Chapter 10 Pricing: Understanding and Capturing Customer Value

4) Consumer perceptions of the product's value set the ________ for prices. A) demand curve B) floor C) ceiling D) variable cost E) image

C) ceiling

9) Value-based pricing is the reverse process of ________. A) variable cost pricing B) cost-plus pricing C) cost-based pricing D) good-value pricing E) value-added pricing

C) cost-based pricing

Internal and External Consideration Affecting Price Decisions

Pure competition Monopolistic competition Oligopolistic competition Pure monopoly

Competition-Based Pricing

Setting prices based on competitors' strategies, costs, prices, and market offerings. •Consumers will base their judgments of a product's value on the prices that competitors charge for similar products.

7) ________ uses buyers' perceptions of what a product is worth, not the seller's cost, as the key to pricing. A) Customer value-based pricing B) Cost-based pricing C) Variable cost D) Price elasticity E) Product image

A) Customer value-based pricing

6) Which of the following is a customer-oriented approach to pricing? A) customer value-based pricing B) sealed-bid pricing C) break-even pricing D) target profit pricing E) C and D

A) customer value-based pricing

12) Underpriced products sell very well, but they produce less revenue than they would have if price were raised to the ________ level. A) perceived B) elastic C) variable D) demand curve E) price-floor

A) perceived

2) Price is the only element in the marketing mix that produces ________. A) revenue B) variable costs C) expenses D) outfixed costs E) stability

A) revenue

8) In ________, price is considered along with the other marketing mix variables before the marketing program isset. A) value-based pricing B) cost-based pricing C) variable costs D) price elasticity E) markup pricing

A) value-based pricing

16) Walmart is famous for using what important type of value pricing? A) competition-based pricing B) everyday low pricing C) cost-plus pricing D) break-even pricing E) penetration pricing

B) everyday low pricing

5) Product costs set a(n) ________ to a product's price. A) demand curve B) floor C) ceiling D) break-even cost E) experience curve

B) floor

14) Some companies have adopted a(n) ________ strategy, offering just the right combination of quality and good service at a fair price. A) value-based pricing B) good-value pricing C) cost-plus pricing D) low-price image E) elastic-pricing

B) good-value pricing

20) Ryanair offers free flights to a quarter of its customers and rock-bottom prices to many of its other customers. Ryanair then charges for all extra services, such as baggage handling and in-flight refreshments. Which of the following best describes Ryanair's pricing method? A) value-added pricing B) good-value pricing C) cost-plus pricing D) high-low pricing E) image pricing

B) good-value pricing

19) When there is price competition, many companies adopt ________ rather than cutting prices to match competitors. A) pricing power B) value-added strategies C) fixed costs D) price elasticity E) image pricing

B) value-added strategies

Cost- Plus Pricing

Benefits: Sellers are certain about costs -Prices are similar in industry and price competition is minimized -Buyers feel it is fair Disadvantages: -Ignores demand and competitor prices

1) ________ is the amount of money charged for a product or service. A) Value B) A demand C) Price D) A wage E) Salary

C) Price

3) ________ is an important element in the marketing mix. It is the only element that does not represent costs. A) Profit maximization B) Market share leadership C) Price D) Product quality leadership E) The target market

C) Price

18) ________ involves attaching features and services to differentiate a company's offers and to support charging higher prices. A) Break-even pricing B) Target pricing C) Value-added pricing D) Cost-plus pricing E) Pricing-down

C) Value-added pricing

15) When McDonald's and other fast food restaurants offer "value menu" items at surprisingly low prices, they are using ________. A) break-even pricing B) target profit pricing C) good-value pricing D) cost-plus pricing E) bundling

C) good-value pricing

11) Measuring ________ can be difficult. A company might conduct surveys or experiments to test this in the different products it offers. A) price elasticity B) the demand curve C) perceived value D) break-even pricing E) quantity supplied

C) perceived value

13) If a seller charges ________ than the buyer's perceived value, the company's sales will ________. A) more; benefit B) more; suffer C) less; increase D) less; suffer E) none of the above

D) less; suffer

10) With ________, price is set to match consumers' perceptions of product value. A) variable cost pricing B) cost-plus pricing C) cost-based pricing D) value-based pricing E) everyday low pricing

D) value-based pricing

17) ________ involves charging a constant, everyday low price with few or no temporary price discounts. A) High-low pricing B) Target pricing C) Cost-plus pricing D) EDLP E) Penetration pricing

E) Penetration pricing

Other Internal and External Consideration Affecting Price Decisions

Economic conditions Reseller's response to price Government Social concerns

(EDLP)

Everyday low pricing charging a constant everyday low price with few or no temporary price discounts

Customer Value-Based Pricing

Value-based pricing uses the buyers' perceptions of value, not the sellers cost, as the key to pricing. Price is considered before the marketing program is set. •Value-based pricing is customer driven •Cost-based pricing is product driven

Value-added pricing

attaches value-adding features and services to differentiate offers, support higher prices, and build pricing power

High-low pricing

charging higher prices on an everyday basis but running frequent promotions to lower prices temporarily on selected items

Price elasticity of demand

illustrates the response of demand to a change in price

Elastic Demand

occurs when demand changes greatly for a small change in price

Inelastic Demand

occurs when demand hardly changes when there is a small change in price

Good-value pricing

offers the right combination of quality and good service at a fair price

Price

only element in the marketing mix that produces revenue; all other elements represent costs

Cost-based pricing

setting prices based on the costs for producing, distributing, and selling the product plus a fair rate of return for effort and risk adds a standard markup to the cost of the product

The demand curve

shows the number of units the market will buy in a given period at different prices •Normally, demand and price are inversely related •Higher price = lower demand •For prestige (luxury) goods, higher price can equal higher demand when consumers perceive higher prices as higher quality

Target costing

starts with an ideal selling price based on consumer value considerations and then targets costs that will ensure that the price is met