Deck 9: Pricing: Understanding and Capturing Customer Value

Question 1

Consumer perceptions of the product's value set the ________ for prices.

A)demand curve
B)floor
C)ceiling
D)variable cost
E)image

Answer 1

C

Question 2

General Motors,in order to achieve a 15 to 20 percent profit on its investment,prices its automobiles accordingly.This approach is called ________.

A)value-based pricing
B)value-added pricing
C)cost-plus pricing
D)low-price image
E)target return pricing

Answer 2

E

Question 3

Value-based pricing is the reverse process of ________ pricing.

A)variable cost-based
B)cost-plus
C)cost-based
D)good-value
E)equity value-based

Answer 3

C

Question 4

________ is the amount of money charged for a product or service.

A)Payroll
B)Remuneration
C)Price
D)Wage
E)Salary

Question 5

________ pricing involves setting prices based on the costs for producing,distributing,and selling the product plus a fair rate of return for the company's efforts and risks.

A)Value-based
B)Fixed cost
C)Cost-based
D)Variable cost
E)Cost-skimming

Question 6

Costs that change directly with the level of production are referred to as ________ costs.

A)fixed
B)variable
C)target
D)break-even
E)unit

Question 7

Rent,electricity,and executive salaries are examples of ________ costs.

A)fixed
B)variable
C)break-even
D)target
E)marketing

Question 8

________ involves charging a constant low price with few or no temporary price discounts.

A)High-low pricing
B)Target return pricing
C)Cost-plus pricing
D)Everyday low pricing
E)Penetration pricing

Question 9

Which of the following is an external factor that affects pricing decisions?

A)the salaries of production management
B)competition
C)the salaries of finance management
D)overall pricing objectives
E)the company's overall marketing strategy

Question 10

Fixed costs ________ as the number of units produced increases.

A)decrease
B)increase
C)divide in half
D)remain the same
E)increase at a diminishing rate

Question 11

Underpriced products sell very well,but they produce less revenue than they would have if the price were raised to the ________ level.

A)perceived value
B)value-added
C)variable cost
D)demand curve
E)price-floor

Question 12

Product costs set a(n)________ to a product's price.

A)demand curve
B)experience curve
C)floor
D)ceiling
E)break-even cost

Question 13

Price is the only element in the marketing mix that produces ________.

A)revenue
B)variable costs
C)expenses
D)fixed costs
E)demand

Question 14

________ uses buyers' perceptions of what a product is worth,not the seller's cost,as the key to pricing.

A)Customer value-based pricing
B)Target return pricing
C)Cost-based pricing
D)Equity-based pricing
E)Competition-based pricing

Question 15

Break-even pricing,or a variation called ________ pricing,is when the firm tries to determine the price at which it will break even or make the profit it is seeking.

A)competition-based
B)target return
C)fixed cost
D)value-based
E)customer-based

Question 16

Xbox 360 decides to add a free subscription to XBOX magazine with every game bought in an effort to differentiate its offering from PS3 games.This is an example of ________.

A)good-value pricing
B)add-on pricing
C)product-support pricing
D)value-added pricing
E)cost-based pricing

Question 17

Which of the following statements about a break-even analysis is true?

A)A break-even analysis is used to determine how the customer-perceived value changes with value-added pricing.
B)A break-even analysis is a tool used to calculate fixed costs.
C)A break-even analysis shows the level of earnings a company has during an accounting period.
D)A break-even analysis is a tool marketers use to examine the relationship between supply and demand.
E)A break-even analysis does not consider customer value and the relationship between price and demand.

Question 18

When there is price competition,many companies adopt ________ rather than cutting prices to match competitors.

A)high-low pricing strategies
B)value-added pricing strategies
C)target return pricing strategies
D)EDLP strategies
E)image pricing strategies

Question 19

________ costs are the sum of the fixed and variable costs for any given level of production.

A)Target
B)Skimming
C)Value-based
D)Total
E)Break-even

Question 20

The company designs what it considers to be a good product,totals the expenses of making the product,and sets a price that adds a standard markup to the cost of the product.This approach to pricing is called ________ pricing.

