Deck 9: Pricing: Understanding and Capturing Customer Value 

Question 1

If consumers perceive less value relative to competing products, a company should attempt to change customer perceptions to justify a higher price.

Answer 1

True

Question 2

Unlike the other marketing mix elements, price plays a minor role in creating customer value and building customer relationships.

Answer 2

False

Question 3

Retailers like Winners and Marshalls carry less-expensive versions of established brand name products or new lower-price lines. They have adopted a pricing strategy.

A) cost-plus
B) market-skimming
C) target return
D) high-low
E) good-value

Answer 3

E

Question 4

Which of the following sets the price floor lower limit for a product's pricing?

A) competition
B) profits
C) elements of the product mix
D) consumer perceptions of value
E) product costs

Question 5

When establishing prices, it's important for a manager to understand that "good value" is not the same as .

A) "perceived value"
B) "high price"
C) "low price"
D) "everyday value"
E) "bargain basement"

Question 6

Break-even pricing involves setting prices based on competitors' strategies, costs, prices, and market offerings.

Question 7

is the only element in the marketing mix that produces revenue.

A) Place
B) Promotion
C) Price
D) Profit
E) Product

Question 8

Providing extra amenities to differentiate and support high-priced products is referred to as _ pricing.

A) high-low
B) value-added
C) cost-plus
D) everyday low
E) target return

Question 9

The Fashion Store, a new startup, sets product prices so that revenues will equal manufacturing and marketing costs. The pricing strategy used by the company is referred to as pricing.

A) competition-based
B) target return
C) good-value
D) value-added
E) cost-plus

Question 10

is the sum of all the values that customers exchange for the benefits of having or using a product or service.

A) Salary
B) Profit
C) Cost
D) Payroll
E) Price

Question 11

Lovely Skin is establishing a pricing strategy for a new moisturizer. The total cost to produce each unit is $3.50. The company has decided to add a $1.50 markup, so the unit price to distributors will be $5. Lovely Skin is
Using a approach to price the new moisturizer.

A) good-value
B) value-added
C) cost-plus
D) break-even
E) competitor-based

Question 12

Costs that change directly with the level of production are referred to as costs.

A) fixed
B) payroll
C) target
D) variable
E) capital

Question 13

uses buyers' perceptions of what a product is worth as the key to pricing.

A) Cost-plus pricing
B) Customer value-based pricing
C) Psychological pricing
D) Target return pricing
E) Competition-based pricing

Question 14

pricing involves setting prices based on the expenses involved in producing, distributing, and selling a product plus a fair rate of return for a company's effort and risk.

A) Demand-based
B) Good-value
C) Competition-based
D) Cost-based
E) Value-added

Question 15

Rent, electricity, and executive salaries that do not vary with production or sales level are referred to as costs.

A) break-even
B) fixed
C) promotional
D) variable
E) target

Question 16

pricing is an approach whereby a firm tries to determine the price at which it will break even or earn the profit it is seeking.

A) Cost-plus
B) Good-value
C) Target return
D) Value-added
E) Competition-based

Question 17

A pricing strategy for an offering begins with an assessment of customer needs and perceptions. Then a target price is set based on customer perceptions of worth.

A) value-based
B) competition-based
C) target costing
D) cost-based
E) value-added

Question 18

costs refer to the sum of the fixed and variable costs for any given level of production.

A) Target
B) Total
C) Value-based
D) Marginal
E) Break-even

Question 19

Which of the following statements about break-even analysis is most likely true?

A) It fails to consider customer value and the relationship between price and demand.
B) It is used to determine the maximum price that can be set on a product.
C) It is a tool used to calculate fixed costs.
D) It determines how customer-perceived value changes with value-added pricing.
E) It is a tool marketers use to examine the relationship between supply and demand.

Question 20

Which of the following sets the price ceiling for a product's pricing?

A) profits
B) elements of the product mix
C) product costs
D) consumer perceptions of value
E) competition

Question 21

An airline runs a 6-month promotional program where all baggage fees are waived. It is using a cost-based pricing strategy.

Question 22

Price elasticity is a measure of the sensitivity of demand to changes in price.

Question 23

There are more than 200 wild blueberry producers in Nova Scotia. An individual farmer cannot charge more than the going market price per unit without the risk of losing business to the other farmers. This is an example of _.

A) a pure monopoly
B) a black market
C) pure competition
D) oligopolistic competition
E) monopolistic competition

Question 24

Los Amigos, a new Mexican restaurant, has set up shop across the street from Hot Tamales and More. Which of the following pricing strategies will Los Amigos likely use?

A) break-even
B) target costing
C) competition-based
D) cost-plus
E) good-value

Question 25

Under , the market consists of a few large sellers who are highly sensitive to each other's pricing and marketing strategies.

A) pure competition
B) oligopolistic competition
C) a pure monopoly
D) pure monopsony
E) monopolistic competition

Question 26

In monopolistic competition, the market is dominated by one seller.

