Price
Suppose a manufacturer of tires wants to sell many tires to cover its fixed cost at a given price. Assuming that the average price customers are willing to pay for each tire is $100 and that the fixed cost has grown to $30,000 and the unit variable cost for a tire is $20, calculate the break-even quantity.
375
Which of the following is an advantage of using break-even analysis?
It's simple
If a firm prices a product too low, it may signal
Low quality
Strategies that can be used as part of a firm's profit objectives include which two of the following?
Maximizing current profits Target return
Organizations using ________ pricing set the initial price low for the introduction of the new product to appeal immediately to the mass market.
Penetration
The ability to attract price sensitive customers and discourage competitors from entering a market make which pricing strategy appealing?
Penetration
The pricing objective known as unit volume is based on what?
The quantity of product sold
Break-even analysis examines the relationship between which two at various levels of output?
Total revenue total cost
The relationship, or ratio, between a product's perceived benefits and the consumer's costs is known as its
Value
Movement along a demand curve occurs because of
a change in price.
A shift in the demand curve is the result of
a change in selling conditions.
When Wilkinson Sword exchanged some of its knives for advertising used to promote its razor blades, it was an example of
barter.
Pricing approaches that consider the production and marketing costs and then add enough to cover direct expenses, overhead, and profit are known as
cost-oriented.
Adding a fixed percentage or fixed fee to the total costs for a product is known as ________ pricing.
cost-plus
The four common approaches to pricing include
demand-oriented competition-oriented cost-oriented profit-oriented
Once marketers have decided on a product's price, the next step is to
determine demand
Price lining involves a firm setting ________ prices for different related products.
distinct
When Newsweek magazine set different prices in five cities to study the resulting purchase behavior, they were
estimating their demand curve
Return on investment (ROI) analysis provides
evaluation of the dollars invested in an initiative
Firms often pursue ________ as a pricing objective when industry sales are relatively flat or declining.
market share
A marketing manager considers pricing objectives and constraints to
narrow the range of choices among the variety of pricing strategies.
Movement along a demand curve implies
no changes have occurred in any demand factors except price.
Value is defined as
perceived benefits divided by price.
Auto manufacturers like Bentley and Rolls Royce work to maintain a high status association with their products. The most appropriate pricing approach for these companies is
prestige pricing
The percentage change in quantity demanded relative to a percentage change in price is known as
price elasticity of demand.
A firm that sells a number of similar products may price them at different specific price points, using a strategy called
price lining
Break-even analysis can help evaluate the impact of changes in _______ and _______ on ________.
price; costs; profit
By focusing on target profit pricing or target return pricing, a firm is using a ________ pricing approach.
profit-oriented
Expert opinion as a basis for sales forecasting is a type of
qualitative methods
On a demand curve, one of the axes represents the price of a product while the other represents the
quantity demanded.
The profit earned from an initiative in comparison to what was invested is called
return on investment
Loss-leader pricing entails
selling a product below its customary price to attract attention to it.
Snowboard manufacturers typically introduce new products with very high prices and new technology every season. Previous years' products are then sold at lower prices. This exemplifies
skim pricing
When a new product appeals to those segments of consumers who are willing to pay a high initial price to have an innovation first, marketers should use a ________ pricing strategy.
skimming
In ________, prices are lowered in a series of steps with the demand by those who really desire the product being satisfied at the highest prices.
skimming pricing
Cost-plus pricing entails
summing total units costs and adding a fixed percentage or fee to arrive at a price.
In ________ pricing, an organization estimates what consumers are willing to pay for a product, and works backward, accounting for markups by retailers and wholesalers, to determine what it can charge for the product.
target
With a profit goal and an annual sales estimate, a firm can calculate a price per item sold. This is called
target profit pricing
The three elements influencing the demand curve are consumer ________, consumer ________, and the price and availability of similar product
tastes; income
Price is defined as
the money or other considerations exchanged for the ownership or use of a product.
In an effort to gain sales, some pizza restaurants will offer any size pizza for the same price, know that most buyers will prefer more pizza over less. This exemplifies the concept of
value pricing
Organizations can most effectively use price skimming under which two of the following conditions?
A product's uniqueness is understood and valued by consumers. A new product is protected by patents.
The practice of exchanging products and services for other products and services rather than for money is called
Barter
McDonald's offers extra value meals, which include a hamburger, fries, and soft drink. The total price is lower than if each item were purchased individually, and the consumer just has to mention one item when ordering. This is an example of ________ pricing.
Bundle
_______-oriented approaches to pricing set the price to reflect the way the marketer wants consumers to interpret prices relative to competitor's offerings.
Competition
________-oriented pricing approaches weigh factors underlying expected customer tastes and preferences
Demand
Pricing has __ effect on a firm's profits.
Direct
If a competitor reduces their prices, we might expect
Downward shift
A manufacturer that uses coupons and other small price decreases to create large changes in demand is relying on a(n) ______ demand for the product
Elastic
The demand for many consumer products, like clothing, is
Elastic
When a 1 percent decrease in price produces more than a 1 percent increase in quantity sold, the product or service demand is:
Elastic
A sales forecast is best described as a(n)
Estimate
Demand-oriented pricing approaches weigh which factors most heavily?
Expected customer tastes and preferences
Most often, the lowest-priced brand will have the highest market share.
False
Executive salaries are a good example of a ________ cost.
