Marketing Ch 15
For a price skimming strategy to be successful,
E. it must be difficult for competitors to enter the market.
Dan is especially price sensitive. He has been known to line up on "Black Friday" (the day after Thanksgiving) at 4 a.m. in order to be among the first to buy sale items. Dan would likely respond to a __________ pricing strategy.
A. high/low
What type of pricing tactic is being used when several airlines agree to charge the same fare for a single route?
A. Horizontal price fixing
A pricing strategy is
A. a long-term approach to setting prices in a companywide integrated effort.
Chris works for a hardware store. His boss directs him to make a list of manufacturers whose brand names were included in the store's recent newspaper ads and to put copies of the ads with the invoices from each manufacturer. Chris's boss is documenting a(n)
A. advertising allowance.
Many stores now e-mail codes to their customers that can be used on their websites or printed and brought into the store to receive discounts. The customer is using a __________ to receive the discount.
A. coupon
In a __________ pricing strategy, marketers rely on the promotion of sales, during which prices are temporarily reduced to encourage purchases.
A. high/low
In determining the price for his company's new small business accounting software, Raymond is assessing how much better the software is as compared to alternative products available in the market. Raymond is using __________ pricing.
A. improvement value
Price skimming focuses on selling products to __________ and __________ in the consumer adoption process model.
A. innovators and early adopters
Supermarkets often offer great deals on milk, beef, or eggs to get customers into their stores, knowing that many customers will also purchase items that have higher markups for the store. These supermarkets are using a __________ pricing tactic.
A. leader
The primary reasons manufacturers offer seasonal discounts to retailers are to more easily plan production schedules and to
A. lessen inventories of finished goods.
Odd prices often suggest __________ to consumers.
A. low quality
When a new product is not being sold at the rate originally forecasted, the retailer may reduce the price in order to reduce the inventory of the product. This reduction is known as a
A. markdown.
Retailers use ____________ to get rid of slow moving or obsolete merchandise.
A. markdowns
Mario is the first retailer in town to sell games for Sony's new PlayStation 3 machine. Mario wants to quickly capture as much of the market for the new games as possible. Mario will likely use a __________ pricing strategy.
A. market penetration
When HP first introduced their inkjet printers, consumers could only buy refill cartridges from HP. HP made significant profits from the sale of replacement cartridges. In this situation, HP logically used a __________ pricing strategy for their printers.
A. market penetration
With a __________ pricing strategy, marketers set a low initial price for the introduction of a new product or service.
A. market penetration
A major airline sells an aggressively low priced ticket compared to a new low-fare airline, which is trying to enter the market. The airline may be accused of engaging in the unethical practice of
A. predatory pricing.
The Clayton Act and the Robinson-Patman Act forbid certain types of
A. price discrimination.
Mary decided to purchase an electronic toothbrush priced at $100 because of a special offer from the manufacturer. By sending proof of purchase and the receipt to the manufacturer, she could receive a $40 check in return, making the final price $60. This pricing tactic is known as a
A. rebate.
The local furniture store will only purchase outdoor furniture during winter months because the manufacturer offers a better price to the furniture store. This type of pricing tactic is known as a
A. seasonal discount.
When Burroughs-Wellcome introduced the first anti-AIDS drugs, they initially set the price at $10,000 for a year's supply. Burroughs-Wellcome was probably pursuing a __________ pricing strategy.
A. skimming
Retailers often require manufacturers to pay _________ in order to obtain shelf space for new products.
A. slotting allowances
B2B quantity discounts are legal if
A. the discounts are available to all customers.
The difference between a coupon and a rebate is that
A. the retailer handles coupons while manufacturers handle most rebates.
One of the difficulties associated with value-based pricing is that ***
A. the way consumers perceive value constantly changes.
When Sony introduced its new PlayStation 3 game system, buyers who could not get them the first day bid up the price of the systems on eBay and other auction sites. As Sony provided more PlayStation 3 units to the market and early demand was satisfied, prices dropped because ***
A. the way consumers perceived their value changed.
Betty's Bird Seed Company charges $50 for 10 pounds of bird feed, including shipping. Betty is using __________ to determine shipping costs.
