Marketing Final ch. 20
A retailer of Real Dry deodorant prices it at $2.00; it costs the retailer $1.40. What is the approximate markup as a percentage of selling price?
30%
Kohl's pays $16.50 for a six-ounce bottle of cologne and sells it for $25.95. Its markup as a percentage of cost is approximately ____% for this product.
57
Which of the following pricing objectives sets prices to recover cash as quickly as possible?
Cash flow
Brian is shopping for a new coat at Stein Mart and finds a North Face down jacket that he really likes. He knows that the North Face brand is considered to be high quality and that it's usually very expensive. He's pleasantly surprised to see the price—the "suggested retail price" is $199 and Stein Mart's price is $99. Brian decides to purchase the coat even though it's a little more expensive than he originally thought he'd spend on the jacket. What type of pricing strategy is Stein Mart using to price the North Face jacket and other merchandise?
Comparison discounting
The manager at Target puts a sign up next to a Samsung audio system that reads, "Only $299.99! $60 less than at Best Buy." This is an example of what type of pricing strategy?
Comparison discounting
If PepsiCo sets its twelve-pack price to match the price charged by Coca-Cola, Pepsi is using which of the following pricing methods?
Competition-based
For custom-made equipment or commercial construction projects, which pricing method is most likely used?
Cost-plus
All for Fun is a retail store that offers a variety of board games, magic cards, and other collectible items and caters to teens and adults who enjoy strategy-based games. The store has over 20,000 magic cards and utilizes a sophisticated computer system to identify the value of each card. All for Fun determines the rarity of a given card and adjusts prices according to how much money customers are likely to pay for a particular card. Cards that are in limited production or considered "rare" are more expensive than cards that are widely available. Thus, the price for a single magic card might vary between $25 and $50 or more per card depending on the market. What type of pricing is All for Fun utilizing?
Demand-based pricing
After selecting a pricing strategy, what is the next step in the establishment of prices?
Determining a specific price
Department stores such as Kohl's and Macy's are interested in learning how much their competitors are charging for similar merchandise. Which of the following practices might these retailers utilize to identify competitors' prices?
Employing comparative shoppers who systematically collect data on prices at competing stores
Janet works at ITZ, a new makeup brand. Her company has decided that they want to lead the makeup industry in product quality. They have assessed the market and determined that women will associate higher-priced makeup with being higher in quality. What is the next step that Janet's company must do?
Evaluate competitors' prices
Which of the following characteristics is unique to pricing more so than other variables of the marketing mix?
Flexibility
Pfizer wants to price its newest medication product so that it earns a 35% return on investment. It chose this pricing objective because of the significant amount of resources it spent on research and development. What is one challenge of using return on investment as a pricing strategy?
It typically involves trial and error.
Aldi and Dollar General stores have been expanding their footprint across the United States, opening new locations and competing against traditional discount and grocery store chains, such as Walmart, Target, Kmart, Kroger, Jewel Osco, and Schnucks. Both Aldi and Dollar General hope to capture a large proportion of the dollars consumers spend on grocery and general merchandise items and have responded to consumer desires for value and convenience of a smaller store. What type of pricing objective are these stores utilizing?
Market share
Which of the following bases for pricing is most commonly used by retailers?
Markup pricing
In 2003 Frito-Lay introduced its Stax brand of potato chips. These chips were meant to compete directly against Pringles. The intent was to gain market share quickly. During the first few months they were on the market, Stax retailed for 69 cents. What type of pricing strategy is Frito-Lay likely using?
Penetration pricing
Which of the following would be used in setting the price of a new product if considerable competition is expected?
Penetration pricing
____________ is setting the price lower than competing brands in order to enter a market and quickly gain a significant share of the market.
Penetration pricing
Mindy is selling soda and lemonade at the local university's baseball game. She prices the soda at $4 a bottle and lemonade at $7 each. These are generally much higher prices than people would normally pay. What is likely to happen to demand?
