Deck 14: Pricing Concepts for Establishing Value

Question 1

The key to successful pricing is to match the product with the consumer's perception of value.

Answer 1

True

Question 2

When a firm has a particular profit goal as its overriding concern,it will use target return pricing to meet the profit objective.

Answer 2

False

Question 3

If a firm is engaged in monopolistic competition,it should seek a way to differentiate itself.

Answer 3

True

Question 4

Because consumers are generally more sensitive to price increases than to price decreases,it is easier to lose current customers with a price increase than it is to gain new customers with a price decrease.

Question 5

Sellers using an EDLP pricing strategy often communicate their strategy through the creative use of a reference price.

Question 6

Pure competition occurs when there are many firms competing for customers in a given market but their products are differentiated.

Question 7

At the break-even point,profits are maximized.

Question 8

A gray market employs irregular but not necessarily illegal methods of distributing products.

Question 9

A high / low pricing strategy relies on the promotion of sales,during which prices are temporarily reduced to encourage purchases.

Question 10

Dynamic pricing is also referred to as individualized pricing.

Question 11

A demand curve shows the relationship between income and demand.

Question 12

Pricing strategies should be aligned with a firm's overall goals and objectives.

Question 13

Brands that have developed loyal customers have a higher price elasticity of demand.

Question 14

When a retail store rarely sells deeply discounted or sale products,it is known as "everyday low pricing."

Question 15

American Airlines just reduced its fares for summer flights by $100.Delta Airlines changes its pricing structure and reduces its flights by $100 as well.Delta is employing status quo pricing.

Question 16

Diana owns a boutique specializing in ball gowns.Sales are stable and Diana feels it is time she had a 20 percent increase in her salary.If Diana takes this increase in compensation,it will decrease the break-even quantity of gowns she needs to sell on a monthly basis.

Question 17

Price is the only part of the marketing mix that does not generate costs.

Question 18

Price elasticity of demand measures how changes in a price affect the quantity of the product demanded.

Question 19

Rarely is the lowest-price product offering the dominant brand in a given market.

Question 20

The demand curve for prestige products generally slopes downward due to higher prices.

Question 21

Firm A has set very low prices for its products in an attempt to drive its competitor,Firm B,out of business.This is known as monopolistic pricing.

Question 22

Unlike product,promotion,or place,price is the only part of the marketing mix

A) that offers the opportunity for an oligopoly.
B) that is subject to gray market manipulation.
C) that leads to competition.
D) that generates revenue.
E) that is determined by the consumer.

Question 23

When a firm sets its pricing strategy based on how it can add value to its products or services it has embraced a(n)_______ orientation to pricing.

A) industry
B) sales
C) competitor
D) production
E) customer

Question 24

Julia wants her firm's gourmet snacks to be the leading brand in the U.S.market.When adopting a pricing strategy designed to gain market share,she should remember that

A) rarely is the lowest-price offering the dominant brand in a market.
B) prestige products need to be competitively priced.
C) companies can gain market share by offering low-quality products at a high price.
D) total value equals total cost minus variable costs leading to price escalation.
E) price wars are the way to become the dominant brand.

Question 25

Naomi tells her sales representatives the goal is to generate at least a 20 percent return on investment for all of the industrial building supplies they sell.Naomi is using a _______ pricing strategy.

A) sales orientation
B) target profit
C) target return
D) status quo
E) competitive parity

Question 26

Many years ago Honda's Accord and Ford's Taurus were the two top-selling cars in the United States.As the year was coming to an end,Ford cut the price of the Taurus,hoping to outsell the Accord and allow Ford to claim that "Taurus is the best-selling car in America." Ford was using a _______ pricing strategy.

A) maximizing profits
B) target profit
C) sales orientation
D) status quo
E) target return

Question 27

The full price of a product or service includes all of the following except

A) taxes.
B) shipping.
C) travel costs.
D) the price of alternative products and services.
E) value of the consumer's time.

Question 28

A _______ strategy involves accurately measuring all the factors needed to predict sales and profits at various price levels,so that the price level that produces the highest return can be chosen.

A) sales orientation
B) target profit
C) target return
D) status quo
E) maximizing profits

Question 29

Historically,prices were

A) the center of attention in almost all marketing strategies.
B) analyzed and changed constantly.
C) calculated to minimize contribution per unit.
D) allowed to vary seasonally as cross-shopping tendencies fluctuated.
E) rarely changed except in response to radical shifts in market conditions.

