Question 1

Penetration pricing works best for goods or services:
A) that offer a unique advantage over competitors' brands.
B) that are characterized by highly elastic demand.
C) that face little or no competition in the market place.
D) that involve high production and operational costs.

Accepted Answer

Penetration pricing is a strategy used to set a relatively low initial price to quickly attract a large number of buyers and gain a foothold in the market. This strategy works best for goods or services that are characterized by highly elastic demand. Highly elastic demand means that a small change in price will result in a large change in the quantity demanded. This type of demand allows for a firm to lower the price and increase demand without sacrificing too much on profit margins. Therefore, choice B is the best answer.

Question 2

Since it involves the use of a high price relative to prices of competing products or services,the skimming pricing strategy is sometimes referred to as _____ pricing.
A) penetration
B) competitive
C) market-plus
D) functional

Accepted Answer

The skimming pricing strategy is referred to as market-plus pricing because it sets a high price relative to the prices of competing products or services, aiming to maximize profits by targeting consumers willing to pay more.

Question 3

A _____ pricing strategy helps manufacturers to distinguish their high-end products from similar products of their competitors.
A) skimming
B) market share
C) competitive
D) penetration

Accepted Answer

A skimming pricing strategy involves setting a high price for a new or unique product to generate maximum revenue before competitors enter the market. This can help manufacturers distinguish their high-end products from similar products of their competitors.

Question 4

The price reduction offered to a customer,business user,or marketing intermediary in return for prompt payment of a bill is called a _____ discount.
A) functional
B) trade
C) quantity
D) cash

Accepted Answer

The price reduction offered for prompt payment is called a cash discount. The other types of discounts, while commonly used in marketing, are not specifically tied to prompt payment.

Question 5

Retailers such as Home Depot and Lowe's,who offer to meet and beat the best price offered by their competitors,use the strategy of _____ pricing.
A) skimming
B) penetration
C) competitive
D) cost-plus

Accepted Answer

Competitive pricing refers to offering prices that are in line with or lower than those offered by competitors, as seen in the example of Home Depot and Lowe's. Skimming pricing refers to setting high initial prices for a new product, whereas penetration pricing involves setting lower prices to quickly gain market share. Cost-plus pricing involves calculating the cost of producing a product and adding a mark-up to determine the final price.

Question 6

The payment offered to a channel member for performing marketing functions is called a _____.
A) cash discount
B) trade discount
C) quantity discount
D) rebate

Accepted Answer

The payment offered to a channel member for performing marketing functions is called a trade discount. Cash discounts are offered as incentives for paying invoices early. Quantity discounts are offered based on the volume of products purchased. Rebates are offered after the sale is made as a way to encourage repeat purchases or customer loyalty.

Question 7

Everyday low pricing is a strategy devoted to continuous low prices as opposed to:
A) seasonal changes in prices based on current demand.
B) purely cost-based prices that vary as the manufacturer's costs vary.
C) relying on short-term price-cutting tactics such as cents-off coupons, rebates, and special sales.
D) prices that are set on a weekly or monthly basis in reaction to competitors' actions.

Accepted Answer

Everyday low pricing focuses on maintaining low prices consistently, rather than relying on temporary price reductions or reacting to competitors' actions. Seasonal changes in prices (A) and purely cost-based prices (B) may not always result in the lowest overall prices for customers. Setting prices based on current demand may result in higher prices during peak demand periods. Similarly, setting prices purely based on costs may not always result in the lowest prices for customers.

Question 8

In order to recover research and development costs rapidly and earn high initial profits,SenseTV is setting a high price for its plasma TVs.The pricing strategy SenseTV is using is called _____ pricing strategy.
A) market-minus
B) skimming
C) penetration
D) competitive

Accepted Answer

Skimming pricing strategy is used when a company wants to recover research and development costs rapidly and earn high initial profits by setting a high price for its product. This strategy is commonly used for innovative and new products where the company faces little to no competition.

