Ch. 11: Pricing Strategies: Additional Considerations

reference prices

prices that buyers carry in their minds and refer to when they look at a given product

FOB-origin pricing

pricing in which goods are placed free on board a carrier; the customer pats the freight from the factory to the destination

uniform-delivered pricing

pricing in which the company chargers the same price plus freight to all customers, regardless of their location

zone pricing

pricing in which the company sets up two or more zones. all customers within a zone pay the same total price; the more distant the zone, the higher the price

product bundle pricing

combining several products and offering the bundle at a reduced price

discount

a straight reduction in price on purchases during a stated period of time or of larger quantities

dynamic pricing

adjusting prices continually to meet the characteristics and needs of individual customers and situations

Market-skimming pricing (price skimming)

setting a high price for a new product to skim maximum revenues layer by layer from the segments willing to pay the high price; the company makes fewer but more profitable sales

by-product pricing

setting a price for by-products to help offset the costs of disposing of them and help make the main products price more competitive

captive-product pricing

setting a price for products that must be used along with a main product, such as blades for a razor and games for an xbox

geographical pricing

setting prices for customers located in different parts of the country or world

product line pricing

setting the price steps between various products in a product line based on cost differences between the products, customer evaluation of different features and competitors prices

promotional pricing

temporarily pricing products below the list price, and sometimes even below cost, to increase short-run sales

Techniques that can be used by sellers for avoiding​ customers' perception of price gouging includes all of the following except​ __________. A. maintaining a sense of fairness surrounding any price increase B. price increases should be supported by company communications telling customers why prices C. the company can shrink the product or substitute​ less-expensive ingredients instead of raising the price D. the company should consider ways to meet higher costs or demand without raising prices E. rationing products to customers

E. rationing products to customers

What is the purpose of the​ Robinson-Putnam Act? A. To prevent deceptive pricing B. To prevent​ price-fixing C. To prevent predatory pricing D. To prevent scanner fraud E. To prevent unfair price discrimination

E. to prevent unfair price discrimination

freight-absorbing pricing

pricing in which the seller absorbs all part of the freight chargers in order to get the desired business

__________ is selling a product or service at two or more prices, where the difference in prices is not based on differences in costs. A. Product bundle pricing B. Captive-product pricing C. By-product pricing D. Segmented pricing

D. segmented pricing

base-point pricing

pricing in which the seller designates some city as a basing point and chargers all customers the freight cost from that city to the customer

segmented pricing

selling a product or service at two or more prices, where the difference in prices is not based on differences in costs

market penetration pricing

setting a low price for a new product in order to attract a large number of buyers and a large market share

optional-product pricing

the pricing of optional or accessory products along with a main product

________ is setting a low price for a new product in order to attract a large number of buyers and large market share. A. Market-penetration pricing B. Optional-product pricing C. Market-skimming pricing D. Product line pricing

A. Market-penetration pricing

Which of the following describe product line pricing? A. Setting the price steps between various products in a product line based on cost differences between the products, customer evaluations of different features, and competitors' prices B. Setting a low price for a new product in order to attract a large number of buyers and large market share C. The pricing of optional or accessory products along with a main product D. Setting a high price for a new product to skim maximum revenues layer by layer from the segments willing to pay the high price; the company makes fewer but more profitable sales

A. Setting the price steps between various products in a product line based on cost differences between the products, customer evaluations of different features, and competitors' prices

Which of the following statements is true regarding initiating price​ increases? A. Wherever​ possible, the company should consider ways to meet higher costs or demand without raising prices. B. Price increases do not impact profits. C. Cost inflation is not a factor in price increases. D. Prices should be increased when there is a lack of demand. E. Companies do not need to communicate to customers reasons for price increases.

A. Wherever​ possible, the company should consider ways to meet higher costs or demand without raising prices.

Market skimming prices are preferred in all of the following conditions except​ __________. A. an initial low price is set by the companies B. the​ product's quality and image must support its higher price C. enough buyers must want the product at that price D. the costs of producing a smaller volume cannot be so high that they cancel the advantage of charging more E. competitors should not be able to enter the market easily and undercut the high price

A. an initial low price is set by the companies

________ occurs when retailers set an artificially high​ "regular price" and then advertise a​ "sale price," which is actually close to their everyday price. A. Deceptive pricing B. Predatory pricing C. ​Price-fixing D. Retail price maintenance E. Price discrimination

A. deceptive pricing

__________ occurs when a seller states prices or price savings that mislead consumers or are not actually available to consumers. A. Deceptive pricing B. Uniform-delivered pricing C. Zone pricing D. Dynamic pricing