Question 30

Gary is the marketing manager for an automobile dealership.His boss tells him the firm's primary goal is to increase its local market share from 15 to 30 percent.His firm is using a ________ orientation.

A) profit
B) sales
C) competitive
D) customer satisfaction
E) product development

Question 31

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.

Question 32

Proving that a company has engaged in the deceptive bait and switch practice is easy.

Question 33

In developing marketing strategies,why is price often the most challenging of the four Ps to manage?

A) because most managers feel it is the least important element of the marketing mix
B) because it is the least understood element of the marketing mix
C) because it has to be based on the promotion budget for the product
D) because it is difficult to calculate markups for products
E) because managers don't understand the relationship between benefits and costs

Question 34

For market penetration pricing to work,the product or service must be perceived as breaking new ground in some way.

Question 35

According to your text,research has consistently shown that consumers usually rank which of the four Ps as one of the most important factors in their purchase decisions?

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

Question 36

Health clubs often use a low,introductory offer price to get people to join their club.These low prices represent a _______ pricing strategy.

A) maximizing profits
B) target profit
C) target return
D) status quo
E) sales orientation

Question 37

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.

Question 38

Price is the _____________ a consumer is willing to make to acquire a specific product or service.

A) amount of money
B) overall sacrifice
C) fixed cost
D) target return
E) substitution

Question 39

Bernard's firm has set corporate direction to become one of the leaders in each of its significant market segments.It was Bernard's job to examine the firm's pricing strategy to determine how to maximize market share,even at the expense of profits in the short run.What kind of company objective would guide Bernard's effort?

A) industry-oriented
B) sales-oriented
C) competitor-oriented
D) innovation-oriented
E) customer-oriented

Question 40

Which of the following is not one of the five Cs of pricing?

A) customers
B) channel members
C) cost
D) collaboration
E) company objectives

Question 41

A "no-haggle" pricing policy is a type of _____ pricing strategy.

A) maximizing profits
B) sales orientation
C) target return
D) status quo
E) customer-oriented

Question 42

For which of the following is demand likely to be least sensitive to price increases?

A) spring break vacations
B) a specific brand of cereal
C) prescription drugs
D) theater tickets
E) restaurant meals

Question 43

For which of the following is demand likely to be most sensitive to price increases?

A) prescription drugs
B) college tuition for last-semester seniors
C) electricity
D) hospital care
E) a specific brand of soft drink

Question 44

A demand curve is built on the assumption that

A) income is derived from demand.
B) price remains the same,and fixed costs change.
C) everything but price and demand remains the same.
D) fixed costs change with quantity demanded.
E) the firm does not advertise.

Question 45

When firms set prices similar to those of competitors,they are following a strategy of

A) me-too pricing.
B) copycat pricing.
C) competitive parity.
D) market-broadening pricing.
E) industry-standard pricing.

Question 46

A customer orientation toward pricing implicitly invokes the concept of

A) knowing the dimensions of the target market.
B) positioning.
C) the income effect.
D) value.
E) profit.

Question 47

Julia's is an upscale women's clothing store.Prices are based on customers' beliefs about the value of the clothing.The store focuses on a limited target market and provides excellent customer service.Julia's is using a _______ pricing strategy.

A) customer-oriented
B) target profit
C) target return
D) status quo
E) maximizing profits

Question 48

Sharon knew that her established customers liked her product much better than her competitor's.She was planning to expand into new markets,and she was considering pricing.She was leaning toward charging a higher price than competitors to help demonstrate that hers was a high-quality product.Sharon was considering

A) a top of market strategy.
B) the value of quality.
C) advantageous pricing.
D) premium pricing.
E) differential pricing.

Question 49

A demand curve shows the relationship between _______ in a period of time.

A) income and demand
B) price and costs
C) price and elasticity
D) profit and price
E) price and demand

Question 50

When Ursula decides how to price new products in her gift store,she measures the value of her product offerings against those of the other stores in her area.Ursula uses a _______ pricing strategy.

A) maximizing profits
B) target profit
C) target return
D) competitor-oriented
E) sales oriented

Question 51

Ryan gave the manager of his convenience store a set of binoculars so she could see the gasoline prices charged by the other convenience store at that intersection.Ryan told the manager to always match the gasoline prices of the other store.Ryan is using a _______ pricing strategy.