Fixed
When a firm sells more product than it needs to cover its total costs, it will
Make a profit
With which profit-oriented pricing objective is a firm likely to price its products relatively low compared to their cost to develop, with the prospect of gaining a high market share?
Managing for long-run profits
American firms are sometimes criticized for using which profit-oriented pricing objective, because it results in a short-term orientation?
Maximizing current profit
Which profit-oriented pricing objective is common in many firms because the targets can be set and performance measured quickly?
Maximizing current profit
________ pricing is seen as the exact opposite of skimming pricing when introducing a new product.
Penetration
pricing involves setting a high price so that quality- or status-conscious consumers will be attracted to the product and buy it.
Prestige
Insurance premiums, credit card interest and doctor's fees are all examples of
Price
The money or other consideration (including other products and services) exchanged for the ownership or use of a product is known as
Price
Which of the following are the key factors that influence demand?
Price and availability of similar products Consumer income
Select all of the following that are benefits of a penetration pricing strategy.
Production costs drop with increased volume Potential to gain market share Discourages competitors
Total revenue less (that is, minus) total cost is known as
Profit
Identify the broad categories of forecasting
Qualitative methods Time-series methods
A firm with a sales objective will set prices at a level that generates more
Revenue
Gillette's five-blade Fusion shaving system has 70 patents protecting its product technology, making it more likely that ______ pricing can be used successfully.
Skimming
Identify the type of profit objective that occurs when a company sets its price to achieve a profit goal of 20 percent for return on investment (ROI).
Target return
The relationship between price and quantity sold is called the
The demand curve
While most Canadian telecommunications providers offer relatively similar pricing, some companies have emerged with lower priced packages reflecting
a penetration pricing approach
Following the pricing experiment, Newsweek pursued more aggressive advertising and distribution of the magazine resulting in increased sales. This is an example of
a shift in the demand curve
When a board of directors determines a specific profit goal, marketing managers usually implement
a target return objective.
Many fast food restaurants understand that value is a key consideration for consumers. For this reason, they will offer some items or meal combos as part of
a value pricing strategy
If an organization sets prices similar to those of major competitors, it is using ______ pricing.
at-market
For some products where tradition, a standardized channel of distribution, or other competitive factors dictate the price, ________ pricing is used.
customary
The process of gauging, or measuring, demand for a product at differing price levels is
demand curve estimation
Odd-even pricing is used to ________, although overuse of this approach may mute its effect.
increase demand for products
To increase customer value for a given price, the marketer must
increase perceived benefits.
When a 1 percent decrease in price results in less than a 1 percent increase in quantity sold, demand for the product or service is:
inelastic
In ________ pricing, an organization sets a price a few dollars or cents under an even number, such as at $3.99.
odd-even
When a firm has a particular profit goal in the form of a specific dollar amount as its overriding concern, it is likely to implement
target profit pricing.
To many consumers, price provides information about
the quality of the product.
Grocery stores use standard markup pricing because
they have so many products that it is impossible to estimate demand for each.
When using competition-oriented pricing approaches, price setters stress
what "the market" is doing.
According to price elasticity, when the price of iPhones drop, the demand for iPhones is likely to
Increase
Rolex takes pride in emphasizing that it makes one of the most expensive watches you can buy, which is an example of
above-market pricing.
When an organization deliberately prices a product above the prices set for competing products, to entice those customers for whom pricing doesn't matter, the firm is engaging in
above-market pricing.
Break-even analysis examines the relationship between total revenue and total cost to determine profitability
at various levels of output.
Store chains like Hudson's Bay often establish the going market price for products in the minds of their competitors. Hudson's Bay uses
at-market pricing.
The point at which the number of units sold generates enough revenue to equal total costs is known as
break-even point.
Marketers consider their pricing strategy for a new product as well as the competitive products available in order to
estimate demand
Prestige pricing means the organization deliberately prices a product ________ so that ________ consumer will be attracted to the product and buy it.
high; quality-conscious
A demand curve enables a firm to examine prices
in terms of quantity sold.
For a special promotion, retail stores may deliberately sell a product below its customary price to attract customers, in hopes that they buy other items with large markups, in an approach known as ________ pricing.
loss-leader
As demand from customers who are not price-sensitive is filled, skim pricing normally entails
lowering prices in steps to reach other segments
In target pricing,
manufacturers deliberately adjust the composition of a product to achieve the estimated price that consumers are willing to pay for it.
Current profit ________ and target ________ are two strategies used by firms that are pursuing a profit pricing objective.
maximization; return
Marketing managers may identify profit, market share, social responsibility, or even survival as pricing
objectives
Pricing ________ involve specifying the role of price in an organization's marketing and strategic plans.
objectives
Pricing ________ frequently reflect corporate goals, while pricing ________ often relate to conditions existing in the marketplace.
objectives; constraints
According to the value equation, for a given price, as the ________ increase, the value increases.
perceived benefits
When Swiss watchmaker TAG Heuer increased the average price of its watches from $250 to $1,000, its sales volume jumped sevenfold. This is evidence that ________ pricing is important in this product category.
prestige
While __ refer to money received by a business, __ refer to the money paid out to employees and suppliers.
revenue, cost
The difference between the selling price and the cost of an item, divided by the cost, usually expressed in percentage, is known as ________.
standard markup
Grocery stores offer a wide variety of products across many categories. In order to simplify pricing, they typically use
standard markup pricing
