BA 370: Marketing - Chapter 14
If firms strategize according to the premise that they should measure themselves primarily against firms challenging them directly for customers, they have adopted a ______ orientation.
competitor
The five Cs of pricing are: company objectives, customers, channel partners, competition, and ______.
cost
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
Profit alone ______ how many units should be sold before a firm breaks even.
does not indicate
Prestige products or services do not follow the ______ curve.
downward-sloping demand
Select all that apply The customer orientation strategy increases value by doing which of the following? (Choose every correct answer.)
Setting prices to match consumer expectations Focusing on customer satisfaction
How do managers use break-even analysis?
To find a production quantity where, for a given price, costs are equal to revenues
Which of the following types of theories is the maximizing profits strategy based on?
Economic
Which strategy is used by firms that believe increasing volume of sales will help the firm more than increasing profits?
Sales-oriented strategy
Products whose demands are positively related to one another are known as ______ products.
complementary
The five Cs of pricing include ______.
cost considerations
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
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
Select all that apply If McDonald's reduces the price of a Big Mac by 25% and sales increase by more than 50%, the firm could describe demand as which of the following? (Choose every correct answer.)
elastic price sensitive
Match each axis of the demand curve with what it measures.
horizontal axis ---> quantity demanded vertical axis ---> price
The ratio of change in a price and its effect on the quantity of the product demanded is known as ______.
price elasticity of demand
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
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
The situation in which consumers perceive that different companies sell products that are substitutable 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
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. Products for which demand is negatively related are known as ______ products.
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
When incomes drop, the demand for an elastic product ______.
tends to decrease
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
Prestige products or services follow the premise that ______ associated with the product.
the higher the price, the greater the status
As people make more money, their spending behavior changes. This is known as ______.
the income effect
When a firm uses a mathematical model to identify the price at which the firm will make the most money possible, it is implementing ______.
the maximizing profits strategy
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
Total cost equals ______.
variable costs plus fixed costs
Other elements in the marketing mix may or may not be perfect, but if the price is wrong, revenue ______.
will not accrue
At the break-even point, profits on the sale of a product are ______.
zero
______ products are items whose demands are positively related, so that they rise and fall together. An example would be Blu-ray players and Blu-ray discs.
Complementary
Select all that apply Break-even analysis examines the relationships between which of the following? (Choose every correct answer.)
Cost Price
Select all that apply Which of the following are considered part of the five Cs of pricing? (Check all that apply.)
Customers Company objectives Competition Channel members
True or false: 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
Target return pricing is an example of what type of orientation?
Pricing
Which of the following is an example of pure competition?
Essentially identical agricultural products like corn and soybeans provided by many sellers
Select all that apply Which of the following do you need to know to calculate target return price? (Check all that apply.)
Expected unit sales Variable costs Fixed costs
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. If the company wants to maximize profits, it should price the new product at ______.
$200
Select all that apply Assuming the economy and other factors stay the same, a downward-sloping demand curve for a product shows which of the following? (Check all that apply.)
As price increases, demand decreases. As price decreases, demand increases.
Which is one of the five Cs of pricing?
Company objectives
Select all that apply A break-even analysis graph shows curves for which of the following? (Select all that apply.)
Fixed Costs Total Costs Revenue
Which of the following is another term for target return percentage?
Markup
Select all that apply The types of strategies that could be implemented in a profit orientation strategy include which of the following? (Choose every correct answer.)
Maximizing profits strategy Target return pricing
Of the following, which best describes a monopoly?
One firm controls the market.
______ ______ occurs when a company has a very low price for its product(s) in order to drive its competition out of business.
Predatory pricing
Match each of the following items with the type of price elasticity.
Price insensitive ---> Apple increases the price of the new iPhone by 25% and sales decrease less than 1%. Price sensitive ---> Pepsi drops the price of a six-pack by 50% and sales increase 78%.
Which of the following is an example of a monetary sacrifice included in the overall price of a product or service?
Shipping
Select all that apply Firms engaged in competitor orientation might use which of the following strategies? (Choose every correct answer.)
Status quo pricing Competitive parity
On which of the following does brand loyalty have the most significant effect?
Substitution effect
Select all that apply A firm may set low prices to do which of the following? (Choose every correct answer.)
Take market share away from competitors Encourage current firms to leave the market Discourage new firms from entering the market
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
______ makes up one of the Cs of the five Cs of pricing.
The customer
Which of the following is an example of an oligopoly?
The oil industry, with a limited number of providers
Select all that apply Which of the following accurately characterize demand curves? (Choose every correct answer.)
They relate demand to prices while assuming everything else remains unchanged. They show how much consumers will demand during a specific period at different prices.
True or false: Channel members can have different perspectives when it comes to strategies.
True
True or false: Customers are one of the five Cs of pricing.
True
True or false: In general, customers are more sensitive to price increases than to price decreases
True
Select all that apply Channel members include which of the following? (Choose every correct answer.)
Wholesalers Manufacturers Retailers
When firms compete by lowering prices, they are engaged in ______.
a price war
A useful technique that enables managers to examine the relationships among cost, price, revenue, and profit over different levels of production and sales is called ______.
break-even analysis
The point at which the number of units sold generates enough revenue to equal total costs is known as the ______.
break-even point
What is the name for the point at which the lines on a break-even analysis graph intersect?
break-even point
Variable costs _____ production volume.
change with
Status quo pricing ______.
changes prices only to meet those of competition
The five Cs of pricing include ______.
channel members
When developing a pricing strategy, channel members should ______.
clearly communicate their pricing goals to one another
One of the five Cs of pricing is ______.
competition
The five Cs of pricing are company objectives, customers, cost, channel members, and ______.
competition
If a firm sets prices similar to major competitors' prices, this is an example of ______ pricing.
competitive parity
Price is the one element in the marketing mix that ______.
generates revenues
When there are many substitute products available, the price elasticity of demand for a given product will likely be ______.
higher
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 less than a 10% increase in quantity sold, demand for the product or service is described as ______.
inelastic
The situation in which many firms compete for customers in a given market and the products are differentiated is known as ______.
monopolistic competition
When only a few firms dominate a market, it is known as ______ competition.
oligopolistic
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
Products that cost a lot of money but that people buy anyway because of the status and exclusivity that they project to others 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
Consumers' ability to replace other products with the focal brand is known as ______.
the substitution effect
An example of a nonmonetary sacrifice made in acquiring a product or service is ______.
time
The _____ is fixed costs plus the sum of the variable costs.
total cost
Price times quantity equals ______.
total revenue
Variable cost per unit times quantity equals ______.
total variable cost