A) maximizing profits
B) target profit
C) target return
D) status quo
E) sales

Question 52

A strategy of setting prices based on how customers develop their perceptions of value can often be the most effective pricing strategy,especially if the strategy

A) leads the marketer to being the low-cost seller.
B) is supported by consistent advertising and distribution strategies.
C) challenges consumers to discard their perceptions of value.
D) is consistent with a competitive target return strategy.
E) is measured against the competition.

Question 53

According to a typical demand curve,the higher the price,

A) the greater the income effect.
B) the lower the quantity consumers will buy.
C) the lower the output of producers.
D) the greater the production costs.
E) the lower the cross-price elasticity.

Question 54

Customers must see value in a product or service before they are willing to exchange time or money to obtain it,but not all customers see the same value in a product.To analyze how many units will be sold at any given price point,marketers draw on

A) a demand curve.
B) the law of averages.
C) multiple regression analyses.
D) target return strategies.
E) a sales orientation.

Question 55

_______ measures consumers' sensitivity to price changes.

A) Cross-price elasticity of demand
B) Price elasticity of demand
C) Income elasticity of demand
D) Competitive profit elasticity of demand
E) Inelastic demand price parity

Question 56

A study found that among addicted smokers,a 10 percent increase in the price of cigarettes resulted in a 2 percent decrease in quantity demanded.For these consumers,cigarettes have a(n)_______ price elasticity demand.

A) elastic
B) inelastic
C) cross-price
D) income effect
E) substitution effect

Question 57

In many high-end resort markets,Westin hotels compete directly with Crown Plaza hotels.When it comes to pricing,Westin tends to charge its guests similar rates to what the Crown Plaza hotels charge.Westin is using a _______ pricing strategy.

A) maximizing profits
B) target profit
C) target return
D) competitive parity
E) sales oriented

Question 58

There is an old saying "If you have to ask the price of a yacht,you cannot afford it." Products like yachts are most likely to be associated with

A) cross-shopping.
B) competitive parity pricing.
C) target return value.
D) prestige pricing.
E) break-even point pricing.

Question 59

When it comes to measuring consumers' price sensitivity,products are viewed as either

A) elastic or inelastic.
B) fixed or variable.
C) complementary or substitutable.
D) necessary or optional.
E) dynamic or rigid.

Question 60

The _______ is the ratio of the percentage change in quantity demanded to the percentage change in price.

A) cross-price elasticity of demand
B) price elasticity of demand
C) income elasticity of demand
D) break-even point
E) demand curve

Question 61

Marketers spend millions of dollars annually trying to create or reinforce brand loyalty.Brand loyalty changes the demand curve for the firm's products by

A) reducing the price elasticity of demand.
B) making demand more oligopolistic and less monopolistic.
C) increasing the income effect.
D) reducing fixed costs and increasing the gray marketing effect.
E) shifting the market from a monopoly to pure competition.

Question 62

Natalie operates on a pretty tight budget.She is a price-conscious shopper and usually buys store or generic brands to save money.Recently,however,Natalie was given a pretty substantial raise.As such,she has altered her shopping patterns and now regularly buys more expensive name-brand goods.This is an example of

A) the substitution effect.
B) the price inelasticity coefficient.
C) the income effect.
D) the target return effect.
E) cross-price elasticity.

Question 63

The process of charging different prices for goods or services based on the type of customer,level of demand,or time of the day,week,or season is referred to as

A) dynamic pricing.
B) the substitution effect.
C) the income effect.
D) the target return effect.
E) cross-price elasticity.

Question 64

Sales of national brands of orange juice tend to increase when the economy is doing well,while sales of generic orange juice increase when the economy is not doing well.This is an example of how _______ impacts demand for products.

A) dynamic pricing
B) the price inelasticity coefficient
C) the income effect
D) the target return effect
E) cross-price elasticity

Question 65

The observation that consumers are generally more sensitive to price increases than to price decreases suggests that

A) most consumers cannot remember what price they paid the last time they bought a particular product.
B) it is easier to lose customers with a price increase than to gain customers with a price decrease.
C) most consumers would rather skip buying a product than pay a higher price.
D) most consumers are emotionally attached to their favorite products and are unlikely to change,even if the price changes.
E) firms gain more customers with price decreases than they lose with price increases.