A. deceptive pricing

Market penetration prices are preferred in all of the following conditions except​ __________. A. enough buyers must want the product at a higher price B. the production and distribution costs must decrease as sales volume increases C. the market must be highly price sensitive so that a low price produces more market growth D. the penetration price must maintain its​ low-price position E. the low price must help keep out the competition

A. enough buyers must want the product at a higher price

What is predatory​ pricing? A. Selling below cost with the intention of punishing a competitor B. Selling below cost to unload excess inventory C. Setting prices without talking to competitors D. A manufacturer requiring dealers to charge a specified retail price for its product E. Sellers offering the same price terms to customers at a given level of trade

A. selling below cost with the intention of punishing a competitor

One major objective associated with a​ market-penetration pricing strategy is to​ ________. A. win a large market share B. skim off​ small, but​ profitable, market segments C. prevent customer dissatisfaction D. attract buyers willing to pay a higher price E. avoid everyday low pricing

A. win a large market share

Which of the following statements is true concerning new product pricing​ strategies? A. For a​ market-skimming strategy to be​ successful, the costs of producing a smaller volume cannot be so high that they cancel the advantage of charging more. B. When using a​ market-skimming strategy, marketers do not need to focus on the​ product's quality and image. C. A​ market-penetration strategy should be used if the market is not highly price sensitive. D. For a market penetration strategy to​ work, production and distribution costs must increase as sales volume increases. E. If competitors can easily enter the​ market, a​ market-skimming strategy should be used.

A.For a​ market-skimming strategy to be​ successful, the costs of producing a smaller volume cannot be so high that they cancel the advantage of charging more.

__________ is pricing that considers the psychology of prices and not simply the economics; the price is used to say something about the product. A. FOB-origin pricing B. Psychological pricing C. Geographical pricing D. Promotional pricing

B. Psychological

A discount is best defined as __________. A. a high price for a new product intended to skim maximum revenues from the specific segments willing to pay B. a straight reduction in price on purchases during a stated period of time or in larger quantities C. promotional money paid by manufacturers to retailers in return for an agreement to feature the manufacturer's products in some way D. a price that buyers carry in their minds and refer to when they look at a given product

B. a straight reduction in price on purchases during a stated period of time or in larger quantities

__________ is a geographical pricing strategy in which the seller designates some city as a basing point and charges all customers the freight cost from that city to the customer. A. Dynamic pricing B. Basing-point pricing C. Uniform-delivered pricing D. Zone pricing

B. basing-point pricing

Which of the following statements is true regarding initiating price​ cuts? A. Cutting price has no effect on costs. B. Cutting prices in an industry loaded with excess capacity might lead to price wars. C. Firms never cut​ prices; they only raise them. D. When faced with falling​ demand, firms should not cut prices. E. If faced with excess​ capacity, a firm should not cut its price

B. cutting prices in an industry loaded with excess capacity might lead to price wars

A company has set a low price on a new product it introduced. It wants to maximize its market share and attract a large number of buyers quickly. Which new product pricing strategy should the company​ use? A. Product bundle pricing B. ​Market-penetration pricing C. Psychological pricing D. ​Captive-product pricing E. ​Market-skimming pricing

B. market-penetration pricing

​________ is the practice of pricing products below cost to harm competitors. A. Deceptive pricing B. Predatory pricing C. Price discrimination D. ​Price-fixing E. Retail price maintenance

B. predatory pricing

Bath​ & Body Works offers​ "three-fer" deals on its soaps and lotions​ (such as three antibacterial soaps for​ $10). This is an example of​ _______ pricing. A. ​two-part B. product bundle C. product line D. ​by-product E. ​captive-product

B. product bundle

The pricing method in which sellers combine several products and offer a reduced price is known as​ __________. A. ​optional-product pricing B. product bundle pricing C. ​captive-product pricing D. ​by-product pricing E. product line pricing

B. product bundle pricing (most fast food chains bundle a burger, fries, and a drink for a combo price)

Temporarily pricing products below the list price, and sometimes even below cost, to increase short-run sales is __________ pricing. A. geographical B. promotional C. FOB-origin D. psychological

B. promotional

Which of the following is a potentially effective action a company could take in response to a​ competitor's price​ cut? A. Decrease the perceived value. B. Reduce the price. C. Raise the price. D. Reduce both the price and quality. E. Launch a​ high-price "fighter​ brand."