Question 9

A step out is a pricing practice in which a firm:
A) maintains a high price for a product throughout its life cycle.
B) offers an extremely low price on a single product purchase to reach the mass market quickly and capture a large market share.
C) markets a product at a low price compared to competitive offerings to secure market acceptance.
D) raises the price of a product and then waits to see if others follow suit.

Accepted Answer

The answer of A step out is a pricing practice...

Question 10

Which of the following pricing strategies tries to reduce the emphasis on price as a competitive weapon?
A) Penetration pricing
B) Everyday low pricing
C) Skimming pricing
D) Competitive pricing

Accepted Answer

The answer of Which of the following pricing strategies tries...

Question 11

When General Motors introduced the Saturn,it priced the SL sports sedan at $2,000 less than the Toyota Corolla DLX and $1,500 less than comparable Nissan and Honda automobiles.This is an example of the _____ pricing strategy.
A) skimming
B) penetration
C) competitive
D) leader

Accepted Answer

This pricing strategy is called "penetration," where the price is set lower than competitors to quickly gain market share.

Question 12

The price a consumer or marketing intermediary actually pays for a product after subtracting any discounts,allowances,or rebates from the list price is called _____ price.
A) retail
B) market
C) functional
D) sticker

Accepted Answer

The answer of The price a consumer or marketing intermediary...

Question 13

A penetration pricing strategy is called _____ pricing when it implements the premise that a lower-than-market price will attract buyers and move a brand from an unknown newcomer to brand-recognition or brand-preference stage.
A) market-plus
B) market-minus
C) EDLP
D) FOB

Accepted Answer

A penetration pricing strategy that involves setting a lower price than the market price is called market-minus pricing. This strategy is used to attract buyers and gain brand recognition or preference. EDLP (Everyday Low Pricing) is a pricing strategy where prices are kept constant, avoiding discounts or sales. FOB (Free On Board) is a shipping term that indicates when the seller is responsible for goods until they are loaded on board the transport. Market-plus pricing is not a recognized pricing strategy.

Question 14

_____ pricing is the pricing strategy of continuously offering low prices rather than relying on short-term price-cutting tactics such as cents-off coupons,rebates,and special sales.
A) Minimum advertised
B) Skimming
C) Everyday low
D) Competitive

Accepted Answer

The description matches the strategy of Everyday low pricing, which offers consistently low prices rather than temporary discounts or promotions. Minimum advertised pricing refers to a policy where retailers cannot advertise a product below a certain price set by the manufacturer. Skimming pricing is used to set high prices for new and innovative products. Competitive pricing involves setting prices based on the prices of competitors.

Question 15

Which of the following is a major disadvantage associated with the skimming pricing strategy?
A) It is not effective for higher-end goods.
B) It is not effective in recovering the high research and development costs.
C) It attracts competition as potential competitors enter into the market observing the high financial returns obtained by innovative firms.
D) It leads to fulfillment problems if the demand for the product outstrips the firm's production capacity.

Accepted Answer

Skimming pricing strategy involves setting high initial prices to recover high research and development costs and also to target early adopters who perceive the product as having high value. However, this strategy attracts competition as potential competitors enter into the market observing the high financial returns obtained by innovative firms. This increases price competition and reduces profit margins for the firm. Therefore, option C is the major disadvantage associated with the skimming pricing strategy. Options A and B are irrelevant, and option D is a fulfillment problem, which is not a major disadvantage associated with skimming pricing strategy.

Question 16

If a manufacturer offered an intermediary a percentage discount off the list price of products it handled in exchange for performing certain wholesaling activities,this would be classified as a:
A) cash rebate.
B) list price.
C) cumulative discount.
D) trade discount.

Accepted Answer

This type of discount offered to intermediaries is commonly known as a trade discount. It is a reduction in the list price of goods or services and is usually given to intermediaries like wholesalers and retailers as compensation for their services in promoting and selling the product.

Question 17

The price normally quoted to potential buyers before any discounts or allowances are allowed is called the _____ price.
A) market
B) list
C) cash
D) trade

Accepted Answer

The price normally quoted to potential buyers before any discounts or allowances are allowed is called the list price.

