Question 1

The pricing approach where prices are set based on what competitors are charging is called the:________
A) demand-oriented approach.
B) value-oriented approach.
C) competitor-oriented approach.
D) cost-oriented approach.

Accepted Answer

The competitor-oriented approach sets prices based on what competitors are charging, focusing on maintaining competitive parity or positioning rather than primarily on costs, customer demand, or perceived value.

Question 2

Fixed costs do not vary according to the number of units of product made or service sold. Which of the following is not an example of a fixed cost?
A) Office buildings.
B) Salaries.
C) Energy costs.
D) Cars and other vehicles.

Accepted Answer

Fixed costs are expenses that do not change with the level of production or sales, such as rent for office buildings, salaries for employees, and costs for vehicles. Energy costs, however, typically vary with the level of production or service activity, making them a variable cost, not a fixed cost.

Question 3

With the ________to pricing, the firm sets prices according to how much customers will pay. This approach is prevalent in marketing services, but again could be used in B2B or consumer marketing contexts.
A) demand-oriented approach .
B) cost-oriented approach .
C) Price differentiation.
D) Price fixing.

Accepted Answer

The demand-oriented approach to pricing involves setting prices based on customer demand and how much they are willing to pay for a product or service. This method focuses on the perceived value of the product or service to the customer rather than just the cost of production or market competition.

Question 4

This is when a product or service is offered together with an offering to make the price look more reasonable______
A) Odd-number pricing.
B) Pure price bundling.
C) Product pricing.
D) Price differentiation.

Accepted Answer

Pure price bundling is when multiple products or services are offered together as a package, often making the overall price seem more attractive compared to purchasing each item separately.

Question 5

Prices are based on customer location (e.g. pharmaceutical companies sell their prescription drugs at different prices in different countries). This pricing approach for business-to-business is known as:_______________
A) value-in-use pricing
B) geographical pricing
C) negotiated pricing
D) discount pricing

Accepted Answer

Geographical pricing involves setting different prices for the same product in different geographical locations, often to reflect variations in market conditions, costs, or consumer purchasing power. This approach is common in industries like pharmaceuticals, where companies may price their products differently across countries.

Question 6

___________ act as cues by indicating to a potential customer that there is a bargain to be had.
A) Price surplus.
B) Sale signs.
C) Odd-number pricing.
D) Relative price.

Accepted Answer

Sale signs are used to attract customers by signaling that there is a discount or special offer available, suggesting a bargain.

Question 7

The setting of prices depends on a number of factors. Which of the following is not a factor?
A) How price affects demand.
B) How sales revenue is linked to price.
C) How cost is linked to price.
D) All of the options given above are correct.

Accepted Answer

All the options given (A, B, C) are indeed factors that affect the setting of prices. How price affects demand relates to the price elasticity of demand, how sales revenue is linked to price involves understanding the revenue implications of different pricing strategies, and how cost is linked to price is fundamental in ensuring that the price covers the costs and generates a profit. Therefore, none of the options listed is incorrect; they all are factors in setting prices.

Question 8

For emergency purchases such as funeral services or prescription pharmaceutical products for life-threatening diseases, when companies do set charges that are perceived to be unfair, they are liable to claims of __________.
A) price collusion
B) price war
C) price bundle
D) price gouging

Accepted Answer

Price gouging refers to the act of raising prices to unfair levels, especially during emergencies or on essential goods, which is considered exploitative and unethical.

Question 9

_____ refers to setting a price low relative to competition to gain market share.
A) Penetration pricing
B) Price skimming
C) Economy pricing
D) Bundling

Accepted Answer

Penetration pricing is a strategy where a product is priced lower than the competition to quickly gain market share.

Question 10

This term is associated with the winning bidder obtains an unprofitable contract that she or he is duty-bound to deliver because their bid price was set so low so that they won the contract.
A) Winner's curse.
B) Bidding curse.
C) Pitch chase.
D) Black bid.

Accepted Answer

The term "Winner's curse" refers to the phenomenon where the winning bidder in an auction ends up regretting the win because the bid price was too low, leading to an unprofitable contract. This occurs when the winner overestimates the value of the item or underestimates the costs involved in fulfilling the contract.

Question 11

Pricing refers to 'the amount of money expected, required, or given in payment for something; an unwelcome experience or action undergone or done as a condition of achieving an objective; decide the amount required as payment for something offered for sale; and discover or establish the price of something for sale'.

