Question 1

Which of the following objectives might a service organisation pursue?

Accepted Answer

A service organization may pursue revenue-oriented objectives to increase its profitability and financial performance, user-oriented objectives to provide high-quality services to its customers and improve customer satisfaction, and patronage-oriented objectives to enhance customer loyalty and retention. Therefore, all the given options (a, b, and c) are potential objectives for a service organization.

Question 2

___________ is concerned with obtaining the best possible yield over time from each available unit of capacity.

Accepted Answer

Yield management is a pricing strategy that focuses on maximizing revenue by selling the right product to the right customer at the right time and place. It is concerned with obtaining the best possible yield (i.e., revenue) over time from each available unit of capacity (i.e., hotel room, airline seat, rental car, etc.). It involves collecting and analyzing data on customer behavior, market trends, and competitor pricing to forecast demand and adjust pricing and inventory availability accordingly. This allows businesses to optimize revenue and profitability, even during periods of high demand or low occupancy.

Question 3

A customer who perceives high levels of __________worries that their choice of service provider may not meet with the approval of family or friends.

Accepted Answer

Social cost refers to the fear that a person may not appear socially acceptable or may be criticized by others based on their choice of service provider. Hence, a customer who worries that their choice may not meet with the approval of family or friends exhibits high levels of social cost perception.

Question 4

Companies seeking to make a profit must recover the full costs associated with producing and marketing a service, and then add a margin sufficient to yield a satisfactory profit.This is known as:

Accepted Answer

Cost-based pricing involves recovering the full costs associated with producing and marketing a service and then adding a margin to yield a satisfactory profit. This is often the most common method used by companies seeking to make a profit. The other pricing methods listed (value-based pricing, yield-based pricing, marginal-cost pricing, and activity-based pricing) may also be used but do not necessarily require recovery of all costs in the same way that cost-based pricing does.

Question 5

A service provider can increase the net value of a service by doing all of the following except:

Accepted Answer

Adding costs would decrease the net value of a service, not increase it. The other options (A, B, and C) would all increase the net value of a service.

Question 6

Price can play a strategic role in which of the following ways?

Accepted Answer

Price can play a strategic role in many ways, including symbolising quality, differentiating a service from its competitors, symbolising value offered, and managing demand. All of these options are valid ways in which the price of a service can play a strategic role.

Question 7

Which of the following is NOT a way in which pricing can be used for strategic purposes?

Accepted Answer

All of the given options are ways in which pricing can be used for strategic purposes. None of them are excluded as an option. Therefore, the correct answer is E) None of the above.

Question 8

The ___________ of the service to the customer sets a ceiling to the price that may be charged.

Accepted Answer

The value of the service to the customer determines the maximum price that can be charged. If the price is higher than the perceived value, customers will not be willing to pay for the service. Therefore, the value of the service is a crucial factor in determining the price.

Question 9

A customer who perceives high levels of __________ risk worries about how comfortable and secure they will feel with a particular service provider.

Accepted Answer

The perceived risk related to comfort and security falls under the category of psychological risk. This risk arises from thoughts and beliefs about the service provider's ability to meet the customer's expectations and needs. The customer may also worry about how the service experience will affect their self-esteem or status. Hence, option C is the correct choice.

Question 10

When price is set and used with the aim of maximising sales, cash flow and/or profits, we may say that the pricing objective is primarily:

Accepted Answer

When the pricing objective is focused on maximizing sales or profits, it is revenue-oriented. This means that the main goal is to generate revenue and increase the company's profitability.

Question 11

Which of the following is NOT a way that a marketer can increase the net value of the service?

Accepted Answer

Increasing the amount of time involved in service purchase, delivery, and consumption typically decreases the net value of the service to the customer, as it adds inconvenience rather than reducing it. Options B, C, D, and E all describe ways to increase the net value by reducing efforts or unpleasant experiences for the customer.

Question 12

Which of the following conditions would intensify price competition?

Accepted Answer

Increased surplus capacity in the industry would mean that there is an excess supply of the product or service, which creates more competition among companies to attract customers with lower prices.

Question 13

Price competition intensifies with each of the following except:

Accepted Answer

Switching costs refer to the cost a customer incurs when they switch from one product or service to another. If switching costs are high, customers are less likely to switch to a competitor even if prices are lower, which reduces price competition. Therefore, increased switching costs do not intensify price competition.

Question 14

When a firm has a relatively undifferentiated service compared to its competitors, price competition intensifies.Which of the following is NOT an example of price competition?

Accepted Answer

Decreased capacity in the industry is not an example of price competition. It may lead to a decrease in supply and an increase in prices, but it is not a direct result of companies competing on price. The other options listed all relate to price competition in some way, such as increased competition, substitutes, and surplus capacity leading to lower prices. Wider distribution may also lead to price competition if companies are trying to attract new customers by offering lower prices.

Question 15

The _________ to be recovered set a floor to the price that may be charged for a specific service.

Accepted Answer

The costs to be recovered set a floor to the price that may be charged for a specific service because the price must at least cover the costs incurred in providing the service to ensure the business is financially viable.

Question 16

Which of the following benefits can be achieved by using activity-based costing?

Accepted Answer

Activity-based costing allows for the determination of differences in costs of serving different customers, identifies different activities associated with each customer, determines the amount of each activity demanded by different customers, and ultimately allows for the determination of profitability for different customers. Therefore, all of the above benefits can be achieved by using activity-based costing.

Question 17

Research by Zeithaml suggests four broad expressions of value.Which of the following is NOT one of them?

Accepted Answer

The answer of Research by Zeithaml suggests four broad expressions...

Question 18

A customer who perceives high levels of _________ worries about when and how she will be able to find, evaluate and select a service provider.

Accepted Answer

Time and effort cost refers to the concern about the amount of time and effort it will take to find, evaluate, and select a service provider, which directly relates to the customer's worry mentioned in the question.

Question 19

A cost management system that provides a structured way of thinking about the relationship between activities and the resources they consume is known as:

Accepted Answer

Activity-based costing is a cost management system that helps to identify the activities that drive costs and the resources consumed by each activity, which helps in better management of costs. It provides a structured way of thinking about the relationship between activities and resources. Volume-based costing and product-based costing do not focus on understanding the relationship between activities and resources. Yield-based costing and margin-based costing are not commonly used cost management systems.

Question 20

How do we compute net value?

Accepted Answer

Net value can be computed by subtracting the total perceived costs from the total perceived benefits. This is because net value measures the overall value received by a consumer or business after taking into account all costs incurred.

Quiz 6: Understanding costs and developing pricing strategy