Question 27

A break-even chart shows the total cost and total revenue expected at various sales volume levels of a product.

Question 28

Which of the following is an economic factor that affects the pricing decisions of a company?

A) market-penetration practices
B) reseller policies
C) top management decisions
D) interest rates
E) promotional activities

Question 29

What is customer value-based pricing? Describe the two types of value-based pricing.

Question 30

The demand curve shows the number of units the market will buy in a given time period at similar prices.

Question 31

Each PC produced by HP involves a cost of computer chips, wires, plastic, packaging, and other inputs. Although these costs tend to be the same for each unit produced, they are called costs because the total
Changes based on the number of units produced.

A) variable
B) capital
C) payroll
D) fixed
E) target

Question 32

Under , the market consists of many buyers and sellers trading over a range of prices rather than a single market price.

A) a pure monopoly
B) pure competition
C) oligopolistic competition
D) a pure monopsony
E) monopolistic competition

Question 33

Competitive pricing is a variation of break-even pricing.

Question 34

In , the market consists of many buyers and sellers trading in a uniform commodity, such as wheat, copper, or financial securities.

A) pure competition
B) monopolistic competition
C) a pure monopoly
D) oligopolistic competition
E) a pure monopsony

Question 35

Explain competition-based pricing.

Question 36

Under oligopolistic competition, the market consists of only a few large sellers.

Question 37

When demand hardly changes with a small change in the price of a product, the demand for the product is best described as .

A) variable
B) flexible
C) cyclical
D) inelastic
E) elastic

Question 38

What are the two different types of costs a company incurs? Explain with examples.

Question 39

Radox, a luxury watch brand, identifies a market segment that is willing to pay premium prices for its watches, and Radox managers select an ideal selling price. Managers then determine the costs to create watches that meet the ideal selling price. The company's pricing approach is referred to as .

A) target costing
B) value-added pricing
C) target return pricing
D) cost-plus pricing
E) mass production

Question 40

The relationship between the price charged for a product and the resulting demand level can be shown in a(n) .

A) inelastic demand slope
B) elastic demand slope
C) demand curve
D) break-even chart
E) supply curve

Question 41

Establishing prices for razor blades that must be used with a razor blade system is known as pricing.

A) product bundle
B) market-penetration
C) product line
D) by-product
E) captive-product

Question 42

Distinguish between market-skimming pricing and market-penetration pricing.

Question 43

NerdHerd Electronics sells three different sizes of televisions at three different prices. In this case, the company's pricing strategy is referred to as pricing.

A) captive-product
B) product bundle
C) optional-product
D) product line
E) by-product

Question 44

Which of the following conditions is most likely essential for implementing a successful market-penetration pricing strategy for a product?

A) Production costs rise with an increase in marketing efforts.
B) The market for the product is highly price sensitive.
C) Alternative products can enter the market easily.
D) Prices increase incrementally as sales volume increases.
E) The product's quality supports its high price.

Question 45

The first Canadian Tire store opened in 1922. Since the early 21st century, its strategy has been updated to capture a larger market share by offering lower everyday prices to attract a large number of buyers and win a large market share. This is referred to as .

A) market-skimming pricing
B) target costing
C) value-added pricing
D) market-penetration pricing
E) deceptive pricing

Question 46

With reference to the different types of markets, compare pure competition with monopolistic competition.
Provide an example for each.

Question 47

Netcorp, an Internet service provider, charges its users a fixed rental fee for its basic package, which has a download limit. If a user exceeds this download limit, an additional fee is charged for every download. In this case, the firm's pricing strategy is referred to as pricing.

A) segmented
B) by-product
C) two-part
D) optional-product
E) promotional

Question 48

With each new generation of Apple iPhone, iPad, or Mac computer, new models start at a high price then work their way down as newer models are introduced. Apple initially uses a strategy.

A) market-skimming
B) deceptive
C) target costing
D) market-penetration
E) predatory

Question 49

Which of the following conditions is most likely essential for implementing a successful market-skimming pricing strategy for a product?

A) A low-price position of the product is maintained.
B) Low prices promote more market growth than high prices.
C) Lower-priced alternatives can enter the market easily.
D) The product's quality and image must support its high price.
E) The product's price matches its manufacturing costs.

Question 50

The St. Jacobs Farmers' Market in Woolwich Ontario features many vendors often selling the same produce. On any Saturday in the early autumn, 20 or more apple vendors are present. This is an example of an oligopoly.

Question 51

With reference to pricing in different types of markets, compare oligopolistic competition with a pure monopoly.

Question 52

What external factors affect the pricing decisions made by organizations?

Question 53

Explain the concept of price elasticity.

Question 54

Posh Collections introduced a new watch to appeal to upscale consumers. The company will most likely use a(n) _ strategy.

