IBM 3012: SmartBook Chapter 11 - Pricing

As a tactic, predatory pricing is aimed mainly at _______.

competitors

As a pricing tactic, a marketer decides to add 10% to the price of the product to arrive at the final selling price. This is an example of _______ pricing

cost-plus

The central focus of determining what pricing tactic to use should be the _______.

customer

The most common examples of _______ pricing involve firms that falsely advertise wholesale pricing or promise a significant price reduction on an artificially high retail price.

deceptive

A retailer inflated the price of its dining room sets so that when it put them on sale, it appeared to customers that they were getting a better deal than they really were. In doing so, the retailer was engaged in _______.

deceptive pricing

The price-setting process begins with _____.

defining the pricing objectives

In the price-setting process, after demand has been evaluated, the next step is to _____.

determine the costs

A pricing tactic that involves selling a product at a price that causes the firm a financial loss is called _______.

loss-leader pricing

Firms using _______ hope that customers will buy other items in the store that are more profitable.

loss-leader pricing

Marketers typically prefer targeting international markets with _ (lower/higher) tariffs.

lower

Pricing objectives should be an extension of a firm's _ objectives

marketing

In an industry in which a small number of firms compete, firms will typically _______.

match the price of competitors

Price is the amount of something that a buyer exchanges with a seller to obtain a product. This exchange can be in the form of _______. (Check all that apply.)

money time effort

McDonald's prices its Extra Value Meals at $4.99. McDonald's is most likely using a(n) _ pricing tactic in this instance.

odd

Once a firm has estimated fixed and variable costs, it can incorporate them into a(n) _-_ analysis to determine how much it would need to sell to make the product profitable.

Blank 1: break Blank 2: even

What is the process of items shrinking in size or quantity while their price remains the same or increase?

Shrinkflation

Select the instances in which a consumer would most likely be price sensitive.

1. Mitch thought the package price that was being asked for his new cell phone and data plan was totally unreasonable. 2. Josyln was surprised to see the price of the prom dress she wanted was much higher than she thought it would be. 3. Quentin can only afford to spend a certain amount on a new car.

Lucy is the owner of a full-service pet grooming salon. For the month of May, she will pay $1,500 in rent, $3,200 in salaries, and $100 on advertising. A full-service pet grooming costs $30.00. Unit variable costs per grooming are $7.50. Approximately how many full-service pet groomings does Lucy need to perform to break-even for the month?

213

According to recent research, approximately what percentage of consumers search for and purchase a low-priced product using an in-store shopping app or online search engine?

40%

According to your text, one of the most common mistakes made when pricing products is to _______.

charge someone less than they are willing to pay

What type of agreement protects providers of goods and services should they encounter unreasonable financial hardship as a result of uncontrollable increases in the costs required to deliver products to consumers?

An escalator clause

_ _ is when two or more companies collude to set a product's price.

Blank 1: Price Blank 2: fixing

_ is the practice of charging someone less than they are willing to pay.

Blank 1: Underpricing

Technology has helped to shift the balance of power from _ to _.

companies customers

In terms of demand, prices are generally more _ in the early stages of the product life cycle and increasingly _ in the later stages of the product life cycle.

Blank 1: elastic Blank 2: inelastic

Calculating the total cost of a product begins with an understanding of the two major types of costs: _ and _.

Blank 1: fixed or fixed costs Blank 2: variable or variable costs

A firm that takes branded products and sells them through legal, but unauthorized, distribution channels is participating in the _ market.

Blank 1: gray or grey

Prestige pricing involves pricing a product _ than competitors.

Blank 1: higher, greater, or more

In order to encourage a greater volume of purchases, a volume maximization strategy sets prices _ to lower the level of involvement for the consumer.

Blank 1: low or lower

As an element of evaluating demand for a product, _ _ can be defined as the change in total cost that results from producing one additional unit of product.

Blank 1: marginal Blank 2: cost

The degree to which the price of a product affects consumers' purchasing behavior is referred to as _ _.

Blank 1: price Blank 2: sensitivity

While shopping for cable television services, Brett found that if he ordered the package that included basic cable, HBO, Showtime, Redzone, and the MLB Network he could get a better price than if he just ordered basic cable alone. This strategy of packaging products together and selling them at a single price is called _ _.

Blank 1: price or bundled Blank 2: bundling or pricing

Regardless of the type of product, the _ of a product typically factors into a consumer's decision on what to purchase and is part of almost every consumer decision a person makes.

Blank 1: price, cost, or pricing

As a pricing objective, _ _ assumes that customers value a product's differentiating attributes and are willing to pay a higher price to take advantage of those attributes.

