to a price war is a _____.
center of scale pricing structure
Price competition is considered a negative sum game because _____.
competition often devalues the market
Relevant costs are _____.
costs that determine the profit impact of a pricing decision
Once the results of price sensitivity studies are presented, managers should _____.
critically evaluate the data and determine what more management can learn about its buyers
Whether underpricing competitors is successful depends on_____.
customer and competitor reactions to new pricing
Pricing a new product too low at its launch can influence long term profitability because _____.
customers will have established a low reference price for the product and any increase is perceived as a loss
What are the stages of the product life cycle?
development, growth, maturity, and decline
Managers are needed for survey research to _____.
ensure that product descriptions are appropriately worded and include variables relevant to buyers
During product growth, a company that employs a differentiated product strategy to market its product must _____.
establish a perception in buyers that the product has unique attributes that excentuate value
Because companies tend to be cross-functional, a formalized pricing organization should _____ for responsible management of the pricing process.
establish formal reporting relationships
Which of the following roles is ideal for a pricing organization in which business groups operate in different, fast-moving consumer markets but use similar types of data to make pricing decisions?
expert resource role
A distinction between harvesting and consolidation strategies in a declining market is _____.
harvesting results in a complete exit from the industry whereas consolidation waits for fallout of other competitors
A trial promotion is the best strategy for educating consumers about a new product that _____.
has low incremental production cost, is intended to be a frequent purchase, and the benefit is realized upon its initial use
A challenge of increasing prices following underpricing products relative to their value is _____.
hat customers will question why the company is now charging for value and consider this increase unfair or unreasonable
Which costs change as prices change affecting relative profitability of different pricing strategies?
incremental costs
A means by which prices are slowly increased over a period of time until the sales data show profits are no longer improved is referred to as _____.
incremental implementation
Pricing organization should be defined by _____.
its alignment with a company's strategic goals
Educated buyers and reduced differentiation of products contribute to increased price competition at which stage of a product's life cycle?
maturity
Which is typically the longest stage of a product's life cycle?
maturity
The means by which the right behaviors are encouraged in a company is referred to as _____.
motivation
The structure of a pricing function of a company is referred to as _____.
organization
Which of the following forms of sales data offers demographic data as well as product purchase data?
panel data
The formula for calculating $CM is _____.
price - variable cost
Market decline for a product is characterized by _____.
reduced demand for the product due to customers identifying new or different products to solve their needs
Which of the following is a sunk cost?
research and development
Sequential skimming _____.
sets very high initial prices for durable goods and lowers prices once the initial least price-sensitive segment of the market is gone
Which of the following would be considered a controlled measurement of price sensitivity?
simulated purchase experiment
A strategic implication for high percent contribution margin is _____.
that the company has room to retaliate against discount pricing set by competitors
As percent contribution increases, _____.
the company's ability to use segment pricing to penetrate multiple market segments improves
A process by which customers become educated about a product and its value through social interaction of other consumers is called _____.
the diffusion process
A price ceiling is determined by _____.
the economic value
The point on the demand curve where marginal revenue is equal to marginal cost is _____.
the point at which prices maximize profit
Which research tool allows researchers to measure price sensitivity by predicting consumer preferences for a product at different prices and other attributes?
trade-off analysis
Coordination of pricing with suppliers for the purpose of improving the efficiency of pricing and avoiding incrementalization of a supplier's nonincremental fixed costs and profits is referred to as _____.
transfer pricing