Question 66

Rodi owns Hallman's auto repair service.He has observed over the years that customers keep their high-mileage cars longer when the economy is doing poorly,creating demand for his maintenance and repair service.Rodi has observed the impact of _______ on demand for his service.

A) break-even points
B) the price inelasticity ratio
C) the income effect
D) the target return effect
E) cross-price elasticity

Question 67

If a 1 percent decrease in price results in less than a 1 percent increase in the quantity demanded,demand is

A) cross-price elastic.
B) price inelastic.
C) price elastic.
D) status quo elastic.
E) derived demand inelastic.

Question 68

Brad always buys and uses Nike brand golf balls.If he finds a Titleist or Callaway ball in the rough,he gives it away.Brand-loyal golfers like Brad allow Nike to charge a higher price and not lose many sales.By building a strong brand,Nike has effectively

A) increased the income effect for its products.
B) increased the cross-price elasticity for its products.
C) focused on the competitive parity point for its products.
D) shifted the golf ball market from a monopoly to pure competition.
E) reduced the price elasticity of demand for its products.

Question 69

Bill is a yacht broker in the southeastern United States.For years he has had difficulty selling large yachts locally because there were few places to dock these boats.Yachts and spaces to dock them are an example of

A) substitute products.
B) purely competitive products.
C) status quo pricing products.
D) complementary products.
E) competitive parity products.

Question 70

Deep Check
_______ products are products whose demands are positively related and as such,they rise or fall together.

A) Substitute
B)
B) Premium
C) Elastic
D) Inelastic

Question 71

The more substitutes that exist in a market,

A) the lower the price elasticity for each product.
B) the greater the income elasticity for each product.
C) the easier it will be to utilize a target profit pricing strategy.
D) the more sensitive consumers will be to changes in the price of a particular product.
E) the more likely the market will be characterized as an oligopoly.

Question 72

What situation is occurring if a 1 percent decrease in price results in more than a 1 percent increase in quantity demand?

A) Demand is cross-price elastic.
B) Demand is price inelastic.
C) Demand is price elastic.
D) Demand maintains the status quo.
E) Demand results in the income effect.

Question 73

Managers of Wendy's fast-food restaurants keep track of prices at competitors such as McDonald's,Burger King,and Arby's,knowing that a decrease in the prices at these other fast-food restaurants will

A) increase the income effect for Wendy's products.
B) increase demand for Wendy's products.
C) decrease the income effect for Wendy's products.
D) increase the complementary effect for Wendy's products.
E) decrease demand for Wendy's products.

Question 74

Deep Check
Cross-price elasticity is the

A) percentage change in quantity of a product demanded divided by the percentage change in its price.
B)
B)
B) percentage change in quantity demanded of product A compared to the percentage change in price of product
C) change in price of product A divided by change in quantity demanded for product

Question 75

Dynamic pricing is also referred to as _______ pricing.

A) complementary
B) substitution
C) break-even
D) target return
E) individualized

Question 76

Barry customizes Harley-Davidson motorcycles.No two cycles are alike.He notices that very few customers even ask the price of his motorcycles before they decide to purchase them.Demand for his motorcycles is probably

A) price sensitive.
B) price elastic.
C) price inelastic.
D) income elastic.
E) cross-price elastic.

Question 77

If the price for a product increases,the demand for the complementary product will

A) decrease.
B) increase.
C) stay the same.
D) become more elastic.
E) become more inelastic.

Question 78

Frank's Heating and Air Conditioning Company specializes in electric heat pumps.Frank keeps track of the price of natural gas,knowing that

A) natural gas creates more environmental greenhouse effects than coal.
B) an increase in the price of natural gas will increase demand for his electrical heating systems.
C) gas heating systems and electrical heating systems are complementary goods.
D) when the price of natural gas goes up,the quantity demanded also rises.
E) the demand for natural gas is price elastic.

Question 79

There are many options available to consumers when it comes to breakfast cereals.So,if Kellogg's significantly increases the price of Rice Krispies,consumers are more apt to buy alternate cereals instead.This illustrates which concept?

A) the income effect
B) the substitution effect
C) the break-even point
D) the target return effect
E) cross-price elasticity

Question 80

Which of the following is the most logical example of complementary products?

A) hot dogs and hamburgers
B) VCRs and DVD players
C) hot dogs and hot dog buns
D) Honda cars and Toyota cars
E) a university and a corporation