Blank 1: profit or price Blank 2: maximization or skimming

According to traditional economic theory, setting price is as simple as finding the point at which marginal _ equals marginal

Blank 1: revenues or revenue Blank 2: costs or cost

Dynamic pricing helps marketers emphasize _ _, which is a strategy for maximizing revenue even when a firm has only a fixed amount of goods or services.

Blank 1: yield Blank 2: management

For marketers, which of the following are advantages of a price bundling strategy? (Check all that apply.)

Bundled packages can be sold for a higher price. Bundled packaging can lead to reduced advertising costs. Bundled packaging can lead to reduced selling costs.

_ pricing tactics can lead to price confusion, where customers have difficulty discerning what they are actually paying because they have been misled by price promotions.

Deceptive

In the second quarter of the year, the motorcycle dealer sold 50 bikes at $15,000 each. For the third quarter, the dealer reduced the price to $13,750 and sold 53 units. Which of the following statements is accurate regarding this situation?

Demand is inelastic and total revenue fell in the third quarter.

In which of the following strategies would companies most likely use data management systems to provide marketers with more data and enhanced ways of estimating price elasticity?

Dynamic pricing

Which pricing tactic has grown explosively due to improving and readily available technological tools that facilitate the ease with which prices can be updated to reflect changes in supply, demand, or market conditions?

Dynamic pricing

True or false: Survival pricing is applicable for use as a permanent pricing strategy.

False

According to your text, which of the following are considered variable costs for a firm? (Check all that apply.)

Insurance Salaries Rent // Sales commissions Delivery costs Raw material

What is the biggest disadvantage to using markup pricing?

It is not effective at maximizing profits.

According to your text, what has been the outcome for marketers pricing products now that consumers have access to mobile applications while shopping?

Marketers must aggressively review the prices of online stores when setting the initial price of an item.

When it comes to setting prices, which of the following stakeholders would be most interested in setting prices high across all product lines in order to increase profits for the firm?

Marketing executives

What pricing tactic involves adding a certain amount to the cost of a product to set the final selling price?

Markup pricing

_ pricing is a strategy in which a firm prices a product a few cents below the next dollar amount.

Odd

Which of the following factors affect price sensitivity? (Check all that apply.)

Perceived risk Price-quality perceptions Size of the expenditure

_ pricing is the practice of first setting prices low with the intention of pushing competitors out of the market or keeping new competitors from entering the market, and then raising prices to normal levels.

Predatory

Because it directly impacts the financial viability of both organizations and individuals, activities related to which marketing mix element are watched and regulated most closely?

Price

Which element of the marketing mix is directly related to the value a product delivers to consumers, as well as the value it captures for the firm in terms of revenue and profits?

Price

Which of the following are ethical issues marketers may face as they seek to set prices for their products? (Check all that apply.)

Price fixing Predatory pricing Price discrimination

How should pricing strategies be addressed during the product life cycle?

Pricing strategies evolve and should be reevaluated throughout the product life cycle.

_____ prices are the prices that consumers consider reasonable and fair for a product.

Reference

_______ are price reductions given to customers purchasing goods or services out of season.

Seasonal discounts

Your text cites that there are only two ways to increase revenue. Which of the following are those two ways? (Check all that apply.)

Sell products at a higher price Sell more products

What takes place in an unbundling strategy?

Separating out the individual goods that make up a product and pricing each one separately

_ are taxes on imports and exports between countries.

Tariffs

What factors have made global pricing more transparent and, in many cases, more competitive in recent times? (Check all that apply.)

Technological advancements Growing Internet access

Which of the following exemplifies the fact that technology has shifted the balance of power from companies to consumers?

The Internet has made it possible for customers to comparison shop for products from companies all over the world.

What considerations should marketers take into account when determining which pricing tactic to use? (Check all that apply.)

The customers' ability to pay How customers' intend to use the product The value customers perceive the product to have

In addition to technological and economic factors, which of the following are unique challenges related to global pricing for firms seeking to increase their revenue and profits? (Check all that apply.)

The gray market Dumping Tariffs

What is being measured by the price elasticity of demand?

The percentage change in quantity demanded in response to a percentage change in price

When identifying reference prices, which of the following would provide marketers with the best information regarding the price sensitivity of customers?

The sales staff

What is the goal for marketers in determining the cost of a product?

To make sure they will not lose money by pricing the product too low

A product used to refinish wood surfaces contains a stripping agent, a primer, the wood stain, and a sealer. These are normally sold as a complete set containing all four products. If the company decided to sell each item individually, it would be an example of which pricing strategy?

Unbundling

Which of the following factors influencing price are often overlooked? (Check all that apply.)

Underpricing Reference prices

_ costs are costs that can change depending on the number of units produced or sold.