A) by-product pricing
B) market-skimming pricing
C) market-penetration pricing
D) allowance pricing
E) optional-product pricing

Question 55

Computer World sells laptops separately from accessory products like docking stations, anti-virus software, and external hard drives. This is referred to as _ _ pricing.

A) by-product
B) product line
C) product bundle
D) market-penetration
E) optional-product

Question 56

Pricing strategies usually remain the same as a product passes through its life cycle.

Question 57

What is a demand curve? Why is it useful to marketers?

Question 58

There is no true substitute for coffee. If the price goes from $8 to $12 for a package of k-cups due to a coffee bean shortage, demand will remain relatively unchanged. This is an example of demand elasticity.

Question 59

How do firms that use captive-product pricing make up for the low prices of their main products?

A) They increase the price of the main products.
B) They provide the captive products as freebies.
C) They reduce the cost of the captive products.
D) They offer the captive products and main products together at a reasonable price.
E) They set high markups on the captive products.

Question 60

Market penetration makes sense when a product's quality and image must support its higher price.

Question 61

Salon Du Jour offers special combination packages at a reduced price. Separately, a haircut is $30 and a conditioning treatment is $35. But the combo price is $50. This is referred to as pricing.

A) captive-product
B) product bundle
C) product line
D) by-product
E) optional-product

Question 62

The National Tree Company offers resellers half-price reductions on artificial Christmas trees if they purchase them in July. This is an example of a _ .

A) functional discount
B) trade-in allowance
C) quantity discount
D) seasonal discount
E) promotional allowance

Question 63

When a manufacturer seeks a market for by-products and accepts a price that covers more than the cost of storing and delivering those by-products, the manufacturer is able to reduce the main product's price to make it more competitive.

Question 64

Universal Appliance prices its refrigerators at five distinct price levels based on finish, style, capacity, and features. They range from $799 to $9,500. This is an illustration of price steps.

Question 65

BC Place, home of the Vancouver Whitecaps FC charges different prices for seats in different areas of the stadium, even though each seat costs the same for the owners of the stadium. What is this form of pricing called?

A) product-form pricing
B) market-penetration pricing
C) time-based pricing
D) location-based pricing
E) market-skimming pricing

Question 66

prices are carried in buyers' minds and used when looking at a given product.

A) Geographical
B) Reference
C) Captive-product
D) Dynamic
E) Promotional

Question 67

Consumers rely less on price to judge the quality of a product when they .

A) are unable to research the product
B) are unable to judge the quality of the product
C) lack information about the product
D) rely on cues from sellers to differentiate a high or low price
E) have prior experience with the product

Question 68

Movie theaters charge matinee pricing during the daytime, and resorts give weekend and seasonal discounts. This is illustrative of a _ pricing strategy.

A) product form
B) value-added
C) market-skimming
D) market-penetration
E) time-based

Question 69

Captive-product pricing refers to setting prices across an entire product line.

Question 70

Dynamic pricing is particularly suitable for Internet-based companies like Amazon who want to be responsive to shoppers' desires and marketplace changes.

Question 71

Vac "N" Sew, a consumer electronics outlet, offers a price reduction of $100 when customers bring in a used vacuum cleaner and exchange it for a new vacuum cleaner or sewing machine. This is an example of a .

A) seasonal discount
B) cash discount
C) functional discount
D) by-product allowance
E) trade-in allowance

Question 72

When Nabisco offers to cover half the cost of all local advertising for supermarkets that sell Oreo Cookies, the company is granting .

A) promotional allowances
B) seasonal discounts
C) cash discounts
D) quantity discounts
E) trade-in allowances

Question 73

Which group is most likely offered functional discounts by manufacturers?

A) trade-channel members that perform sales tasks
B) buyers who purchase merchandise out of season
C) buyers who pay their bills before the due date
D) consumers who buy products in large quantities
E) retailers that participate in advertising programs

Question 74

The Royal Ontario Museum has different admission prices for students, adults, and seniors. All three groups are entitled to the same services. This form of pricing is called pricing.

A) customer-segment
B) product form
C) time-based
D) by-product
E) location-based

Question 75

Rakuten is an example of an e-commerce platform. They refer you to a particular store and the company receives commission if you purchase through their website, which they pass on to you. This is a newer example of a company offering a _.

A) quantity discount
B) functional discount
C) cash rebate
D) flash sale
E) promotional allowance

Question 76

What type of pricing is being used when a company temporarily prices its products below the list price to create buying excitement and urgency?

A) geographical pricing
B) segmented pricing
C) promotional pricing
D) psychological pricing
E) dynamic pricing

Question 77

Price bundling promotes the sales of products consumers might not otherwise buy, but the combined price must be low enough to get them to buy the bundle.

Question 78

Pricing a product based on consumers' reference prices is referred to as pricing.

A) geographical
B) captive-product
C) psychological
D) allowance
E) by-product

Question 79

Which pricing mix strategy should be used in relation to saleable scrap materials? How does this strategy function?

Question 80

Explain product line pricing. Provide an example.