A. uniform delivered pricing
Rebates provide manufacturers with greater control than coupons and provide the firm with
A. valuable customer information.
Despite the economic downturn, Alban-Turner Advertising Agency has a reputation for developing campaigns that increase sales at least 10 percent. In sales presentations, Alban-Turner emphasizes its track record in order to demonstrate that its services are worth the cost. This is an example of which pricing strategy?
A. value-based pricing
Christina owns and operates a shop that sells home furnishings. One of her vendors has just offered her a greatly reduced price for some traditional Christmas decorations, even though it is really too early to be thinking about holiday merchandise. One of the main pricing issues Christina will have to address as she considers the offer is
A. whether the cost reduction will be low enough to cover the additional inventory costs she will have to incur.
When Sheila decided to sell her shoe racks on eBay, she stated the price and a shipping rate according to delivery area. Which method of pricing was Sheila using?
A. zone pricing
Because market and operating conditions are different in each target market
B. the choice of a pricing strategy is specific to the target market.
Supermarket A always waits until Thursday to price their canned beans in an effort to match Supermarket B's prices, which are advertised on Wednesday. This demonstrates what type of pricing strategy?
B. Competitor-based pricing
__________ lowers the price below the store's cost.
B. Loss leader pricing
3/10, n/30 means
B. a 3 percent discount if paid in full within 10 days, or the net amount is due in 30 days.
A noncumulative B2B quantity discount is
B. based only on the amount purchased in a single order.
Price advertisements should never
B. deceive customers to the point of doing harm.
The major objectives associated with a market penetration pricing strategy are to
B. quickly build sales and market share.
Marketers advertising an artificially high "regular price" are unethically attempting to influence consumers'__________ perceptions.
B. reference price
Marlie designs and manufactures specialty furniture. She has a number of unique products but can only produce in limited quantities. Marlie will probably NOT use a market penetration strategy because
B. she could not meet a rapid rise in demand.
One of the problems associated with an everyday low pricing (EDLP) strategy is that
B. some consumers may associate EDLP with lower quality goods.
A reference price is
B. the price against which buyers compare the actual selling price.
A reference price might be considered deceptive if
B. the reference point has been inflated or is fictitious.
One important reason manufacturers like rebates is that
B. their redemption rates are low.
Clark Manufactured Housing Company charges $500 for deliveries within 50 miles and $800 for deliveries 51 to 100 miles away from their factory. The company is using a ____________ pricing tactic.
B. zone
Yurgen is opening a financial consulting service for high-income retirees in his area. This target market is used to paying for quality and associates high quality with high prices. Yurgen should probably NOT use a market penetration pricing strategy because
C. a low price might signal low quality.
Value-based pricing methods include approaches to setting prices that focus on the overall value of the product offering
C. as perceived by the consumer.
Bill desperately needed tires for his car, and he found an ad with an incredibly low price. When he got there, he found out that those had been sold out, and he was pressured into buying tires that were more expensive than he wanted. Bill found out later that Marcelo had had the same experience at the store a few weeks earlier. It's quite possible that both Bill and Marcelo had become the victim of a deceptive pricing tactic known as
C. bait and switch.
Firms using a(n) ____________ pricing method set their prices relative to what other firms are charging.
C. competitor-based
A weakness associated with cost-based pricing methods is that they
C. do not recognize the role that consumers or competitors' prices play in the marketplace.
If the Amador County Pest Control Association got together and all members agreed to charge 3 percent of the value of a home for a termite inspection letter, the association members would be engaging in
C. horizontal price fixing.
Each generation of cell phones has provided greater clarity, range, and multi-functionality. Marketers of cell phones can use these upgrades in __________ pricing.
C. improvement value
When the first hybrid automobiles became available on the market, manufacturers had only minimal production capacity. They used a price skimming strategy primarily to
C. limit demand.
Developing pricing strategies for __________ is one of the most challenging tasks a manager can undertake.
C. new products
A video gaming system is being sold. The package includes one game console, two gaming accessories, and one video game for $200, which is $60 less than what it would cost to purchase the items separately. This type of pricing is known as
C. price bundling.
When Toyota introduced its Scion line of cars, the lowest priced model was listed for $15,000 while the highest priced model was listed for $21,000, with two or three other list prices in between. Toyota used a __________ pricing approach.