A)value-based
B)fixed cost
C)cost-plus
D)cost-based
E)skimming

Question 21

A company sets not just a single price,but rather a ________ that covers different items in its line that change over time as products move through their life cycles.

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

Question 22

If demand hardly changes with a small change in price,we say the demand is ________.

A)variable
B)inelastic
C)value-based
D)at break-even pricing
E)penetrating the market

Question 23

With an understanding of price elasticity,sellers should know that the less elastic the demand for their product is,the more advantageous it is for them to ________.

A)drop the price
B)raise the price
C)leave the price where it is
D)discontinue the item
E)bundle the product with another product

Question 24

Companies facing the challenge of setting prices for the first time can choose between two broad strategies: ________.

A)value-added pricing and market-level pricing
B)target cost pricing and competitive pricing
C)target cost pricing and market-skimming pricing
D)market-penetration pricing and market-skimming pricing
E)market-penetration pricing and value-added pricing

Question 25

Swatch surveyed the market and identified an unserved segment of watch buyers.Using these results,they created a watch at a price consumers were willing to pay.The unorthodox order of this marketing mix decision is an example of ________.

A)competition-based pricing
B)cost-plus pricing
C)target costing
D)value-based pricing
E)penetration pricing

Question 26

________ describes how responsive demand will be to a change in price.

A)Price elasticity
B)Break-even pricing
C)The break-even chart
D)Target costing
E)A supply curve

Question 27

In Sao Paulo,Brazil,there are more than 20 stores specializing in selling the same quality and brand of wheat products located in one street.An individual seller cannot charge more than the going price without the risk of losing business to the other stores.This is an example of what type of market?

A)pure competition
B)monopolistic competition
C)oligopolistic competition
D)a pure monopoly
E)black market

Question 28

A firm is using ________ when it charges a high,premium price for a new product with the intention of reducing the price in the future.

A)price skimming
B)trial pricing
C)value pricing
D)market-penetration pricing
E)predatory pricing

Question 29

If demand changes greatly with a small change in price,we say the demand is ________.

A)inelastic
B)variable
C)elastic
D)value-based
E)fixed

Question 30

When NerdHerd Electronics sets its televisions at three price levels of $699,$899,and $1,099,it is using ________.

A)product line pricing
B)market-skimming pricing
C)market-penetration pricing
D)break-even pricing
E)target return pricing

Question 31

With target costing,marketers will first ________ and then ________.

A)build the marketing mix; identify the target market
B)identify the target market; build the marketing mix
C)design the product; determine its cost
D)use skimming pricing; use penetrating pricing
E)determine a selling price; target costs to ensure that the price is met

Question 32

Price setting is usually determined by ________ in small companies.

A)top management
B)marketing departments
C)sales departments
D)divisional managers
E)cross-functional teams

Question 33

Under ________,the market consists of a few large sellers who are highly sensitive to each other's pricing and marketing strategies.

A)pure competition
B)monopolistic competition
C)oligopolistic competition
D)a pure monopoly
E)pure monopsony

Question 34

Under ________,the market consists of many buyers and sellers who trade over a range of prices rather than a single market price.

A)pure competition
B)monopolistic competition
C)oligopolistic competition
D)a pure monopoly
E)pure monopsony

Question 35

Qriosity Inc.comes out with a new antivirus program and prices it at half price to attract buyers.The company is using ________.

A)marketing-skimming pricing
B)market-penetration pricing
C)value-added pricing
D)reference pricing
E)promotional allowances

Question 36

________ pricing is the approach of setting a low initial price in order to attract a large number of buyers quickly and win a large market share.

A)Market-skimming
B)Market-penetration
C)Above-market
D)Value-based
E)Follow-the-leader

Question 37

The relationship between the price charged and the resulting demand level can be shown as the ________.

A)demand curve
B)supply curve
C)cost curve
D)break-even chart
E)inflation rate

Question 38

Setting a price for products that must be used along with a main product is known as ________ pricing.