People will be willing to pay to enhance their baseball game experience.
A product that has more features than those of its competition, or that is perceived to be of higher quality, warrants using which type of pricing strategy?
Premium pricing
Which of the following pricing strategies often results in a retailer losing money on the product?
Price leader
What type of pricing strategy is used in a situation where the seller has an ethical responsibility not to overcharge the client and the fees do not relate directly to the time and/or effort spent in specific cases?
Professional pricing
Target released a promotional campaign with the tagline, "Expect more. Pay less." Which of the following pricing strategies is Target most likely using?
Psychological pricing
A manager at Kohl's discovers that Macy's has reduced the price of its children's Levi's from $31.99 to $24.99, according to an advertisement in the Sunday newspaper. She immediately phones her store and instructs the salesperson on duty to put a sign up next to their children's Levi's that reads, "SALE: $24.99." This is an example of what pricing strategy?
Random discounting
_____________ is pricing a product at a moderate level and positioning it next to a more expensive model or brand.
Reference pricing
A Macy's manager designs the casual clothing department such that one of Macy's private label pairs of jeans, priced at $24.99, is positioned next to a national brand of jeans, such as Levis, priced at $39.99. What is the manager attempting to accomplish?
Reference pricing strategy
What type of pricing objective would an organization use if it were in a favorable position and desired nothing more?
Status quo
Which pricing objective de-emphasizes price and can lead to a climate of nonprice competition in an industry?
Status quo
Which type of pricing objective can reduce a firm's risk by helping to stabilize demand for its products?
Status quo
Gavin is trying to come up with a pricing strategy for his store. He greatly admires Walmart and is considering adopting an everyday low price strategy. However, he is concerned because he believes that consumers might then view his products as being of low quality. At what stage of the process is Gavin currently at as he is trying to establish prices?
Step 2: Assessment of the target market's evaluation of price
You are head of sales and marketing for your firm, and you are meeting with the CEO to establish pricing objectives for the upcoming product year. Which of the following factors are you going to consider as you establish your firm's pricing objectives?
The firm's survival
Which of the following is true about the target market's evaluation of price?
The importance of price depends on the type of product.
Which of the following is a requirement for setting pricing objectives?
The objectives should be explicitly stated.
Which of the following statements about markup pricing is correct?
The use of similar markups reduces price competition.
Which of the following is true about the evaluation of competitors' prices?
This is done in stage three of the price-setting process.
Which of the following statements is true about the determination of a specific price for a product?
When no government controls exist, pricing is a flexible way to adjust the marketing mix.
If Kroger food stores advertise 2-liter bottles of Pepsi for 89 cents to generate store traffic so that shoppers will purchase other items at regular prices, the grocer is using
a price leader.
Odd-even pricing is
a psychological pricing strategy.
When Gabriella logs on to Dell's website, she sees a notebook model priced well below $1,000. As she continues through the site to view the other options, she realizes the first one she saw was the cheapest model available, but she of course wants more features. Dell is utilizing
bait pricing.
Tiffany and John recently purchased a 25-year-old home and are currently immersed in a kitchen remodel, which includes replacing countertops, cabinets, and kitchen appliances. They are shopping for appliances and visited several retailers to compare prices and determine which brands best met their requirements. One retailer is offering the GE brand refrigerator, cook top, built-in oven, dishwasher, and warming drawer for $3,999, while another retailer has a set of LG appliances that includes a larger refrigerator, range/oven combination, dishwasher, and wine cooler for $3,450. Tiffany and John are meeting with their kitchen designer to finalize their plans for the kitchen and think that either one of these packages will fit their requirements. The appliance retailers are utilizing a ______ pricing strategy.
bundle
When Mia and Shane are planning their honeymoon, their travel agent tells them that if they buy a special package, their trip to Paris will include meals, tickets to the theater, and a rental car in addition to airfare and a hotel. This is an example of the use of
bundle pricing.