C. price lining
When a marketer establishes a price floor and a price ceiling for an entire line of similar products and then sets price points in between for differences in quality among the products, he or she is using a __________ pricing approach.
C. price lining
The advantage of zone pricing to the seller is the shipping charges typically
C. reflect more closely the cost of delivery.
For marketers to advertise a price as their __________, the Better Business Bureau recommends that at least 50 percent of the sales of a product occur at that price.
C. regular price
The most common form of a quantity discount for consumers is a
C. size discount.
The manufacturers of the early electric cars are charging relatively high prices to consumers who are willing to pay the price. They need to use a price skimming strategy because of
C. the high costs associated with producing a small volume of cars.
It is legitimate for a manufacturer to charge a retailer a lower price than its usual price if
C. the seller is trying to match a competitor's price.
If a market penetration pricing strategy results in lower per-unit cost, competitors will be discouraged from entering the market because
C. they would likely need to quickly produce a large volume in order to compete.
Cost-based pricing assumes costs
C. will not vary much for different levels of production.
__________ pricing tactics lower the price of a product below cost.
D. Loss leader
__________ is the practice of colluding with other firms to control prices.
D. Price fixing
__________ occurs when members of the marketing channel collude to control the prices passed on to consumers.
D. Vertical price fixing
A pricing tactic is
D. a short-term approach that often is a response to a competitive threat.
An everyday low pricing strategy stresses the continuity of retail prices
D. at a level somewhere between the regular price and the deep-discount sale prices competitors may offer.
In a __________ pricing tactic, sellers advertise low prices and then aggressively pressure customers to purchase higher-priced versions of the product advertised with the low price.
D. bait and switch
With a price skimming strategy, a marketer will NOT benefit from
D. economies of scale associated with a larger volume of production.
Production of the DeLorean car, made famous in the film Back to the Future, never got above 25,000 units during its lifetime. Automobile industry analysts estimate that production of this car needed to reach around 300,000 units to achieve the __________, a decrease in unit cost as product volume increases.
D. experience curve effect
The __________ occurs when unit cost drops as the quantity sold increases.
D. experience curve effect
The saying "leaving money on the table" is associated with
D. using a market penetration strategy when there is an opportunity for price skimming.
One reason marketers of new, innovative products often start out with a price skimming strategy rather than a market penetration strategy is that
D. it is easier to lower prices than to raise them.
Which of the following is NOT a common business-to-business pricing tactic?
D. loss leader pricing
For marketers using a price skimming strategy, once the initial demand is met for new and innovative products, they will likely
D. lower the price to capture the next most price sensitive market segment.
It is the responsibility of __________ to determine the ethical approach to setting prices so consumers find value and the firm can make a profit.
D. marketers themselves
Pricing __________ products is especially challenging because little or nothing is known about consumers' perceptions of value.
D. new-to-the-world
Everyday low pricing (EDLP) provides value to consumers by
D. reducing their search costs.
In determining the price for his company's new pocket digital camera, Matt determines what consumers consider the regular or original price for similar cameras available in the market. Matt is assessing the influence of __________ on pricing strategy.
D. reference prices
Manufacturers use cash discounts primarily because they benefit from
D. the time value of money.
Marketers use a price skimming strategy for any or all of the following reasons EXCEPT
D. to gain market share quickly.
One of the benefits of offering a size discount to consumers is they will purchase more of a marketer's product and
D. will be less likely to switch brands.
__________ price fixing occurs when competitors collude to control prices, and __________ price fixing occurs within a marketing channel to control prices passed on to consumers.
E. Horizontal; vertical
When Greenbelt Construction Company began building houses in a large subdivision with many other builders, they priced their homes slightly higher than their competitors and promoted the added quality features in their homes. Greenbelt was using a(n) __________ pricing strategy.
E. competitor-based
Ben owns a lawn care business. From experience, Ben has found that John Deere equipment lasts almost twice as long as competitors' machines. For John Deere, Ben's perception about its products makes __________ pricing possible.
E. cost of ownership
In determining the price for his company's new personal computer photography printer, Raymond is assessing the total cost of owning his printer as compared to alternative products available in the market. Raymond is using __________ pricing.