A)by-product
B)market-penetration
C)skimming
D)product bundle
E)captive product

Question 39

Companies pricing nonobligatory or accessory products along with a main product are engaged in ________ pricing.

A)product bundle
B)optional product
C)market-penetration
D)by-product
E)skimming

Question 40

Under ________,the market consists of many buyers and sellers trading in a uniform commodity such as wheat,copper,or financial securities.

A)pure competition
B)monopolistic competition
C)oligopolistic competition
D)a pure monopoly
E)pure monopsony

Question 41

When Glow Gift Card Shop offers a price reduction to customers who buy Christmas cards the week after Christmas,it is giving a(n)________ discount.

A)functional
B)seasonal
C)annual
D)allowance
E)credit

Question 42

Producers use captive product pricing to set the price of the main product ________ and set ________ on the supplies necessary to use the product.

A)low; low markups
B)high; low markups
C)low; high markups
D)high; high markups
E)moderately; moderate markups

Question 43

Consumers usually perceive higher-priced products as ________.

A)not within reach of most people
B)having higher quality
C)having high profit margins
D)popular brands
E)being in the introductory stage of the product life cycle

Question 44

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

A)lack information
B)lack skills to use the product
C)have experience with the product
D)are shopping for a specialty item
E)cannot physically examine the product

Question 45

Vac "N' Sew will give customers $100 for a used vacuum cleaner,regardless of condition,when they purchase a new vacuum or sewing machine.This essentially reduces the price by $100.What is this type of discount called?

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

Question 46

________ prices are the prices that a buyer carries in his/her mind and refers to when looking at a given product.

A)Captive product
B)Reference
C)Promotional
D)Geographical
E)Dynamic

Question 47

Trade or functional discounts are offered by manufacturers to which of the following?

A)channel members who perform tasks that the manufacturer would otherwise have to perform
B)consumers who earn a price reduction for buying in bulk
C)intermediaries such as financing institutions as a cost of doing business with them
D)manufacturers that agree to exclusive distribution contracts
E)the government market and other organizations that require bid proposals

Question 48

When a manufacturer offers a ________,customers buy products from manufacturers' dealers within a specified time period and the manufacturer sends the customer a check.

A)cash rebate
B)markup price
C)dealer reduction
D)flash sale
E)functional discount

Question 49

When General Motors provides payments or price reductions to its new car dealers as rewards for participating in advertising and sales support programs,it is granting a ________.

A)trade discount
B)functional discount
C)captive product discount
D)promotional allowance
E)by-product allowance

Question 50

Hotline Long Distance Service uses captive product pricing for its phone call charges.Because this is a service,the price is broken into a fixed rate plus a ________.

A)fixed rate usage
B)variable usage rate
C)standard usage rate
D)market usage rate
E)fixed fee

Question 51

Busch Stadium in St.Louis charges different prices for seats in different areas of the ball park,even though their costs are the same.What is this form of pricing called?

A)location-based
B)skimming
C)product-form
D)time-based
E)penetration

Question 52

With product bundle pricing,sellers can combine several products and offer the bundle ________.

A)as a working unit
B)at a reduced price
C)as a complete self-service package
D)as a reward to loyal customers
E)as segmented pricing

Question 53

When a firm varies its price by the season,month,day,or even hour,it is using ________ pricing.

A)revenue management
B)penetration
C)skimming
D)time-based
E)value-added

Question 54

________ falls between FOB-origin pricing and uniform-delivered pricing.

A)Captive pricing
B)Dynamic pricing
C)Basing-point pricing
D)Price bundling
E)Zone pricing

Question 55

Which of the following is the opposite of FOB-origin pricing?

A)basing-point pricing
B)dynamic pricing
C)uniform-delivered pricing
D)freight-absorption pricing
E)zone pricing

Question 56

Under which type of geographic pricing strategy does each customer pay the same price for the product from the factory to its destination?

A)basing-point pricing
B)freight-absorption pricing
C)FOB-origin pricing
D)dynamic pricing
E)uniform-delivered pricing

Question 57

The fact that a hot dog cost five times more at Disneyland than at Sam's Club is an example of ________.

