Deck 11: Pricing Strategies: Additional Considerations

Question 1

Refer to the scenario below to answer the following question(s).
Champion, Inc. is a manufacturer of lunch boxes, school bags, and school stationery. Charles Payton, the CEO of Champion, hopes to sell the products at a low price to penetrate the market quickly.
Which of the following best supports a market-penetration strategy for Champion?

A) Production costs increase as sales volume increases.
B) It is very difficult for competitors to enter the market.
C) The cost of producing a smaller volume is negligible.
D) The quality of the products supports high initial prices.
E) The market for the products is highly price sensitive.

Answer 1

E

Question 2

When The Candy Store sets a low initial price in order to get its "foot in the door" and to quickly attract a large number of buyers, the company is using market-skimming pricing.

Answer 2

False

Question 3

Companies set not a single price, but a pricing ________ that covers different items in its line and changes over time as products move through their life cycles.

A) by-product
B) structure
C) loop
D) cycle
E) bundle

Answer 3

B

Question 4

A market-penetration pricing policy should LEAST likely be used for a new product when ________.

A) the market is highly price sensitive
B) production and distribution costs fall as sales volume increases
C) the product's quality and image support a high price
D) a high price helps keep out the competition
E) there are few or no competitors in the market

Question 5

Companies facing the challenge of setting prices for the first time can choose between two broad strategies: market-penetration pricing and ________ pricing.

A) comparative
B) competitive
C) market-skimming
D) market-segmentation
E) cost-plus

Question 6

Companies that set a low price for a new product in order to attract a large number of buyers and a large market share are using the ________ strategy.

A) market-skimming pricing
B) market-penetration pricing
C) cost-plus pricing
D) inclusive pricing
E) exclusive pricing

Question 7

Differentiate between market-skimming and market-penetration pricing strategies. Explain the conditions within which they are effective.

Question 8

Whizz Corp. wishes to introduce a new hybrid car into mature markets in developed countries with the goal of gaining mass-market share quickly. Which of the following pricing strategies would help the firm meet its goal?

A) market-skimming pricing
B) market-penetration pricing
C) market-segmentation pricing
D) cost-plus pricing
E) captive-product pricing

Question 9

Pricing strategies tend to change and evolve as the average product passes through its life cycle.

Question 10

In a bid to attract more customers in a market that has several competitors, Barrymore's Bakery slashed the prices of all its products by 50 percent. Managers at the firm reasoned that lower prices would draw in even more customers, making up for the reduction in price several times over. Which of the following pricing strategies are they using?

A) market-skimming pricing
B) market-penetration pricing
C) captive-product pricing
D) cash discount pricing
E) by-product pricing

Question 11

After entering a market by using market-penetration pricing, a company can easily raise its price and maintain its market share.

Question 12

For a market penetration-price strategy to succeed, which of the following is LEAST likely to be true?

A) Production costs decrease as sales volume increases.
B) A low price triggers market growth.
C) Distribution costs decrease as sales volume increases.
D) Low prices must inhibit competition from entering the market.
E) The strategy can be changed quickly, to a higher-priced position, with no negative impact.

Question 13

For market skimming to be successful, the costs of producing a smaller volume cannot be so high that they cancel the advantage of charging more.

Question 14

Which of the following is true of market-penetration pricing?

A) It should be used when the product's quality and image support a high price.
B) It involves setting a high price for a new product to appeal to the elite in society.
C) It results in drawing in large numbers of buyers quickly, winning a large market share.
D) It is best used in conjunction with a market-skimming pricing strategy.
E) It results in the company making fewer and less profitable sales.

Question 15

Which of the following is true of price skimming?

A) It is effective in situations in which competitors are able to undercut prices easily.
B) It can be profitably used when the product's quality and image support its price.
C) It involves underpricing products so that companies make larger sales.
D) It is ineffective in situations in which competitors are unable to enter the market easily.
E) It leads to a situation in which the company completes more, though less profitable, sales.

Question 16

For what types of products might marketers use market-skimming pricing?

Question 17

When a company sets a high price for a new product with the intention of reducing the price in the future, it is using the ________ pricing strategy.

A) market-skimming
B) cost-plus
C) market-segmentation
D) market-penetration
E) competitive

Question 18

A market-skimming pricing strategy should NOT be used for a new product when ________.

