Marketing Chapter 9
Which of the following price increases is most likely to lead to a negative customer reaction?
A company sets high prices in order to take advantage of customer needs.
Which of the following pricing methods involves setting prices based on the cost of producing, distributing, and selling a product plus a fair rate of return for effort and risk?
Cost-based pricing - involves setting prices based on the costs for producing, distributing, and selling the product plus a fair rate of return for effort and risk.
Harold sells ice cream from an ice cream truck. It costs Harold $0.75 for each ice cream bar; Harold sells the ice cream bars for $1.50. Which of the following is Harold using to determine his prices for ice cream bars?
Cost-plus pricing - involves adding a standard markup to the cost of the product.
Which of the following is LEAST likely to be a consideration when setting the price for a product?
Frequency of Advertising
Which of the following is LEAST likely to be used to increase product sales in a particular market?
Introducing a fighter brand - usually used to increase market share in a different market
Doors Inc. is a technology company that focuses on creating operating systems, which are the software packages that run everything on a computer. The company is releasing the newest version of its operating system and is deciding on the appropriate pricing strategy. The CEO favors an aggressive market-penetration pricing strategy in order to gain market share, even if it means pricing the operating system at a level at which the company would lose money on every sale. The CFO favors market-skimming pricing. Which of the following, if true, would strengthen the CFO's argument for adopting a price skimming strategy?
Large organizations are eager to adopt the new version because of improved enterprise functions.
Video Game Palace has developed a brand new video game system that is the latest thing in video games. As no one else has this type of technology, the company has decided to set the prices for the new system significantly higher than its competitors, gradually lowering the price as the system's novelty wears off. Which of the following is Video Game Palace using to determine its prices?
Market-skimming pricing
Market-skimming pricing and market-penetration pricing are strategies used with which type of products?
New Products
On a Budget Stores realizes that it holds a special place in the market. Consumers rely on their low prices and react extremely negatively at any changes in price—if prices fall too low, the customers do not purchase items because they feel that the items are of low quality; if prices are raised too high, customers do not purchase items because they feel the price is not worth the value they are getting for the product. Consequently, On a Budget Stores keeps its prices in a small range: usually between $1 and $5. Which of the following does On a Budget Stores use to determine its prices?
Price Elasticity - measure of sensitivity of demand to changes in price
Product mix strategies differ from other product pricing strategies in which of the following ways?
Prices in the product mix are set to maximize profit on several products, not one.
Tooth Brite Tooth Care, Inc. sells several products related to dental care: toothbrushes, toothpaste, dental floss, tooth whitener, and mouthwash. Which of the following product mix pricing strategies would be the most helpful to Tooth Brite Tooth Care?
Product bundle pricing
Which of the following involves temporarily lowering pricing to fuel sales on a short term basis?
Promotional pricing - companies use this to create buying excitement and urgency
Legal Eagle Law Firm knows that people are not likely to trust a lawyer who works for low fees—the customer will trust the lawyer's ability to win cases. Consequently, the firm charges very high prices in the hopes that customers will choose the firm for their legal needs. Which of the following pricing strategies is being used by Legal Eagle Law Firm?
Psychological Pricing - sellers consider the psychology of prices, not simply the economies; the price says something about the product.
Doors Inc. is a technology company that focuses on creating operating systems, which are the software packages that run everything on a computer. The company is releasing the newest version of its operating system and is deciding on the appropriate pricing strategy. The CEO favors an aggressive market-penetration pricing strategy in order to gain market share, even if it means pricing the operating system at a level at which the company would lose money on every sale. The CFO favors market-skimming pricing. Which of the following, if true, would strengthen the CFO's argument for adopting a Market-penetration pricing?
There are significant Economies of Scale in production