Some grocery stores collect data on competitive prices
by using full-time comparison shoppers.
Maintaining or increasing market share
can be achieved even if industry sales are flat or decreasing.
A market share objective
can be used effectively whether total industry sales are rising or falling.
Lexmark sells some of its color printers for about $100, but the refill cartridges cost over $30 each. Lexmark's pricing strategy would be best labeled as
captive pricing.
Pricing the basic product in a product line low while pricing related items at a higher level is called
captive pricing.
Gambrell Designs thinks its new product, the Automatic Dog Walker, will have a short product life cycle; therefore, its marketing department sets its primary pricing objective as
cash flow.
Showing a product's price along with its previous price, the price of a competing brand, or the price at another retail outlet is called
comparison discounting.
Theatergoers in the Midwest were pleasantly surprised when they arrived at the cinema to see the latest release and learned that a price reduction had just gone into effect. The Wehrenberg Theater chain, which is the oldest theater company and operates in 15 Midwest locations, decided to drop matinee prices from $7.75 to $4.50 per person and reduce evening prices from $9.75 to $7.50 per person. The price decrease is a result of decreased traffic at the theater and a trend for consumers to use Netflix or Hulu to watch movies. The Starplex Cinemas operating in the same communities as Wehrenberg followed suit and reduced their prices to attract consumers as well. The two movie theater chains are utilizing the ______ pricing basis.
competition-based
When products in an industry are relatively homogeneous and price is a key purchase consideration,
competition-based pricing becomes more important.
If local Shell gasoline stations look at BP stations' prices as the primary method of determining its own prices, Shell is using
competition-based pricing, which considers costs to be less important than competitor's prices.
When determining markup as a percentage of cost, divide the markup amount by
cost
The federal government often uses ____ pricing when it grants defense contracts.
cost-plus
When a seller's costs are usually determined during or after a product is made and then a specified percentage or dollar amount is added to the cost to establish a price, an organization is using ____ pricing.
cost-plus
The three primary bases for developing prices are
demand, competition, and cost
If General Motors determines that it wants to sell 200,000 Chevrolet Acadias and sets the price at $29,500 because it knows that at that price it will reach that goal, the firm would be using a ____ pricing method.
demand-based
If a product is priced based on how many or how few people want it at a particular time and place, ____ pricing is being used.
demand-based
During July and August, Lakewood Links Golf Course, located in South Carolina, offers weekday rates of $13 for a round of golf with a cart. During the rest of the year, the weekday rates are between $25 and $35. This is an example of the use of
demand-based pricing.
Amtrak is considering two pricing strategies for its service. One is to price its train tickets so that it is less expensive to travel on weekends than during the week when there is heavy business travel, which illustrates _____ pricing. The second is to price its train tickets so that the further away the travel date, the greater the discount, which is best described as _____.
demand-based; differential pricing
When establishing prices, a marketer's first step is to
develop pricing objectives.
The fact that senior citizens are charged a lower price at movie theaters than younger adults is an example of ____ pricing.
differential
Sony management decided to use skimming as a pricing strategy for its newest line of high-definition television (HDTV) sets. It should be aware that this strategy does not
discourage competitors from entering the market.
George is excited because he has obtained the price list of his company's major competitor. His supervisor, Homer, is also optimistic. However, he has much more experience in the industry than George and cautions him that just because they have access to their competitor's price list
doesn't mean they reflect the actual prices at which competitive products are sold.
Uber uses a pricing strategy based on real-time market conditions. It charges less in periods of low demand and more during periods of high demand. Sometimes these prices double or triple during periods of high demand. Uber argues that these higher prices motivate more drivers to pick up passengers, thus increasing the supply of drivers needed to handle the additional demand. This demand-based pricing strategy is an example of
dynamic pricing.
Pricing strategies and methods
help direct and structure the selection of a final price.