A) the product's quality and image support its higher price
B) enough buyers want the products at that price
C) competitors are unable to enter the market
D) competitors can undercut prices easily
E) producing a smaller number of goods is feasible

Question 19

Electrowhip, a company that manufacturers blenders and electric whisks, has decided to use a market penetration pricing strategy. Which of the following, if true, proves their decision to be a wise one?

A) Electrowhip's competitors utilize social media for marketing their products.
B) Electrowhip sells products whose image and quality support high prices.
C) Electrowhip operates in a market with many competitors.
D) Electrowhip does not operate in a price sensitive market.
E) Electrowhip's products are intended to appeal to the elite in society.

Question 20

Midnight Magic, a perfume manufacturing company, plans to release a new fragrance during the holiday season at $99 per bottle. The company intends to bring the price down to $49 within six months of its release to attract buyers who couldn't afford the initial price. Which of the following pricing strategies is Midnight Magic using?

A) market-penetration pricing
B) market-skimming pricing
C) competitive pricing
D) cost-plus pricing
E) product-line pricing

Question 21

Which of the following product mix pricing strategies involves pricing additional or accessory products sold along with the main product?

A) inclusive product pricing
B) exclusive product pricing
C) by-product pricing
D) product bundle pricing
E) optional-product pricing

Question 22

When amusement parks charge customers for admission and later for food and beverages, they are following a ________ pricing strategy.

A) by-product
B) product line
C) penetration
D) skimming
E) two-part

Question 23

Which of the following product mix pricing strategies involves pricing multiple products to be sold together?

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

Question 24

Which of the following product mix pricing strategies did Polaroid use when it set the general price range of its cameras low and the markup on its film high?

A) product-segmented pricing
B) by-product pricing
C) customer-segmented pricing
D) captive product pricing
E) product bundling pricing

Question 25

Which of the following companies uses captive product pricing?

A) Photo Genie, which sells inexpensive cameras that run only on their own expensive batteries
B) Go Zone, which launched a range of tablet models, each priced according to its features
C) Penguin's Parlor, which offers customers a 20-percent discount on their birthdays
D) Sportsprint, which prices sports equipment according to customer evaluations
E) Burger Den, whose combo meals are priced lower than its individual components sold together

Question 26

Which of the following is true of optional-product pricing?

A) It involves capitalizing on low value by-products.
B) It involves pricing products that can be added to the base product.
C) It is used to price a company's main product.
D) It involves setting geographically specific prices.
E) It is used to price products that must be used with the company's main product.

Question 27

Beach Heaven uses two-part pricing for its holiday resort charges. Because this is a service, the price is broken into a fixed fee for the room plus a(n) ________ usage rate for activities, including kite-sailing and child care.

A) fixed
B) variable
C) standard
D) market
E) optional

Question 28

Multiprint, a printer manufacturing firm, sells ink cartridges for each of its specific models. Only Multiprint cartridges are compatible with Multiprint printers, and no two models share the same specifications. What type of pricing does Multiprint use?

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

Question 29

Which of the following product mix pricing strategies involves pricing products that can only be used with the main product?

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

Question 30

Which of the following companies uses product bundle pricing?

A) Photo Genie, which sells inexpensive cameras that run only on their own, expensive, batteries
B) Go Zone, which launched a range of tablet models, each priced according to its features
C) Penguin's Parlor, which offers customers a 20 percent discount on their birthdays
D) Green Thumb, which gives away free watering cans with the purchase of certain potted plants
E) Panizza, whose combo meals are priced lower than its individual components sold together

Question 31

In the case of services, captive product pricing is called ________ pricing.

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

Question 32

Which of the following is true of product bundle pricing?

A) It promotes the sale of products that consumers might not otherwise buy.
B) It is used to set prices across an entire product range based on customer evaluations.
C) It forces customers to buy product parts that are only compatible with the main product.
D) It results in companies making fewer-though more profitable-sales.
E) It involves pricing the main product low and setting high markups on the supplies.

Question 33

Which of the following is true of product line pricing?

A) The price steps take cost differences between products in the line into account.
B) The pricing strategy cannot be used by companies in developed countries.
C) The price steps do not account for the prices of similar products from competitors.
D) The pricing strategy involves overpricing products so that they appeal to the elite.
E) The customer's perception of the value of different features is considered irrelevant.

