BCOR350 Chapter 11 Pricing Strategies

Cheese makers in Wisconsin sell their leftover price to local city and county highway departments, which use it in conjunction with salt to melt icy roads. Which product mix pricing strategy does this represent?

by-product

Using ___________ pricing, companies are able to turn their trash into cash, allowing them to make the price of their main product more competitive.

by-product

Basic price adjustments known as __________ are used to reward customers for certain responses.

discounts and allowances

Promotional pricing tactics include_________.

discounts, special-event pricing, and limited time offers

Which of the following statements regarding dynamic pricing is correct?

dynamic pricing could cause consumer resentment and damage customer relationships

Market penetration prices are preferred in all of the following conditions except __________.

enough buyers must want the product at a higher price

Which of the following is true concerning new product pricing strategies?

for a market-skimming strategy to be successful, the costs of producing a smaller volume cannot be so high that they cancel the advantage of charging more

Margaret has been invited to a fancy dinner party and wants to bring a good bottle of wine as a gift for the host. Because she does not know much about wine, she will likely use the price of the wines as a(n)________.

indicator of quality

Recently, Amazon has been accused of _________, which is the practice of selling products below cost to harm competitors

predatory pricing

Federal legislation on __________ states that sellers must set prices without talking to competitors.

price-fixing

Psychological Pricing

pricing that considers the psychology of prices and not simply the economics; the price is used to say something about the product

Which product mix pricing strategy involves pricing multiple products to be sold together?

product bundle pricing

Whirlpool washers and dryers are offered in many different models. Whirlpool will use ________ pricing to determine the price steps between the different models.

product line

Some sellers use 00-cent endings on regularly priced items and 99-cent endings on discount merchandise. This is an example of pricing referred to as _________________.

psychological pricing

Techniques that can be used by sellers for avoiding customers' perception of price gouging includes all of the following except ___________.

rationing products to customers low-price fighter items

Segmented Pricing

selling a product or service at two or more prices, where the difference in prices is not based on differences in costs

Predatory Pricing

selling below cost with the intention of punishing a competitor

Market-Skimming Pricing

setting a high price for a new product to skim maximum revenues layer by layer from the segments willing to pay the high price; the company makes fewer but more profitable sales

Market-Penetration Pricing

setting a low price for a new product n order to attract a large number of buyers and large market share

By-Product Pricing

setting a price for by-products in order to make the main product's price more competitive

Captive-Product

setting a price for products that must be used along with a main product, such as blades for a razor and games for a video-game console

Geographical Pricing

setting prices for customers located in different parts of the country or world

Product Line Pricing

setting the price steps between various products in a product line based on cost differences between the products, customer evaluations of different features, and competitors' prices

Promotional Pricing

temporarily pricing products below the list price, and sometimes even below cost, to increase short-run sales

FOB-Origin Pricing

a geographical pricing strategy in which goods are placed free on board a carrier; the customer pays the freight from the factory to the destination

Uniform-Delivered Pricing

a geographical pricing strategy in which the company charges the same price plus freight to all customers, regardless of their location

Zone-Pricing

a geographical pricing strategy in which the company sets up two or more designated areas

Basing-Point Pricing

a geographical pricing strategy in which the seller designates some city as a basing point and charges all customers the freight cost from that city to the customer

Cost Inflation

a major factor in price increases

Discount

a straight reduction in price on purchases during a stated period of time or in larger quantities

Dynamic Pricing

adjusting prices continually to meet the characteristics and needs of individual customers and situations

Market skimming prices are preferred in all of the following conditions except ____________.

an initial low price is set by the companies

Gillette charges a fairly low price for their razors (relative to costs) and a high price for razor blades. They are using a strategy of _______ pricing.

captive-product

Product Bundle Pricing

combining several products and offering a reduced price

Which of the following statements regarding public policy and pricing is correct?

companies can, under some circumstances, price items below cost

A market-skimming pricing strategy should NOT be used for a new product when _____________.

competitors can undercut prices easily

One form of ____________ is when movie theaters charge one price for adults and a different price for senior citizens.

customer-segment pricing

Which of the following is true regarding initiating price cuts?

cutting prices in an industry with excess capacity may lead to price wars

___________ occurs when retailers set an artificially high "regular price" and then advertise a "sale price" which is actually close to their everyday price.

deceptive pricing

Which is a price adjustment strategy?

discount and allowance pricing

Assume a competitor has cut prices and a company determines they should respond. Effective actions that the company could initiate include _________.

launch a low-price fighter brand

A company has set a low price on a new product it introduced. They want to maximize their market share and attract a large number of buyers quickly. Which new product pricing strategy should they use?

market-penetration pricing

Whizz Corp. wishes to introduce a new hybrid car into mature markets in developed countries with the goal of gaining mass-market share quickly. Which pricing strategy would help the firm meet its goal?

market-penetration pricing

Companies facing the challenge of setting prices for the first time can choose between two broad strategies: market-penetration pricing and _____________ pricing.

market-skimming

When Apple introduced the iPhone, they priced the new product at $599, considerably higher than their iPod or competing phones. Which pricing strategy did they pursue?

market-skimming

Deceptive Pricing

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

Which product mix pricing strategy involves pricing additional or accessory products sold alone with the main product?

optional-product pricing

Many personal care companies combine toothpaste with a toothbrush at a reduced price. This is an example of _________ pricing.

product-bundle

A soda company offers a discount to a grocer. In exchange, the grocer agrees to provide in-store advertising for the soda and additional sales-support. This is an example of _________.

promotional allowances

Allowance

promotional money paid by manufacturers to retailers in return for an agreement to feature the manufacturer's products in some way

Which of the following statements regarding segmented pricing is correct?

segmented pricing practices can cause consumer resentment

Which of the following statements regarding initiating price increases is correct?

the company should consider ways to meet higher costs or demands without raising prices

Optional-Product Pricing

the pricing of optional or accessory products along with a main product

A market-penetration pricing policy should LEAST likely be used for a new product when ________________.

the product's quality and image support a high price

What is the purpose of the Robinson-Patman Act?

to prevent unfair price discrimination

True or false: pricing strategies tend to change and evolve as the average product passes through its life cycle.

true

True or false: 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

Many amusement parks charge a daily ticket or season pass charge plus additional fees for food and other in-park features. This is called _________.

two-part pricing

When would a competitor most likely react to a firm's price change?

when the number of firms involved is small

Which of the following is a concern when using optional-product pricing?

which products to include in the base price and which to offer as options

One major objective of a market-penetration pricing strategy is to___________.

win a large market share