Accepted Answer

Pricing encompasses the process of determining the value of a product or service in monetary terms, which includes setting the amount expected or required as payment for a good or service, as well as the evaluation or discovery of this value for items offered for sale. It also metaphorically refers to the "cost" or sacrifice made to achieve a goal.

Question 12

Fixed costs are costs that vary according to the number of units of product made or service sold. For instance, in the pharmaceutical market this would include plastic bottles to place the pills into.

Accepted Answer

Fixed costs are costs that do not vary with the number of units produced or sold. Examples include rent, salaries, and insurance. Costs that vary with production volume, like the cost of plastic bottles for pills, are variable costs.

Question 13

Determining costs and prices is easier when organizations are split into separate profit centres selling onto other divisions within the same company-especially when these adopt inefficient transfer pricing mechanisms.

Accepted Answer

Splitting organizations into separate profit centers and using inefficient transfer pricing mechanisms can actually complicate the process of determining costs and prices, as it may lead to arbitrary cost allocations and potentially distort the economic reality of transactions within the company.

Question 14

When customers assess prices, they estimate value using pricing cues, because they do not always know the true cost and price of the item that they are purchasing.

Accepted Answer

Customers often rely on pricing cues, such as discounts, brand reputation, and comparison with similar products, to estimate the value of a product because they typically do not have direct knowledge of the item's true cost and price.

Question 15

Proposition Quality defined as the standard of something as measured against other things of a similar kind; the degree of excellence of something; general excellence of standard or level; a distinctive attribute or characteristic possessed by someone or something.

Accepted Answer

The provided definition accurately describes the concept of "quality," which refers to the standard or degree of excellence of something when compared to other similar things, as well as highlighting distinctive attributes or characteristics.

Question 16

Odd-Number pricing is when marketers highlight their prices to customers by bundling other products and services into an offering to make the price look more reasonable.

Accepted Answer

Odd-number pricing, also known as psychological pricing, is a strategy where prices are set just below a round number (e.g., $9.99 instead of $10) to make the price appear cheaper to consumers, not about bundling products.

Question 17

A cost-oriented approach allows customers to pay whatever they wish and is based on value and demand considerations.

Accepted Answer

A cost-oriented approach bases prices on the costs of production, not on customer demand or perceived value, and does not allow customers to pay whatever they wish.

Question 18

Negotiated pricing is when prices are set according to specific agreements between a company and its clients or customers.

Accepted Answer

Negotiated pricing refers to the process where the final price of a product or service is determined through bargaining or negotiation between the seller and the buyer, rather than being fixed or listed. This allows for flexibility and customization of pricing based on the specific needs, quantities, or agreements between the company and its clients or customers.

Question 19

Discount pricing focuses our attention upon customer perceptions of product attributes and away from cost-oriented approaches.

Accepted Answer

The answer of Discount pricing focuses our attention upon customer...

Question 20

When launching new offerings, organizations tend to adopt either penetration pricing or the price skimming strategy. In the first approach, they charge a lower price to generate a large volume of sales and recoup their research and development (R&D) investment (hence penetration pricing).

Accepted Answer

Penetration pricing involves setting a low price for a new product to attract a large number of customers and a significant market share quickly, aiming to recover the R&D costs through high volume sales.

Quiz 13: Price and Customer Value

The pricing approach where prices are set based on what competitors are charging is called the:________

Fixed costs do not vary according to the number of units of product made or service sold. Which of the following is not an example of a fixed cost?

With the ________to pricing, the firm sets prices according to how much customers will pay. This approach is prevalent in marketing services, but again could be used in B2B or consumer marketing contexts.

This is when a product or service is offered together with an offering to make the price look more reasonable______

Prices are based on customer location (e.g. pharmaceutical companies sell their prescription drugs at different prices in different countries) . This pricing approach for business-to-business is known as:_______________

___________ act as cues by indicating to a potential customer that there is a bargain to be had.

The setting of prices depends on a number of factors. Which of the following is not a factor?

For emergency purchases such as funeral services or prescription pharmaceutical products for life-threatening diseases, when companies do set charges that are perceived to be unfair, they are liable to claims of __________.

_____ refers to setting a price low relative to competition to gain market share.

This term is associated with the winning bidder obtains an unprofitable contract that she or he is duty-bound to deliver because their bid price was set so low so that they won the contract.