Ch. 14 possible exam questions

maximizing profits

A _________________ strategy involves accurately measuring all the factors needed to predict sales and profits at various price levels, so that the price level that produces the highest return can be chosen

Value

A customer orientation toward pricing implicitly invokes the concept of

everything but price and demand remains the same

A demand curve is built assuming that

price and demand

A demand curve shows the relationship between ___________________ in a period of time

False *A demand curve shows the relationship between price and demand

A demand curve shows the relationship between income and demand

True *One example of a gray market is the sale of goods at prices lower than intended by the manufacturer due to a retailer legally circumventing channels of distribution

A gray market employs irregular but not necessarily illegal methods of distributing products.

customer-oriented

A no-haggle pricing policy is a type of _______________ pricing strategy

is supported by consistent advertising and distribution strategies

A strategy of setting prices based on how customers develop their perceptions of value can often be the most effective pricing strategy, especially if the strategy

False *Break-even analysis determines the point at which revenues and expenses are equal, in other words, the quantity of a product that must be sold to have a $0 profit.

At the break-even point, profits are maximized.

True *Consumers show more sensitivity to price increases than to price decreases. This means that a price increase will generally lose more customers than an equivalent price decrease will gain.

Because consumers are generally more sensitive to price increases than to price decreases, it is easier to lose current customers with a price increase than it is to gain new customers with a price decrease

sales-oriented

Bernard's firm has set corporate direction to become one of the leaders in each of its significant market segments. It was Bernard's job to examine the pricing to determine how to maximize market share, even at the expense of profits in the short run. What kind of company objective would guide Bernard's effort?

False *Brands with loyal customers have lower price elasticity of demand; in other words, demand will decrease more slowly as price goes up

Brands that have developed loyal customers have a higher price elasticity of demand

True *A market penetration pricing strategy starts with a low price to capture market share

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.

a demand curve.

Customers must see value in a product or service before they are willing to exchange time or money to obtain it, but not all customers see the same value in a product. To analyze how many units will be sold at any given price point, marketers draw on

False *The break-even quantity would increase, not decrease, because Diana's salary increase would raise fixed costs

Diana owns a boutique specializing in ball gowns. Sales are stable and Diana feels it is time she had a 20 percent increase in her salary. If Diana takes this increase in compensation, it will decrease the break-even quantity of gowns she needs to sell on a monthly basis

money paid; overall sacrifice

Earl was known for driving 30 miles to save a dollar on the price for his favorite beverage. Earl perceived price as ________________, while most consumers recognize price as the ______________ made to acquire a good or service.

False *This is the definition of predatory pricing.

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.

Sales

Gary is the marketing manager for an automobile dealership. His boss tells him the firm's primary goal is to increase its local market share from 15 to 30 percent. His firm is using a ________ orientation.

high value

Gerald has a number of customers for his lawn care service who never question his bill but expect their lawns to be perfect. These customers do not want low prices, they want

sales orientation

Health clubs often use a low, introductory offer price to get people to join their club. These low prices represent a ______________ pricing strategy

rarely changed except in response to radical shifts in market conditions.

Historically, prices were

True *Monopolistic competition occurs when there are many firms competing for customers in a given market but their products are differentiated

If a firm is engaged in monopolistic competition, it should seek a way to differentiate itself.

True *The substitution effect is one of the factors that increases price elasticity.

In U.S. markets, there are many substitute products for Fruit Loops cereal, suggesting the price elasticity of demand for Fruit Loops is high

competitive parity

In many high-end resort markets, Westin hotels compete directly with Crown Plaza hotels. Each firm weighs the comparative advantages and disadvantages of its offerings to determine whether to price above, equal to, or below the other hotel. In these markets, the hotels are using a _______________ pricing strategy.

rarely is the lowest-price offering the dominant brand in a market.