Question 34

Which of the following companies uses product line pricing?

A) Photo Genie, which sells inexpensive cameras that run only on their own expensive batteries
B) Mobile Point, which launched a range of cell phone models, each priced according to its features
C) Penguin's Parlor, which offers customers a 20-percent discount on their birthdays and certain holidays
D) Green Thumb, which gives away free watering cans with the purchase of certain potted plants
E) Panizza, whose combo meals are priced lower than the individual components sold together

Question 35

Using ________ pricing, companies are able to turn their trash into cash, allowing them to make the price of their main product more competitive.

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

Question 36

A lumber mill takes in logs, turns them into 2 x 4's and other sizes needed for building construction. Wood chips created in the milling process are a(n) ________ that can be sold.

A) bundled product
B) captive product
C) by-product
D) optional product
E) primary product

Question 37

Refer to the scenario below to answer the following question(s).
Champion, Inc. is a manufacturer of lunch boxes, school bags, and school stationery. Charles Payton, the CEO of Champion, hopes to sell the products at a low price to penetrate the market quickly.
Noticing that themed envelopes aren't selling well, Charles Payton decides to offer customers a special "letter writing" kit. He prices the kit-which comprises letter paper, matching envelopes, and pens-at $5, even though the combined prices of the individual items is $8. Which of the following pricing strategies is he using?

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

Question 38

Why might marketers use market-penetration pricing?

Question 39

Go Zone plans to introduce four tablet models over the next year. These models range from basic readers at $99 per unit, to more sophisticated tablets at $399 per unit. The more features a model has, the more expensive it is. What pricing strategy is Tone Zone using for its range of tablets?

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

Question 40

Which of the following product mix pricing strategies involves setting prices across an entire product range based on cost differences between the products, customer evaluations of different features, and competitors' prices?

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

Question 41

Sensenig Propeller manufactures replica antique wooden airplane propellers. In the process of production, the company generates a great deal of scrap hardwood. How can using by-product pricing benefit the company?

Question 42

Give two examples of product bundle pricing.

Question 43

Which of the following is a price adjustment strategy?

A) product bundle pricing
B) by-product pricing
C) product line pricing
D) optional product pricing
E) discount and allowance pricing

Question 44

Give two examples of by-product pricing.

Question 45

Which of the following price adjustment strategies involves reducing prices to reward customer responses such as volume purchases, paying early, or participating in sales-support programs?

A) product bundle pricing
B) captive product pricing
C) product line pricing
D) dynamic pricing
E) discount and allowance pricing

Question 46

Some industries commonly use two-part pricing, breaking the price down into a fixed fee and a fixed usage rate.

Question 47

In addition to its customary services, On the Spot, a moving company, also sells the boxes and padding that are used when moving household furniture. This is an example of customer-segmented pricing.

Question 48

Give two examples of products for which captive product pricing might be used.

Question 49

What should the price steps of product line pricing take into account?

Question 50

Explain product line pricing.

Question 51

Give two examples of products for which marketers might use optional-product pricing.

Question 52

In product line pricing, price steps should account for differences in customer perceptions of the value of different features.

Question 53

When using product bundle pricing, sellers combine several of their products and offer the bundle at an increased price for increased profit.

Question 54

Pricing across a product mix is difficult because various products have related demand and costs, and products face different degrees of competition.

Question 55

A(n) ________ is a straight reduction in price on purchases during a stated period of time or of larger quantities.

A) allowance
B) free sample
C) discount
D) tax credit
E) quota

Question 56

Which of the following price adjustment strategies offers a price reduction to buyers who pay their bills promptly?

A) cash discount
B) season discount
C) quantity discount
D) trade discount
E) functional discount

Question 57

Solar Tanning Salon prices tanning sessions at $25 per visit. It also offers seasonal passes for $175 that allow the customer to visit the salon multiple times in a year. This is an example of a ________.

A) sample
B) promotional allowance
C) product bundle
D) discount
E) product line

Question 58

Thinking Cap Corp. prices its various cap designs at different price levels, ranging from $2.05 to $5.95. This is an example of optional product pricing.

Question 59

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 60

Print-Fast Printers prices its printer cartridges at a premium, since customers must buy Print-Fast cartridges to work with their Print-Fast printer. Print-Fast uses optional-product pricing.