Competitors' prices, along with the marketing variables they emphasize, are determining factors in
how important price will be to customers.
Information about competitors' prices
is often a closely guarded secret.
A product is a price leader when
it is sold at less than cost in the hope that sales of other products will increase.
Under Armour is establishing a ______ pricing objective to maintain or increase its product's sales in relation to total industry sales.
market share
Wet Seal, a retailer of swimwear, employs a commonly used cost-based pricing method called
markup pricing.
Products such as light bulbs, canned soft drinks, and ice cream sandwiches are usually priced using ______, which usually results in a ______.
multiple-unit pricing; lower per unit price
Marketers at organizations engaged in nonprice competition
need competitive price information to make sure that their products are priced at approximately the same level as the prices of competing brands.
Maria recently put her house on the market at an asking price of $260,000. She realizes, however, that in order to sell the house, she may have to use
negotiated pricing.
The decision of Macy's to use even prices such as $60 for a Ralph Lauren Polo is an application of ____, where ____ prices are often used to _____.
odd-even pricing; even; give a product an upscale or exclusive image
Marketers must take steps to make sure that the pricing objectives they set are consistent with the organization's ____ objectives and ____ objectives.
overall; marketing
All of the following are pricing strategies used by companies establishing prices of multiple products within a product line except
penetration pricing.
If Nabisco wants to quickly gain a large market share with its new line of reduced-fat snack crackers, it should use
penetration pricing.
If Samsung uses _____ pricing for its newest version of laptops, it is probably most interested in obtaining market share; and it is assuming
penetration pricing; that other competitors could enter the market easily.
A problem associated with ____ is that consumers can predict when prices will be lowered and delay purchases until that time
periodic discounting
The "White Sale" that many department stores have every year a few weeks after Christmas is an example of
periodic discounting.
Breyer's produces a variety of ice cream flavors and lines of varying qualities. The higher quality ice cream varieties are priced higher than the basic ones. Breyer's is using ____ to price its ice cream.
premium pricing
Max and Tiffany are celebrating their 10th wedding anniversary and are dining at an exclusive French restaurant in a major city a few hours away from their home. They're reviewing the wine list and want to celebrate their anniversary with a bottle of champagne. Max and Tiffany are not very knowledgeable about the different brands of champagne but know that in order to be classified as champagne, the grapes must be grown in a particular region of France known as the champagne viticulture region. Other producers might have similar products, but they must use the phrase "sparkling wine" as they are prohibited from using the champagne name. As Max and Tiffany are reviewing the wine list, they see that a bottle of Cristal, which is a famous label, sells for $250 per bottle but a sparkling wine from the Anjou region of France is $50 per bottle. Since Max and Tiffany are not that knowledgeable about wine, they decide to order the $50 bottle of sparkling wine. What type of pricing strategy does Cristal most likely utilize?
prestige
To attract customers into a store, Safeway advertises its milk at less than cost, hoping that customers will purchase other groceries as well. This pricing strategy is called
price leader pricing.
The pricing strategy that assumes that demand is relatively inelastic over certain price ranges is called
price lining.
When an organization sets a number of prices for selected groups of merchandise, this is commonly referred to as
price lining.
All of the following are psychological techniques except
price skimming.
If Norelco introduced a new electric razor that sonically removes hair and priced it first at $175 and then at $150 before reducing the price to $100, the firm's initial pricing strategy is known as
price skimming.
When Sharp first introduced its line of graphing calculators, it set the price quite high; it has lowered the price as competitors have entered the market. The pricing strategy initially used by Sharp is called
price skimming.
The newest version of a product like Bose headphones is likely to use _____, while the new version of Red Bull is likely to use _____ .
price skimming; penetration pricing
Reference pricing is
pricing a product at a moderate level and positioning it next to a more expensive model or brand.
