Marketing - Chapter 14 notes
What type of orientation has a firm adopted when it measures itself primarily against firms that challenge it for customers?
competitor
The five Cs of pricing are: company objectives, customers, channel partners, competition, and ______.
costs
The percentage change in the quantity of one product demanded compared with the percentage change in price in another product is called ______-price elasticity.
cross
Some specialty retailers attempt to compete not by setting low prices but by justifying higher prices through high levels of personalized service. This is an example of a ______ orientation to pricing.
customer
Which of the following is one of the Cs of the five Cs of pricing?
customers
The graph that shows how many units of a product or service consumers will want during a specific period at different prices is known as the ______ curve.
demand
Profit alone ______ how many units should be sold before a firm breaks even.
does not indicate
For most products, demand increases as the price decreases. Because of this general trend, demand curves usually have a(n) ______ slope.
downward
Which of the following types of theories is the maximizing profits strategy based on?
economic
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
If a restaurant reduces the price of a hamburger by 25% and sales increase by more than 50%, which of the following describe the demand for the hamburger? (Choose every correct answer.)
elastic price sensitive
Which strategy is used by firms that believe increasing volume of sales will help the firm more than increasing profits?
Sales-oriented strategy
How do managers use break-even analysis?
To find a production quantity where, for a given price, costs are equal to revenues
A ______ ______ occurs when oligopolistic companies compete with each other by repeatedly lowering their prices. (Enter one word in each blank.)
price war
Competition, channel members, costs, customers, and company objectives are the five critical components of _____.
pricing
By focusing on target profit pricing, maximizing profits, or target return pricing, a firm is implementing a ______ orientation.
profit
What type of orientation is exemplified by target return pricing?
profit
Firms usually implement target ______ ______ to stimulate a certain level of sales at a certain profit per unit. (Enter one word in each blank.)
profit pricing
Sometimes firms selling a pioneering product will set a very low price in order to attract many customers before competitors enter the market. Which type of orientation does this demonstrate?
sales
Compared to other company objectives, a sales-oriented firm ______.
sets prices very low to generate new sales, even if profits suffer
With ______ quo pricing, companies change their prices only to meet those of their competitors.
status
A percentage increase in the quantity demanded for Product A results in a percentage decrease in quantity demanded for Product B. What term describes products for which demand is negatively related in this way?
substitute
When the change in demand for one product negatively affects the demand for another product, the items are known as ___ products.
substitute
When a firm is aiming for a particular amount of profit as its overriding concern, it usually implements ______.
target profit pricing
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
Antitrust laws are designed to protect consumers from:
the high prices charged by monopolies for their products.
As people make more money, their spending behavior changes. This is known as ______.
the income effect
Price is best defined as __.
the overall sacrifice a consumer is willing to make to acquire a specific product or service
Pricing is difficult to manage because it is the least ______ of the four Ps.
understood
Primary labor and materials are also known as ______ because they change with production volume.
variable costs
Even if other elements in the marketing mix may be perfect, if the price is wrong, revenue ______.
will not accrue
At the break-even point, profits on the sale of a product are ______.
zero
Assuming the economy and other factors stay the same, a downward-sloping demand curve for a product shows which of the following?
As price decreases, demand increases. As price increases, demand decreases.
Which of the following is one of the five Cs of pricing?
Competition
Which of the following are considered part of the five Cs of pricing? (Choose every correct answer.)
Competition Customers Channel members Company objectives
What kind of pricing is being used when a firm sets prices similar to major rivals' prices?
Competitive parity
Firms engaged in competitor orientation might use which of the following strategies? (Choose every correct answer.)
Competitive parity Status quo pricing
What term describes products whose demands are positively related to one another?
Complementary
______ products are items whose demands are positively related, such that they rise and fall together.
Complementary
Which of the following is included in the five Cs of pricing?
Cost considerations
A firm with a primary objective of very high sales growth will have the same pricing strategy as a firm with a primary objective of being a quality leader.
False
Which of the following is a firm implementing when it uses a mathematical model to identify the price at which the firm will make the most money possible?
Maximizing profits strategy
What type of competition occurs when consumers perceive that different companies sell products that are substitutable?
Pure competition
A firm may set low prices to do which of the following? (Choose every correct answer.)
Discourage new firms from entering the market Encourage current firms to leave the market Take market share away from competitors
Which of the following is an example of pure competition?
Essentially identical agricultural products like corn and soybeans provided by many sellers
A break-even analysis graph shows curves for which of the following? (Choose every correct answer.)
Revenue Total Costs Fixed Costs
Which of the following do you need to know to calculate target return price?
Expected unit sales Fixed costs Variable costs
Drag each of the following examples to the type of price elasticity it represents. A. Price insensitive B. Price sensitive 1. Apple increases the price of the new iPhone by 25% and sales decrease less than 1%. 2. Pepsi drops the price of a six-pack by 50% and sales increase 78%.