Julia wants her firm's gourmet snacks to be the leading brand in the U.S. market. When adopting a pricing strategy designed to gain market share, she should remember that

customer-oriented

Julia's is an upscale women's clothing store. Prices are based on customers' beliefs about the value of the clothing. The store focuses on a limited target market and provides excellent customer service. Julia's is using a ________________ pricing strategy

sales orientation

Many years ago Honda's Accord and Ford's Taurus were the top two selling cars in the United States. As the year was coming to an end, Ford cut the price of the Taurus, hoping to outsell the Accord and allow Ford to claim that "Taurus is the best-selling car in America." Ford was using a ___________________ pricing strategy

an indicator of quality

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

Target return

Naomi tells her sales representatives the goal is to generate at least a 20 percent return on investment for all of the industrial building supplies they sell. Naomi is using a _______________ pricing strategy

True *Research has indicated that consumers associate odd prices (prices that end in nines) with lower quality.

Odd prices suggest low quality

treated as an afterthought

Price is often the most challenging of the four Ps to manage, partly because it is often ______________ in developing marketing strategies

Overall sacrifice

Price is the _____________ a consumer is willing to make to acquire a specific product or service.

False *Price is the overall sacrifice a consumer is willing to make to acquire a specific product or service.

Price is the cash expenditure plus taxes that consumers have to pay for a good or service.

True *Product, Place, and Promotion all generate costs; Price generates revenue

Price is the only part of the marketing mix that does not generate costs

False *Bait and switch is a tactic in which a retailer advertises items for a very low price with no intention of actually selling any of them. Once a customer is in the store, sales personnel push the customer toward more expensive items. Salespeople always try to get customers to upgrade, and it is difficult to separate this behavior from actual bait and switch

Proving that a company has engaged in the deceptive bait and switch practice is easy

True *Market leaders are often able to charge a premium due to brand equity.

Rarely is the lowest-price product offering the dominant brand in a given market

status quo

Ryan gave the manager of his convenience store a set of binoculars so she could see the gasoline prices charged by the other convenience store at that intersection. Ryan told the manager to always match the gasoline prices of the other store. Ryan is using a _____________________ pricing strategy

premium pricing

Sharon knew that her established customers liked her product much better than her competitor's. She was planning to expand into new markets, and she was considering pricing. She was leaning toward charging a higher price than competitors to help demonstrate that hers was a high-quality product. Sharon was considering

increase profits

Tess is the marketing manager for a fast food restaurant chain. She uses a target return pricing strategy because her firm's primary objective is to

True *The Robinson-Patman Act applies to business-to-business transactions. Price discrimination refers to selling the same product to different customers at different prices. With a few exceptions, this is legal in sales to consumers, but is illegal under certain circumstances when selling to businesses.

The Robinson-Patman Act does NOT apply to end consumers, at which point many forms of price discrimination occur.

False *When customers value the prestige of a product more than the price differential, a higher price may lead to a greater quantity sold.

The demand curve for prestige products generally slopes downward due to higher prices

the price of alternative products and services

The full price of a product or service includes all of the following EXCEPT

True *Successful pricing considers consumers' perceived value, since to ignore this might result in a price that is too high or too low

The key to successful pricing is to match the product with the consumer's perception of value.

customers

Traditional demand curve economic theory is used by marketers to understand _______________ in the five Cs of pricing.

that generates revenue

Unlike product, promotion, or place, price is the only part of the marketing mix

False *This was a price skimming strategy, which starts with a high price and then gradually lowers it.

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

competitor-oriented

When Ursula decides how to price new products in her gift store, she measures the value of her product offerings against those of the other stores in her area. Ursula uses a __________________ pricing strategy.

True *With an EDLP strategy, companies stress the continuity of their retail prices at a level somewhere between the regular, non-sale prices and deep discount sale prices their competitors may offer

When a retail store rarely sells deeply discounted or sale products, it is known as everyday low pricing

competitive parity.

When firms set prices similar to those of competitors, they are following a strategy

collaboration

Which of the following is NOT one of the five Cs of pricing?