Question 18

A negative cash discount is used by a seller to:
A) reduce prices on a one-time-only basis.
B) improve its liquidity position and cut collection expenses.
C) return the costs incurred by channel members in performing marketing functions.
D) reduce prices in an attempt to integrate promotional strategies within distribution channels.

Accepted Answer

A negative cash discount, also known as a surcharge, is an additional fee charged by a seller for paying with credit rather than cash or check. The purpose of this fee is to encourage customers to pay with cash or check, which improves the seller's liquidity position and cuts collection expenses. This option is the best choice as none of the other options mention improving liquidity or cutting expenses.

Question 19

A skimming pricing strategy is more commonly used by firms to:
A) reduce the raised prices of products to the original level.
B) set a market-entry price for distinctive goods or services with little or no initial competition.
C) set a relatively low price for a product when they enter new markets characterized by dozens of competing brands.
D) set stable wholesale prices that undercut offers competitors make to retailers.

Accepted Answer

Skimming pricing strategy is used when a firm introduces a new and unique product or service with little or no initial competition to set a high initial price. The goal is to maximize profits from early adopters who are willing to pay a premium for the new product.

Question 20

A _____ pricing strategy permits marketers to control demand in the introductory stages of a product's life cycle and then adjust productive capacity to match changing demand.
A) penetration
B) value-added
C) skimming
D) competitive

Accepted Answer

The skimming pricing strategy involves initially setting high prices for a new product to help recoup development costs and establish the product as a premium offering. This strategy is effective in controlling demand in the introductory stages of a product's life cycle, as it attracts early adopters who are willing to pay a premium price for the product. As demand levels off, the marketer can adjust the price downward to appeal to a broader market. Therefore, this pricing strategy allows marketers to adjust productive capacity to match changing demand.

Quiz 19: Pricing Strategies

Penetration pricing works best for goods or services:

Since it involves the use of a high price relative to prices of competing products or services,the skimming pricing strategy is sometimes referred to as _____ pricing.

A _____ pricing strategy helps manufacturers to distinguish their high-end products from similar products of their competitors.

The price reduction offered to a customer,business user,or marketing intermediary in return for prompt payment of a bill is called a _____ discount.

Retailers such as Home Depot and Lowe's,who offer to meet and beat the best price offered by their competitors,use the strategy of _____ pricing.

The payment offered to a channel member for performing marketing functions is called a _____.

Everyday low pricing is a strategy devoted to continuous low prices as opposed to:

In order to recover research and development costs rapidly and earn high initial profits,SenseTV is setting a high price for its plasma TVs.The pricing strategy SenseTV is using is called _____ pricing strategy.

A step out is a pricing practice in which a firm:

Which of the following pricing strategies tries to reduce the emphasis on price as a competitive weapon?

When General Motors introduced the Saturn,it priced the SL sports sedan at $2,000 less than the Toyota Corolla DLX and $1,500 less than comparable Nissan and Honda automobiles.This is an example of the _____ pricing strategy.

The price a consumer or marketing intermediary actually pays for a product after subtracting any discounts,allowances,or rebates from the list price is called _____ price.

A penetration pricing strategy is called _____ pricing when it implements the premise that a lower-than-market price will attract buyers and move a brand from an unknown newcomer to brand-recognition or brand-preference stage.

_____ pricing is the pricing strategy of continuously offering low prices rather than relying on short-term price-cutting tactics such as cents-off coupons,rebates,and special sales.

Which of the following is a major disadvantage associated with the skimming pricing strategy?

If a manufacturer offered an intermediary a percentage discount off the list price of products it handled in exchange for performing certain wholesaling activities,this would be classified as a:

The price normally quoted to potential buyers before any discounts or allowances are allowed is called the _____ price.

A negative cash discount is used by a seller to:

A skimming pricing strategy is more commonly used by firms to:

A _____ pricing strategy permits marketers to control demand in the introductory stages of a product's life cycle and then adjust productive capacity to match changing demand.