B. reduce the price

Assume a competitor has cut prices and a company determines it should respond. Potential actions that the company could initiate include​ ________. A. raising​ price, raising perceived​ value, improving quality and increasing​ price, and launching a​ low-price "fighter​ brand" B. reducing​ price, raising perceived​ value, improving quality and increasing​ price, and launching a​ low-price "fighter​ brand" C. reducing​ price, raising perceived​ value, improving quality and decreasing​ price, and launching a​ low-price "fighter​ brand" D. reducing​ price, raising perceived​ value, decreasing quality and increasing​ price, and launching a​ low-price "fighter​ brand" E. reducing​ price, reducing perceived​ value, improving quality and increasing​ price, and launching a​ low-price "fighter​ brand"

B. reducing​ price, raising perceived​ value, improving quality and increasing​ price, and launching a​ low-price "fighter​ brand"

Optional-product pricing is ________. A. setting a high price for a new product to skim maximum revenues layer by layer from the segments willing to pay the high price; the company makes fewer but more profitable sales B. the pricing of optional or accessory products along with a main product C. setting the price steps between various products in a product line based on cost differences between the products, customer evaluations of different features, and competitors' prices D. setting a low price for a new product in order to attract a large number of buyers and large market share

B. the pricing of optional or accessory products along with a main product

UPS charges different prices for shipping depending on which region of the United States the item is being shipped to. The more distant the city the package is being shipped​ to, the higher the price UPS charges. Which geographic pricing method is UPS​ using? A. ​Base-point pricing B. Zone pricing C. FOB origin D. ​Uniform-delivered pricing E. ​Freight-absorption pricing

B. zone pricing

Which of the following describes dynamic pricing? A. A geographical pricing strategy in which the company charges the same price plus freight to all customers, regardless of their location B. A geographical pricing strategy in which the seller designates some city as a basing point and charges all customers the freight cost from that city to the customer C. Adjusting prices continually to meet the characteristics and needs of individual customers and situations D. A geographical pricing strategy in which the company sets up two or more zones

C. Adjusting prices continually to meet the characteristics and needs of individual customers and situations

What is an allowance? A. Prices that buyers carry in their minds and refer to when they look at a given product B. A straight reduction in price on purchases during a stated period of time or in larger quantities C. Promotional money paid by manufacturers to retailers in return for an agreement to feature the manufacturer's products in some way D. Setting a high price for a new product to skim maximum revenues layer by layer from the segments willing to pay the high price; the company makes fewer but more profitable sales

C. Promotional money paid by manufacturers to retailers in return for an agreement to feature the manufacturer's products in some way

What is captive-product pricing? A. Selling a product or service at two or more prices, where the difference in prices is not based on differences in costs B. Combining several products and offering the bundle at a reduced price C. Setting a price for products that must be used along with a main product, such as blades for a razor and games for a video-game console D. Setting a price for by-products in order to make the main product's price more competitive

C. Setting a price for products that must be used along with a main product, such as blades for a razor and games for a video-game console

What does geographical pricing entail? A. Pricing that considers the psychology of prices and not simply the economics; the price is used to say something about the product B. Temporarily pricing products below the list price, and sometimes even below cost, to increase short-run sales C. Setting prices for customers located in different parts of the country or world D. Placing goods free on board a carrier; the customer pays the freight from the factory to the destination

C. Setting prices for customers located in different parts of the country or world

__________ is setting a price for by-products in order to make the main product's price more competitive. A. Segmented pricing B. Product bundle pricing C. By-product pricing D. Captive-product pricing

C. by-product pricing

Companies that use​ ________ continually adjust prices to meet the characteristics and needs of individual customers and situations. A. cash rebates B. promotional pricing C. dynamic pricing D. segmented pricing E. psychological pricing

C. dynamic pricing

Many state colleges and universities charge one price for​ in-state students and a higher price for​ out-of-state students. Which form of segmented pricing are these schools​ using? A. ​Customer-segment pricing B. ​Product-form pricing C. ​Location-based pricing D. Promotional pricing E. ​Time-based pricing

C. location-based pricing

When Apple introduced its​ iPhone, it priced the new product at​ $599, considerably higher than either its iPod or competing cellular phones. Apple Computer was pursuing​ a(n) ________ new product pricing strategy. A. ​market-penetration B. ​by-product C. ​market-skimming D. ​optional-product E. ​captive-product

C. market-skimming

The Ford Mustang is offered in several different models. Ford will use​ ________ pricing to determine the price steps between the different models. A. ​captive-product B. ​optional-product C. product line D. ​two-part E. product bundle