A)allowance pricing
B)captive product pricing
C)penetration pricing
D)segmented pricing
E)promotional pricing

Question 58

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

A)time-based pricing
B)location pricing
C)customer-segment pricing
D)revenue management pricing
E)generational pricing

Question 59

________ involves selling a product or service at two or more prices,where the difference in prices is not based on differences in costs.

A)Segmented pricing
B)Variable pricing
C)Flexible pricing
D)Cost-plus pricing
E)Reference pricing

Question 60

What type of pricing is being used when a company temporarily prices its product below the list price or even below cost to create buying excitement and urgency?

A)segmented pricing
B)psychological pricing
C)reference pricing
D)promotional pricing
E)dynamic pricing

Question 61

If Dell charges the same price for delivery of its product to any customer that is located within the Great Lakes states,the company is using ________.

A)psychological pricing
B)promotional pricing
C)reference pricing
D)zone pricing
E)uniform-delivered pricing

Question 62

Price discrimination is legal if ________.

A)a manufacturer and reseller have agreed upon a specified retail price for a product
B)a manufacturer maintains the same price to meet different conditions in different world markets
C)a seller can prove its costs per unit are different when selling to different retailers
D)a seller advertises prices that are not actually available to consumers
E)a seller has not communicated with competitors before announcing prices

Question 63

A break-even chart shows the total cost and total revenue expected at various sales volume levels.

Question 64

Chef Brown's Health Food Store sells nutritional energy-producing foods.The price of the products sold varies according to individual customer accounts and situations.For example,long-time customers receive discounts.This strategy is an example of ________.

A)zone pricing
B)cost-plus pricing
C)dynamic pricing
D)value pricing
E)penetration pricing

Question 65

EDLP is a type of high-low pricing.

Question 66

Penny Bank,a discount retail chain,is highly competitive.When entering a new market,Penny Bank often cuts prices so deeply that it sells below costs,effectively pushing smaller retail stores with less purchasing power out of the market.Penny Bank is at risk of being accused of ________.

A)market skimming
B)price-fixing
C)predatory pricing
D)deceptive pricing
E)resale price maintenance

Question 67

Cost-based pricing relies on consumer perception of value to drive pricing.

Question 68

The demand curve shows the number of units the market will buy in a given time period at similar prices.

Question 69

In a pure monopoly,the market is dominated by one seller.

Question 70

Which of the following is a reason for a company to raise its prices?

A)to address the issue of overdemand for a product
B)to win a larger share of the market
C)to use excess capacity
D)to boost sales volume
E)to balance out decreasing costs

Question 71

Product costs set the ceiling for a product's price,whereas consumer perceptions of the product's value set the floor for prices.

Question 72

Value-based pricing means that the marketer cannot design a product and marketing program and then set the price.

Question 73

Rather than cutting prices to match competitors,companies attach value-added features and services to differentiate their offers and thus support their higher prices.

Question 74

The simplest pricing method is break-even pricing,which involves adding a standard markup to the cost of the product.

Question 75

________ refers to selling below cost with the intention of punishing a competitor or gaining higher long-run profits by putting competitors out of business.

A)Oligopolistic pricing
B)Captive pricing
C)Dynamic pricing
D)Zone pricing
E)Predatory pricing

Question 76

In industrial markets,salespeople outrank top management in determining the sales price of products,as well as pricing objectives and policies.

Question 77

Price is the only element in the marketing mix that produces revenue.

Question 78

The Sherman,Clayton,and Robinson-Patman Acts are all federal laws that were initially adopted to curb the formation of ________.

A)monopolies
B)oligopolies
C)competitive markets
D)international markets
E)limited partnerships

Question 79

The Internet offers ________,where the price can easily be adjusted to meet changes in demand.

A)captive pricing
B)dynamic pricing
C)basing-point pricing
D)price bundling
E)cost-plus pricing

Question 80

Target costing reverses the usual marketing process and instead starts with an ideal selling price based on customer value considerations and then targets costs that will ensure that the price is met.