Question 1

For a price skimming strategy to work,the product or service must
A) be bundled with products or services already available on the market.
B) be similar to what consumers are already comfortable with.
C) have wide market appeal.
D) have low production costs.
E) offer consumers some new benefit currently unavailable in alternative products.

Accepted Answer

A price skimming strategy involves introducing a new product or service at a higher price point than the competition, with the goal of attracting early adopters who are willing to pay a premium price for the new offering. For this strategy to work, the product or service must offer consumers some new benefit that is not currently available in alternative products. This new benefit justifies the higher price point and makes early adopters willing to pay it.

Question 2

When Burroughs Wellcome introduced the first anti-AIDS drugs,it initially set the price at $10,000 for a year's supply.Burroughs Wellcome was probably pursuing a(n)__________ pricing strategy.
A) skimming
B) introductory
C) slotting allowance
D) market penetration
E) cost-based

Accepted Answer

Burroughs Wellcome was likely pursuing a skimming pricing strategy by setting a high price for a new, innovative product with limited competition in the market.

Question 3

Developing pricing strategies for __________ is one of the most challenging tasks a manager can undertake.
A) cost-based pricing
B) seasonal rebate items
C) new products
D) zone pricing products
E) quantity discounts

Accepted Answer

Developing pricing strategies for new products is challenging because there is no historical data or competitive pricing to rely on. The manager must consider factors such as production costs, target market, perceived value, and potential demand to determine the best pricing strategy.

Question 4

Pricing _______ products is especially challenging because little or nothing is known about consumers' perceptions of its value.
A) cost-based
B) seasonal
C) service-related
D) bundled
E) new-to-the-world

Accepted Answer

When a product is new-to-the-world, consumers may not have any prior experience with it and may lack a reference point for its value. This makes pricing such products a challenge, as there is little knowledge about consumers' perceptions of its value.

Question 5

In a(n)_______ pricing strategy,marketers rely on the promotion of sales,during which prices are temporarily reduced to encourage purchases.
A) high / low
B) EDLP
C) price skimming
D) uniform delivered
E) bait-and-switch

Accepted Answer

A high/low pricing strategy involves promoting sales through temporary price reductions to entice customers to make purchases. This strategy is often used to create a sense of urgency and encourage impulse buying, as customers are more likely to take advantage of a limited-time sale price.

Question 6

The major objectives associated with a market penetration pricing strategy are to
A) capture the high end of the market demand curve and lower introduction costs.
B) quickly build sales and market share.
C) minimize customer dissatisfaction and maximize reference price value.
D) provide an incentive to purchase a less desirable product to obtain a more desirable product.
E) match competitors' prices and communicate high quality.

Accepted Answer

The main objective of a market penetration pricing strategy is to quickly build sales and market share by offering a low price. This is achieved by setting the price lower than competitors' prices, making the product more attractive to potential customers. By gaining a larger market share quickly, the business can benefit from economies of scale, which can lower production costs and increase profitability in the long term.

Question 7

What is one of the drawbacks of using a price skimming strategy?
A) It is difficult to lower prices on an introductory product.
B) Price skimming allows competitors to easily enter the market.
C) Firms must consider the high costs associated with producing a small volume of product.
D) Price skimming does not work well with new-to-the-market,innovative products.
E) Price skimming is often challenged as being illegal.

Accepted Answer

The answer of What is one of the drawbacks of...

Question 8

Price skimming focuses on selling products to __________ and __________ in the consumer adoption process model.
A) innovators; early adopters
B) early adopters; the early majority
C) the early majority; the late majority
D) the late majority; laggards
E) laggards; innovators

Accepted Answer

Price skimming is a strategy used by businesses to charge a high price for their new or innovative products. This strategy is used to target and attract the innovators and early adopters in the consumer adoption process model, who are willing to pay a premium price for the new product. As the product becomes more mainstream, the price is gradually lowered to attract the early majority and the late majority. Therefore, the correct answer to this question is A) innovators; early adopters.

Question 9

The __________ occurs when unit cost drops as the quantity sold increases.
A) slotting allowance benefit
B) price fixing return
C) improvement value effect
D) experience curve effect
E) cumulative bundling benefit

Accepted Answer

The experience curve effect, also known as the learning curve effect, occurs when there is a reduction in the unit cost of production with an increase in quantity sold due to increased efficiency from experience and learning. As production increases, businesses gain experience and become more efficient, allowing them to produce goods at a lower cost. This decrease in unit cost results in greater profitability for the business.

Question 10

Mario is the first retailer in town to sell games for Sony's new PlayStation 4 machine.Mario wants to quickly capture as much of the market for the new games as possible.Mario will likely use a __________ pricing strategy.
A) market penetration
B) bundling
C) price fixing
D) reference
E) skimming

Accepted Answer

Mario's objective is to capture as much of the market for the new games as possible. A market penetration pricing strategy involves setting a low price for a new product to quickly capture a large share of the market. This strategy is often used by businesses when they introduce new products to the market.

Question 11

It is important to Joanne to get value for her money,but she does not want to spend time comparison shopping.Joanne will likely respond to _______ pricing,but not to _______ pricing.
A) high / low; EDLP
B) premium; high / low
C) high / low; premium
D) price skimming; high / low
E) EDLP; high / low

Accepted Answer

EDLP (Everyday Low Pricing) is a pricing strategy that offers consistently low prices without the need for customers to wait for sales and promotions. This pricing strategy appeals to customers who value their time and do not want to spend time comparing prices. High/low pricing, on the other hand, involves offering high prices initially and then lowering them during promotional periods, which requires customers to wait for sales and promotions to get better prices. Therefore, Joanne is likely to respond to EDLP pricing but not high/low pricing.