E. cost of ownership
Compared to other pricing methods, __________ pricing is relatively simple.
E. cost-based
Yvonne estimates the average cost of her floral arrangements is $14 regardless of whether she is doing 5 or 20 arrangements that day. She adds a standard markup to the $14 estimate to determine her price. Yvonne is using a(n) __________ pricing method.
E. cost-based
Retailers use __________ because they believe the use will induce customers to try new products, convert first-time users to regular users, increase purchases, and protect market share.
E. coupons
It is important to Joanne to get value for her money, but she does not want to spend time comparison shopping. Joanne will likely respond to __________ pricing but not __________ pricing.
E. everyday low; high/low
One of the difficulties associated with value-based pricing is that ***
E. it necessitates a great deal of consumer research to be implemented successfully.
Jill knows her wholesaler will give an additional 20 percent off if she orders more than 100 new swimsuits at a time for her store. The wholesaler is using a __________ pricing tactic.
E. noncumulative quantity discount
For a price skimming strategy to work, the product or service must
E. offer consumers some new benefit currently unavailable.
If a telecommunications company drastically cuts the price for cellular phone service in order to eliminate local competitors, the company could be charged with
E. predatory pricing.
Some consumers make it a point to go shopping the day after Christmas in order to
E. take advantage of seasonal discounts.
Cosmetic retailers often have one price for each item but another price for three or four similar items with the same brand, all attractively packaged together. These retailers are using
E. price bundling.
Mona is selling her artwork at a local festival. Her art is selling well, but t-shirts she had made up with her artwork are not selling. She decides to offer a package price for her art with a t-shirt included. Mona is using
E. price bundling.
A mobile carrier decides to introduce a new cellular phone at a high price. This is known as
E. price skimming.
Generally, a __________ represents either a short-term response to a competitive threat or a broadly accepted method of calculating a final price for the customer that is short-term in nature.
E. pricing tactic
When Apple Computer Company introduced the iPhone—a combination phone, MP3 player, and Internet access device—in 2007, it was priced at $499, considerably higher than either the iPod or competing cell phones. Apple was probably pursuing a __________ pricing strategy.
E. skimming
Charging a relatively high price for new and innovative products to those consumers most willing and able to pay the high price is called price
E. skimming.
Because market and operating conditions are all very similar, marketers' pricing strategies should be uniform
FALSE
Competitor-based pricing is when a company determines the final price of a good based on the cost.
FALSE
Manufacturers like rebates because it provides them with information they can use in developing new products.
FALSE
Proving that a company has engaged in the deceptive bait and switch practice is easy.
FALSE
Slotting allowances are used to get retailers to feature a manufacturer's product in their advertising and promotional efforts.
FALSE
When Sony released its PlayStation 3 game machines, it charged a high price, attracting the most avid game players. This was a market penetration pricing strategy.
FALSE
Cheryl wants to quickly establish a dominant market share for her new line of ergonomic pens. To do this, she will likely use a market penetration pricing strategy.
TRUE
Cost-based pricing assumes costs will not vary much for different levels of production.
TRUE
Coupons may confuse customers and therefore do little to increase store loyalty.
TRUE
3/10, n/30 means a 3 percent discount if paid in full within 10 days, or the net amount is due in 30 days.
TRUE
Kristina sells sports equipment and wants to get customers into her store. She knows from past experience that sales generate customer traffic, particularly when she puts children's baseball equipment on sale. She may consider a leader pricing strategy.
TRUE
Odd prices suggest low quality.
TRUE
One of the reasons a manufacturer may decide to sell its products in a bundle is to encourage trial of a new product.
TRUE
Price lining is setting a price floor and a price ceiling for a line of products and then setting price points in between to represent differences in quality.
TRUE
The Robinson-Patman Act does NOT apply to end consumers, at which point many forms of price discrimination occur.
TRUE
The methods used to develop pricing strategies are cost-based pricing, competitor-based pricing, and value-based pricing.
TRUE
Value-based pricing necessitates a great deal of consumer research to be implemented successfully.
TRUE
When a retail store rarely sells deeply discounted or sale products, it is known as "everyday low pricing."
TRUE