Variable

The _______ point is the point at which the costs of producing a product equal the revenue made from selling the product.

break-even

When a firm is trying to determine what sales volume is needed to achieve a profit of zero, it is engaged in _______.

break-even analysis

price _ is a strategy in which two or more products are packaged together and sold at a single price.

bundling

price _ is only illegal if it injures the competition.

discrimination

The biggest advantage of markup pricing is that it is _____.

easy

In April, a company priced its product at $59.95 and sold 10,000 units. In May, it priced the same product at $52.95 and sold 15,000 units, indicating that demand for the product is _______.

elastic

As a landlord, Jason wants to protect himself in the event that taxes on his apartment complex increase. To do so, he most likely will add a(n) _ clause to his rental agreements.

escalator

What are the two most common and effective strategies for raising prices?

escalator clauses unbundling

Firms that want to promote an image of _______ to customers would most likely pursue a strategy of prestige pricing.

exclusivity

In a market structure in which there are a large number of buyers and sellers, the pricing impact of any single firm will be _____.

fairly small

Viktor is a shop owner. Regardless of how much merchandise he sells, he must pay the rent each month as well as his employees' salaries. Because these costs remain constant and are not dependent on the amount of merchandise Viktor sells, they are referred to as _______.

fixed costs

Every year Walter travels to China where he legally buys large quantities of baseball caps related to MLB sports teams. He imports the caps back into the United States where he sells them for less than the normal market price at his storefront in New York City. The baseball caps are considered to be _______.

gray market goods

A situation in which demand is _ occurs when a specific change in price causes only a small change in the amount purchased.

inelastic

Tony sells hot dogs from a cart for $2.50 each. In the summer months, he typically sells 200 hot dogs a day. Tony thinks if he reduces the price to $2 he will increase sales significantly. However, when he reduced the price, he only sold about 15 more hot dogs per day. This represents demand that is

inelastic

After determining the costs and analyzing the competitive price environment, the next step in the price-setting process is to choose a(n)

price

Because it reflects the value a product delivers to consumers, as well as the value it captures for the firm, decisions involving _______ are considered one of the most important strategic decisions a firm faces.

price

The money, time, or effort that a buyer exchanges with a seller to obtain a product is referred to as _.

price

The price elasticity of demand looks at how demand is affected by a percentage change in _.

price

_______ is common in B2B settings in which different customers might be charged different rates due to the quantities they buy or the differing terms of a negotiated contract.

price discrimination

Used as a measure of price sensitivity, _______ gives the percentage change in quantity demanded in response to a percentage change in price.

price elasticity of demand

If the major airline companies colluded to make consumers pay an additional $50 to be able to carry on luggage, this would be an example of _______.

price fixing

The two major electronic dealers in town conspired together to set the price of new high definition televisions. In doing so, they are engaging in _______.

price fixing

If you were willing to pay $10 for a product, but the firm only charges you $8, the firm will most likely see a reduction in _______.

profit

a firm's _ is calculated by taking its revenue minus its total costs.

profit

Drake's company has just come out with a new product. When the firm launches the product, it intends to set the price relatively high for a while and then decreases the price to a more sustainable level for the long term. This is an example of a _____ pricing objective.

profit maximization

For years Darius has always purchased the same brand of coffee for which he normally pays $10.99 a can. He wants to try a new type of coffee that he saw advertised, but this new brand sells for $16.99 a can. Darius doesn't want to try the new brand because he thinks that $10.99 is a more reasonable price for coffee. For Darius, $10.99 represents his _ price.

reference

Yield management is a strategy for maximizing a firm's _______.

revenue

A hotel resort in Florida prices its rooms differently for different times of the year. In particular, it promotes the months of August and September as its "value" months where the room prices are at their lowest rates. It does this, in part, because the weather in Florida is not as favorable as it is at other times of the year. The pricing tactic the hotel is using to promote hotel stays during the "value" months is most likely ______.

seasonal discounts

Sosoft Company has increased the price of its hand soap, but sells it in a smaller bottle. This is an example of _.

shrinkflation

The effect that technology has had on pricing could be called _______.

significant

there are _ steps in the price-setting process.

six

Similar to a firm's marketing objectives, its pricing objectives should be _______. (check all that apply.)

specific measurable

Fred's Fish House has been hit especially hard by the economic recession. Realizing that people are struggling to afford dining out, Fred has decided to implement a(n) _____ pricing strategy where he will lower the cost of the menu items to the point where his revenue will just cover his costs, allowing him to survive until the economy picks back up again.

survival

When determining a pricing strategy for a firm that sells its goods internationally, the firm must take into account the potential taxes on imports and exports that foreign countries will place on its goods. These potential taxes are known as _______.

tariffs

As it relates to evaluating demand, marginal revenue can be defined as _______.

the change in total revenue that results from selling one additional unit of product

for a _ maximization strategy to work over the long term, the firm must have a significant cost or resource advantage over competitors.

volume

Whereas odd pricing often ends in "9," even pricing often ends in _______.

zero