A1 B2
Which of the following best describes how managers have historically treated pricing?
As an afterthought
A demand curve shows that a company will sell 10,000 units if it prices its new product at $200 per unit, but it will sell 20,000 units if it reduces the price to $75. Where should the company set the price of the new product in order to maximize profits?
$200
What is a useful technique that enables managers to examine the relationships among cost, price, revenue, and profit over different levels of production and sales?
Break-even analysis
What is the name for the point at which the lines on a break-even analysis graph intersect?
Break-even point
What term describes the point at which the number of units sold generates enough revenue to equal total costs?
Break-even point
Which of the following is one of the five Cs of pricing?
Channel members
What should channel members do when developing a pricing strategy?
Clearly communicate their pricing goals to one another
Which is one of the five Cs of pricing?
Company objectives
The customer orientation strategy increases value by doing which of the following? (Choose every correct answer.)
Focusing on customer satisfaction Setting prices to match consumer expectations
When incomes drop, what happens to the demand for an elastic product?
It tends to decrease.
Channel members include which of the following? (Choose every correct answer.)
Manufacturers Wholesalers Retailers
Which of the following are types of strategies that could be implemented in a profit orientation strategy? (Choose every correct answer.) (Choose every correct answer.)
Maximizing profits strategy Target return pricing
What type of competition occurs when many firms with differentiated products compete for customers in a given market?
Monopolistic competition
What type of competition occurs when only a few firms dominate a market?
Oligopolistic
Of the following, which best describes a monopoly?
One firms controls the market.
Break-even analysis examines the relationships between which of the following? (Choose every correct answer.)
Price Cost
What term describes the ratio of change in a price and its effect on the quantity of the product demanded?
Price elasticity of demand
Which of the following is an example of a monetary sacrifice included in the overall price of a product or service?
Shipping
On which of the following does brand loyalty have the most significant impact?
Substitution effect
What term describes consumers' ability to replace the focal brand with other products?
Substitution effect
Which of the following is an example of monopolistic competition? (Note that monopolistic competition is NOT a monopoly.)
The apparel industry, with many providers that seek ways to differentiate themselves and claim market share
What is the premise behind the pricing of prestige products or services?
The higher the price, the greater the status
Which of the following is an example of an oligopoly?
The oil industry, with a limited number of providers
Which of the following accurately characterize demand curves? (Choose every correct answer.)
They show how much consumers will demand during a specific period at different prices. They relate demand to prices while assuming everything else remains unchanged.
What information is gained by adding variable and fixed costs together?
Total cost
Customers are one of the five Cs of pricing.
True
In general, customers are more sensitive to price increases than to price decreases.
True
How is total cost calculated?
Variable costs plus fixed costs
When firms compete by lowering prices, they are engaged in ______.
a price war
When there are many substitute products available, the price elasticity of demand for a given product will likely be ______.
higher
Variable costs ______ production volume.
change with
Status quo pricing ______.
changes prices only to meet those of competition
The five Cs of pricing are company objectives, customers, cost, channel members, and ______.
competition
Price is the one element in the marketing mix that ___.
generates revenues
A demand curve enables a firm to examine prices ______.
in terms of demand and the firm's objectives
According to the cross-price elasticity of demand, when the price of DVD players drops, the demand for DVDs is likely to ______.
increase
If a company needs to raise the prices of some its products, it should choose to raise the prices of ______ products because relatively fewer customers will stop buying the product as a result.
inelastic
When a 10% decrease in price results in a less than 10% increase in quantity sold, the demand for the product or service is described as ______.
inelastic
Which of the following is another term for target return pricing?
markup
Under competitive ______ , companies set their prices close to those of their major competitors.
parity
A firm that opens new stores in a community and sets artificially low prices with the sole purpose of driving competing stores in the area out of business is said to engage in a type of behavior called ______ pricing.
predatory
______ ______ occurs when a company has a very low price for its product(s) in order to drive its competition out of business.
predatory pricing
Products that cost a lot of money but that people buy anyway because of the status and exclusivity that they project are called ______ products.
prestige
The contribution per unit is the ______ minus the variable cost per unit.
price
The equation for price elasticity of demand is the percentage change in quantity demanded divided by percentage change in ______.
price
The overall sacrifice a consumer makes to acquire a product or service is known as
price
Loyalty toward a particular brand makes other brands seem less substitutable, which decreases ______.
the price elasticity of demand
What is an example of a nonmonetary sacrifice made in acquiring a product or service?
time
Price times quantity equals ______.
total revenue
Variable cost per unit times quantity equals ______.
total variable cost
Channel members can have different perspectives when it comes to strategies.
true