If an organization sets prices to recover research and development expenses and establish a premium quality image for its product, it would be using a ____ pricing objective.
product quality
The pricing of Clinique makeup, which is considerably higher than brands such as Cover Girl, Revlon, and Maybelline, is used to communicate ____, which is the company's primary pricing objective.
product quality
Services that are performed by lawyers, dentists, or doctors are typically priced using ____; sometimes these prices are not based on the amount of time that is spent in each situation, but are based on a flat fee regardless of the difficulty involved.
professional pricing
Westin Hotels, Inc. has an objective of achieving a 25% return from its overall sales. This is an example of a ____ pricing objective.
profit
Price leaders, comparison discounting, and special-event pricing are applications of
promotional pricing.
When a satellite dish company uses bundling to combine phone, dish, and broadband Internet access prices, it is attempting to influence a consumer's perception of price to make a product's price more attractive and reduce "sticker shock." This is an example of using a ____ pricing strategy.
psychological
If REVO sets the price for its sunglasses at $240, it is most likely using _____pricing to convey ______.
psychological; prestige
Kendra has been doing research for a smartphone manufacturing company. She has just been reviewing the results of several focus groups and has found that for customers, value is a function of the product's
quality attributes.
A marketer is most likely to set prices according to a cash-flow objective when a
quick return on investment is desired.
If a business decides to reduce its prices once in a while on an unsystematic basis, it is using
random discounting.
Most pricing objectives based on ____ are achieved by trial and error because not all cost and revenue data are available when prices are set.
return on investment
Executives in Japan decided to price Lexus luxury cars in the United States at $55,000 while pricing them at $66,000 in their own country. This is an example of
secondary-market pricing.
Markup is measured either as a percentage of ____ or a percentage of ____.
selling price; cost
Chris is planning three sales during the third quarter of the year at Toys "R" Us. The first is at the beginning of the school year, the second is the week before Halloween, and the third is Black Friday. These sales would be considered to be
special-event pricing.
Maintaining a certain market share, meeting competitors' prices, maintaining a favorable image, and achieving price stability are all associated with a ____ pricing objective.
status quo
In its advertisement, Timberland gives a close-up of one of its boots to show its fine craftsmanship. At the bottom of the advertisement is "Est. 1973," followed by the phrase "Best Then. Better Now." What type of pricing strategy is Timberland most likely to use with this ad?
survival
McDonald's restaurants have experienced declining sales recently due to consumers' increased interest in healthy eating and their preference for fast-casual restaurants such as Chipotle and Noodles. In order to attract more customers to McDonald's, the chain expanded the number of items they are offering on the $1 menu, and many of these items are priced below cost. McDonald's is most likely utilizing a _____ pricing objective.
survival
The Office Place is an office supplies company that has just adjusted its price levels so that it can increase its sales volume to match its expenses. The Office Place is most likely employing a____ objective.
survival
Running a big sale in order to generate enough cash flow to pay creditors is typical in a situation in which a firm's primary pricing objective is
survival.
A sale that advertised prices "up to 65% off" the original price uses
tensile pricing.
A price-skimming strategy assumes that
the initial demand is highly inelastic.
Bundle pricing may be perceived to be of value by customers because
they prefer buying a combination of bundled products in a single transaction, which saves time, effort, and perhaps money.
Competition-based pricing is
used when costs and revenues are secondary to competitors' prices.
Target has worked closely with suppliers such as Calphalon to offer customers a high-quality, branded product that is only available in Target stores. Due to these partnerships, Target has established a high level of perceived _______ among their customers since they provide a large range of brand-name merchandise at reasonable or below-competition prices.
value
Hotels try to price rooms to maximize resources by quickly adapting to changes in demand. Part of this involves anticipating consumer behavior and calculating a number of different factors, including demand for rooms at a particular time period, likely length of stay, types of rooms likely to be requested, etc. It wants to be able to sell rooms at the right price to the right people. This pricing strategy is an example of
yield management