Chapter 14: Pricing Concepts for Establishing Value
There are many forms of price discrimination, but only some of them are considered illegal under the following legislation:
-Clayton Act -Robinson-Patman Act
A firm may set low prices to:
-Encourage current firms to leave the market -Take market share away from competitors -Discourage new firms from entering the market
In the customer orientation strategy, firms might sell their products or services at high prices in order to accomplish which of the following?
-Enhance the company's reputation and image -Enhance the value of the products in consumers' minds -Communicate exclusivity
Which of the following are limitations to break-even analysis?
-It must be conducted several times at different quantities -It cannot predict how many units will sell -It uses an average price rather than specific prices
What are the benefits of high/low pricing strategy?
-It serves two different market segments -It attracts consumers at both ends of the price sensitivity scale -It generates excitement due to the limited duration of sales
Which of the following occur under horizontal price fixing?
-Price is eliminated as an influence on the consumer's decision-making process -Business rivals that produce and sell the same type of merchandise scheme together
The customer orientation strategy increases value by doing which of the following?
-Setting prices to match consumer expectations -Focusing on customer satisfaction
Which of the following are examples of monetary sacrifices included in the overall price?
-Shipping -Travel costs
Firms engaged in competitor orientation might use which of the following strategies?
-Status quo pricing -Competitive parity
Which of the following are reasons that firms implement a market penetration pricing strategy?
-To establish market share -To earn profits -To discourage competitors -To build sales
Channel members include which of the following?
-Wholesalers -Manufacturers -Retailers
The types of strategies that could be implemented in a profit orientation strategy include:
-target profit pricing -maximizing profits -target return pricing
A manufacturer's suggested retail price is:
A price set by manufacturers to pressure retailers to sell the product at that price
Which of the following would most likely be a loss-leader pricing tactic?
Buy one box of cereal at the regular price, get one free
Which pricing tactic lowers the price below store cost?
Loss-leader pricing
Which of the following are examples of monetary sacrifices included in the overall price?
Shipping and travel costs
Which of the following is an example of an oligopoly?
The oil industry, with a limited number of providers
Sales outside of normal channels that employ irregular, though not necessarily illegal, methods of pricing are known as _______________.
a gray market
Price fixing is the illegal tactic of cooperating with other firms to _______________.
artificially establish prices
A useful technique that enable managers to examine the relationships among cost, price, revenue, and profit over different levels of production and sales is called _______________.
break-even analysis
Developing pricing strategies for new products is one of the most _______________ tasks a manager can undertake.
challenging
Variable costs _______________ production volume.
change with
If a firm sets prices similar to major competitors' prices, this is an example of _______________ pricing.
competitive parity
The percentage change in the quantity of one product demanded compared with the percentage change in price in another product is called _______________ _______________ elasticity.
cross-price
In the United States, it is considered unethical and illegal for advertisements to _______________ the consumer so much that the person is harmed
deceive
When a 10% decrease in price produces more than a 10% increase in quantity sold, the product or service is responsive to price changes and is considered to be _______________.
elastic
For a firm, rent, landscaping, and insurance are best examples of _______________.
fixed costs
When consumers relish the challenge of getting the lowest price and are willing to expend the time and effort to seek out the lowest price every time, retailers should use the _______________ pricing strategy.
high/low
When there are many substitute products available, the price elasticity of demand for a given product will likely be _______________.
higher
In which type of market would demand remain unchanged despite lower prices?
inelastic
Pricing is the _______________ of the four Ps.
least understood
Bait and switch is a deceptive practice because the store lures customers in with a very _______________ price only to pressure these customers into purchasing a _______________ model.
low; higher
The goal of a(n) _______________ strategy is to generate profit and establish a new product or service in the market as quickly as possible.
market penetration
When there are many firms competing for customers in a given market, but the products are differentiated, it is known as _______________.
monopolistic competition
In many geographic areas, utilities such as water and electricity are available from only one provider. This is an example of a level of competition called a(n) _______________.
monopoly
A firm sets extremely low prices for its products so that most customers will stop shopping elsewhere. This will cause other companies to go out of business and leave the firm with no more competition. The firm has engaged in _______________.
predatory pricing
Break-even analysis examines the relationships between which of the following?
price and cost
The ratio of change in a price and its effect on the quantity of the product demanded is known as _______________.
price elasticity of demand
When a new product appeals to consumers who are willing to pay a premium price to have an innovation first, marketers should use a _______________ strategy.
price skimming
Competition, channel members, costs, customers, and company objectives are the five critical components of _______________.
pricing
When consumers perceive that different companies sell products that are substitutable, it is known as _______________.
pure competition
Sometimes firms selling a pioneering product will set a very low price in order to attract many customers before competitors enter the market. This is an example of a _______________ orientation.
sales
Buyers compare the reference price to the actual _______________ of the product, which helps them decide how much they would be willing to pay for the item.
selling price
Firms that are less concerned with the level of profits and more interested in the rate at which profits are generated, relative to their investments, tend to use _______________.
target return pricing
Price minus the variable cost per unit equals _______________.
the contribution per unit
Prestige products or services follow the premise that _______________ associated with the product.
the higher the price, the greater the status
The key characteristic of vertical price fixing is that _______________.
the parties who collude are at different levels of the same marketing channels
Price is defined as _______________.
the sacrifice a consumer is willing to make to acquire a product or service
The _______________ is fixed costs plus the sum of the variable costs.
total cost