Question 61

A seller offers a ________ to trade-channel members who perform certain functions, such as selling, storing, and record keeping.

A) functional discount
B) storage allowance
C) cash discount
D) promotional allowance
E) quantity discount

Question 62

Under ________ pricing, different versions of the product are priced differently but not according to differences in their costs.

A) product form
B) optional product
C) captive product
D) by-product
E) seasonal

Question 63

Trade-in allowances are most commonly used in the ________ industry.

A) real estate
B) automobile
C) dairy products
D) financial services
E) health care

Question 64

A movie theater offers a reduced price for an afternoon showing of a film. This type of pricing is ________ pricing.

A) location-based
B) customer-segmented
C) cost-based
D) product form
E) time-based

Question 65

________ allowances are price reductions given for turning in an old item when buying a new one.

A) Promotional
B) Trade-in
C) Depreciation
D) Segmented
E) Functional

Question 66

When a firm varies its price by the season, it is using ________ pricing.

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

Question 67

By definition, ________ pricing is used when a firm sells a product or service at two or more prices, even though the difference in price is not based on differences in cost.

A) segmented
B) variable
C) flexible
D) cost-plus
E) reference

Question 68

When theaters vary seat prices due to audience preferences for seats in coveted rows, they use ________ pricing.

A) customer-segment
B) location-based
C) time-based
D) product line
E) captive product

Question 69

A(n) ________ refers to promotional money paid by manufacturers to retailers in return for an agreement to feature the manufacturer's products in some way.

A) allowance
B) sample
C) discount
D) tax credit
E) tax exemption

Question 70

Segmented pricing is only effective when ________.

A) the segments show similar degrees of demand
B) the cost of segmenting does not exceed the revenue obtained from the price difference
C) the segmented prices do not reflect real differences in customers' perceived value
D) the customers of different socio-economic classes are treated according to their rank
E) companies make their services and products accessible exclusively to wealthy patrons

Question 71

The discount offered by Glamor Gifts to customers who bought Valentine-themed merchandise the week following Valentine's Day is an example of a ________.

A) functional discount
B) seasonal discount
C) trade discount
D) cash discount
E) time-based discount

Question 72

A quantity discount is a price reduction for buyers who ________.

A) buy merchandise out of season
B) buy merchandise in bulk
C) pay their bills on time
D) buy discontinued products
E) return old items while buying new ones

Question 73

Shoe Trends, a company that manufactures formal shoes for men and women, offers to give its customers $10 for an old pair of shoes when they buy a new pair. In essence, they're reducing the price of the new shoes by $10. What is this type of price adjustment called?

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

Question 74

In return for participating in Honda advertising and sales support programs, Honda dealerships are rewarded with payments or price reductions, which are known as ________.

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

Question 75

Leicestershire Renovations has a history of problems with customers who do not pay their bills on time. Leicestershire Renovations wants to improve its cash situation, reduce bad debts, and reduce credit-collection costs. Which of the following forms of pricing would most likely help the firm achieve its goal?

A) by-product pricing
B) zone pricing
C) cash discounts
D) product bundling
E) quantity discounts

Question 76

________ allowances are payments or price reductions that reward dealers for participating in advertising and sales support programs.

A) Promotional
B) Trade-in
C) Segmented
D) Functional
E) Dynamic

Question 77

Sparkling Valley, a luxury resort, prices cottages facing the lake higher than cottages that do not, even though the cottages and services offered are identical in every other aspect. This form of pricing is called ________ pricing.

A) location-based
B) time-based
C) by-product
D) seasonal
E) captive product

Question 78

Consumers are less likely to use price to judge the quality of a product when they ________.

A) have never tried the product before
B) have little knowledge of the brand
C) have experience with the product
D) are shopping for luxury items
E) cannot physically examine the product

Question 79

Which of the following is a price adjustment strategy that considers how a customer's perception of a product is influenced by its price?

A) captive product pricing
B) psychological pricing
C) by-product pricing
D) promotional pricing
E) international pricing

Question 80

The New Age Gallery has three admission prices for students, adults, and seniors, even though all three groups are entitled to the same services. This form of pricing is called ________ pricing.

A) psychological
B) product form
C) customer-segment
D) captive product
E) by-product