Chapter 8- Pricing and Credit Strategies

follow-the-leader pricing:

a pricing strategy that is similar to a meet-or-beat- the-competition strategy but uses a particular competitor as the model for pricing.

penetration pricing:

a pricing strategy that uses a low price during the early stages of a product's life cycle to gain market share.skimming price strategy:

elastic demand:

customer demand moving significantly upward or downward when the price of a product changes.

inelastic demand:

the type of demand that does not change in a significant way when prices change.

Monthly statement fees for merchant card services range from:

$.25 to $.75 per transaction 1 to 6 percent $4 to $20 per month $50 to $200 per month Answer: $4 to $20 per month

Wholesalers often mark up their prices by:

10% 30% 5% 2% 20% Answer: 20%

Which of the following is a consumer credit agency?:

Dun and Bradstreet Experience TransUnion EquiUnion Transfax Answer: TransUnion

Which of the following would not be included on a credit application?

Employer identification number (EIN) or Social Security Number DUNS number (from Dun and Bradstreet), if applicable Different promotion methods Ethnic diversity Signature line, giving legal permission to acquire credit information Answer: Ethnic diversity

Customers frequently judge the quality and value of a product or service based upon its price so it is important to always price your product or service as low as possible.

False

Keystoning provides the highest cost you should charge for your product or service because it already doubles the price.

False

Market clearing prices are the lowest prices at which products or services are sold.

False

Penetration pricing means that you have penetrated the market.

False

Price lining is when you take your cost and add a desired profit margin or "lining."

False

Skimming price strategy is the pricing strategy in which a firm sets high prices on their products or services to send a message of uniqueness or premium quality.

False

Which of the following has elastic demand?

Gas Food Utilities Jewelry Answer: Jewelry

Extending credit to customers has which of the following benefts?

Increases a firm's revenue Builds customer loyalty Can be used for marketing All of the above None of the above Answer: All of the above

Credit terms of 2/10, net 30 means:

Make payment within 30 days and you'll receive a 2/10 discount. 2 percent discount is offered for payment within 10 days or full payment within 30 days. Make payment with 2 days and you'll receive a 10% discount for a usual 30-day invoice. Answer: 2 percent discount is offered for payment within 10 days or full payment within 30 days.

The distinction between follow-the-leader pricing and meet-or-beat-the competition pricing is:

Meet-or-beat-the-competition pricing always has a better price than the leader. Follow-the-leader pricing waits to see the pricing of the competitors and meet-or-beat-the-competition sets the price in anticipation of the competitor. Follow-the-leader pricing uses a particular competitor as the model for pricing. Answer: Follow-the-leader pricing uses a particular competitor as the model for pricing.

Personalized pricing is also known as:

Private pricing Premium pricing Dynamic pricing Luxury pricing Answer: Dynamic pricing

Variable pricing strategy is set so that firms can offer discounts, credit terms, and price concessions.

True

Cost-plus pricing fails to take marketing vision and market conditions into consideration.

True

markup pricing:

a cost-plus pricing strategy in which you apply a predetermined percentage to a product's cost to obtain its selling price.

personalized pricing:

a dynamic pricing strategy in which a company charges a premium above the standard price for a product or service to certain customers who will pay the extra cost.

merchant card services:

financial systems to permit acceptance of major credit cards.

installment credit:

loans to be paid back in installments over time.

variable pricing strategy:

provides different prices for a single product or service.

skimming price strategy:

seeks to charge high prices during the introductory stage of a product when it is novel and has few competitors to take early profits, and then to reduce prices to more competitive levels.

cost-plus pricing:

takes the organization's product cost and adds the desired markup.

price:

the amount that a seller requires in exchange for the use of a product or service, or transferring its ownership.

By showing that your business is _______________, the less you will have to compete on price.

the best different the lowest price provider capable Answer: different

market clearing price:

the particular price at which the supply of products and/or services matches the demand for them.

pocket price:

the portion of full price that remains after all pricing factors are deducted.

prestige pricing:

the pricing strategy in which a firm sets high prices on its products or services to send a message of uniqueness or premium quality.

price lining:

the process of creating distinctive pricing levels.