C. product line

Some sellers use​ 00-cent endings on regularly priced items and​ 99-cent endings on discount merchandise. This is an example of pricing referred to as​ __________. A. segmented pricing B. promotional pricing C. psychological pricing D. geographical pricing E. dynamic pricing

C. psychological

Market-skimming pricing is best defined as________. A. setting a low price for a new product in order to attract a large number of buyers and large market share B. setting the price steps between various products in a product line based on cost differences between the products, customer evaluations of different features, and competitors' prices C. setting a high price for a new product to skim maximum revenues layer by layer from the segments willing to pay the high price; the company makes fewer but more profitable sales D. pricing optional or accessory products along with a main product

C. setting a high price for a new product to skim maximum revenues layer by layer from the segments willing to pay the high price; the company makes fewer but more profitable sales

Gillette charges a fairly low price for its razors​ (relative to​ costs) and a high price for razor blades. It is using a strategy of​ ________ pricing. A. ​by-product B. product line C. product bundle D. ​two-part E. ​captive-product

E. captive-product

__________ is a pricing strategy in which goods are placed free on board a carrier; the customer pays the freight from the factory to the destination. A.Promotional pricing B. Geographical pricing C. Psychological pricing D. FOB-origin pricing

D. FOB-origin pricing

Uniform-delivered pricing is __________. A. a geographical pricing strategy in which the seller designates some city as a basing point and charges all customers the freight cost from that city to the customer B. a geographical pricing strategy in which the company sets up two or more zones C. a pricing strategy that involves adjusting prices continually to meet the characteristics and needs of individual customers and situations D. a geographical pricing strategy in which the company charges the same price plus freight to all customers, regardless of their location

D. a geographical pricing strategy in which the company charges the same price plus freight to all customers, regardless of their location

Companies that make products that must be used along with a main product are using​ __________. A. ​optional-product pricing B. product bundle pricing C. product line pricing D. ​captive-product pricing E. ​by-product pricing

D. captive-product pricing (razors blades cartridges and razors, video games and consoles, coffee pods and single cup brewing systems)

Which of the following describes product bundle pricing? A. Setting a price for products that must be used along with a main product, such as blades for a razor and games for a video-game console B. Setting a price for by-products in order to make the main product's price more competitive C. Selling a product or service at two or more prices, where the difference in prices is not based on differences in costs D. Combining several products and offering the bundle at a reduced price

D. combining several products and offering the bundle at a reduced e

A major factor in price increases is __________. A. strong price competition B. excess capacity C. a weakened economy D. cost inflation

D. cost inflation

Techniques that can be used by sellers for avoiding​ customers' perception of price gouging includes all of the following except​ __________. A. increase prices B. improve perceived value C. reduce prices D. ​low-price fighter items E. adjust quality

D. low-price fighter items

A car buyer can choose a base model at one​ price, or one with a premium sound and navigation system at a higher price. This is an example of​ _______ pricing. A. ​captive-product B. product bundle C. product line D. ​optional-product E. ​by-product

D. optional-product

Archer Daniels Midland Co is the​ world's largest processor of​ soybeans, corn, and wheat. In the​ 1990s, the Justice Department found it guilty of regularly meeting with competitors when setting prices. ADM was guilty of​ ________. A. retail price maintenance B. deceptive pricing C. predatory pricing D. ​price-fixing E. price discrimination

D. price-fixing

In​ __________pricing, the company sells a product or service at two or more​ prices, even though the difference in prices is not based on differences in costs. A. discount and allowance B. promotional C. psychological D. segmented E. dynamic

D. segmented (movie stores charging lower prices for students and senior citizens)

__________ is a geographical pricing strategy in which the company sets up two or more designated areas. A. Uniform-delivered pricing B. Dynamic pricing C. Basing-point pricing D. Zone pricing

D. zone pricing

Margaret has been invited to a fancy dinner party and wants to bring a good bottle of wine as a gift for the host. Because she does not know much about​ wine, she will likely use the price of the wines as​ ________. A. an indicator of the cost of production B. a limited time offer C. an indicator of geographic pricing D. a type of segmented pricing E. an indicator of quality

E. indicator of quality

Federal legislation on​ __________ states that sellers must set prices without talking to competitors. A. deceptive pricing B. interstate commerce C. discriminatory pricing D. ​trade-restrain E. ​price-fixing

E. price fixing

psychological pricing

pricing that considers the psychology of prices and not simply the economics; the price is used to say something about the product

allowance

promotional money paid by manufactures to retailers in return for an agreement to feature the manufacturers products in some way