Question 12

With a __________ pricing strategy,marketers set a low initial price for the introduction of a new product or service.
A) market penetration
B) bundling
C) price fixing
D) reference
E) skimming

Accepted Answer

Market penetration pricing is a strategy where a company sets a low price for its product or service initially to attract customers and gain a greater market share. This approach works well for new products or services entering a crowded market or where there is tough competition. The goal is to attract customers with a low price, gain brand recognition, and build customer loyalty, all of which can lead to higher sales and profits in the long run.

Question 13

Charging a relatively high price for new and innovative products to those consumers most willing and able to pay the high price is called price
A) penetration.
B) bundling.
C) fixing.
D) referencing.
E) skimming.

Accepted Answer

Skimming involves setting a high price for new and innovative products in order to capture the maximum amount of revenue from consumers who are willing to pay a premium. As the market becomes more saturated or competition increases, the price may be lowered to appeal to a broader range of consumers.

Question 14

In determining the price for his company's new pocket digital camera,Matt determines what consumers consider the regular or original price for similar cameras available in the market.Matt is assessing the influence of __________ on pricing strategy.
A) improvement value
B) odd-even prices
C) everyday low pricing
D) reference prices
E) cost of ownership

Accepted Answer

Matt is assessing the influence of reference prices on pricing strategy by considering what consumers consider the regular or original price for similar cameras available in the market. Reference prices are prices that consumers consider as a benchmark for determining the value of a product.

Question 15

One reason marketers of new,innovative products often start out with a price skimming strategy rather than a market penetration strategy is that
A) few consumers understand a penetration strategy.
B) a price skimming strategy lowers the value for consumers.
C) a price skimming strategy targets all product adopters equally.
D) it is easier to lower prices than to raise them.
E) price skimming is legal while price penetration is not.

Accepted Answer

Starting with a price skimming strategy allows marketers to establish a high price point and capture the early adopters who are willing to pay a premium for the product's novelty. As the product gains wider acceptance and competition increases, the marketer can then gradually lower the price to attract more price-sensitive consumers. Lowering the price is generally easier than raising it, making a price skimming strategy a more attractive option for new products.

Question 16

Production of the DeLorean car,made famous in the film Back to the Future,never got above 25,000 units during its lifetime.Automobile industry analysts estimate that production of this car needed to reach around 300,000 units to achieve the __________,which refers to a decrease in unit cost as product volume increases.
A) slotting allowance benefit
B) price fixing return
C) improvement value effect
D) experience curve effect
E) cumulative bundling benefit

Accepted Answer

The phenomenon described in the question is known as the experience curve effect, where the cost per unit decreases as production volume increases. This is because increased volume leads to economies of scale, improved productivity, and increased efficiency. Therefore, the best choice is D.

Question 17

A reference price is
A) the total price including tax.
B) the price against which buyers compare the actual selling price.
C) the manufacturer's cost.
D) a cumulative quantity discount price.
E) the external horizontal fixed price.

Accepted Answer

A reference price is the price against which buyers compare the actual selling price. It could be a previous price, the price of a competitor's product, or the manufacturer's suggested retail price. It serves as a benchmark against which consumers measure the value of a product or service.

Question 18

What makes a high / low pricing strategy appealing to sellers?
A) It attracts two distinct market segments.
B) It allows the seller to market itself as an "everyday low price leader."
C) It doesn't require the seller to continually offer sales or deep discounts.
D) It allows sellers to capture the most profit from a new product or service.
E) It reduces the need for slotting and advertising allowances.

Accepted Answer

A high/low pricing strategy is appealing to sellers because it attracts two distinct market segments. The high-priced products attract customers who are willing to pay a premium for quality, while the low-priced products appeal to price-conscious consumers. This allows the seller to maximize profits from both segments.

Question 19

For marketers using a price skimming strategy,once the initial demand is met for new and innovative products,they will likely
A) leave the market.
B) discontinue the product and create a new one.
C) offer deep discounts to create a loss leader pricing strategy.
D) lower the price to capture the next most sensitive market segment.
E) use zone pricing to maximize differences.

Accepted Answer

Once the initial demand for new and innovative products is met, it is likely that the product will start facing competition and there will be less price sensitive market segments that have not yet been targeted. In such a scenario, a price skimming strategy may no longer be effective and the marketer may have to lower the price to capture the next most sensitive market segment. This allows the marketer to continue generating revenue while also expanding their customer base.

Question 20

When Apple Computer Company introduced the iPhone-a combination phone,MP3 player,and Internet access device-in 2007,it was priced at $499,considerably higher than either the iPod or competing cell phones.Hoping to attract innovators and early adopters,Apple was most likely pursuing a __________ pricing strategy.
A) market penetration
B) slotting allowance
C) price fixing
D) reference price
E) price skimming

Accepted Answer

Apple was pursuing a price skimming strategy, which involves setting a high price initially for a new and innovative product in order to maximize profits from early adopters who are willing to pay a premium. As the product gains wider acceptance, the price is gradually lowered to appeal to a broader market.

Quiz 15: Strategic Pricing Methods

For a price skimming strategy to work,the product or service must

When Burroughs Wellcome introduced the first anti-AIDS drugs,it initially set the price at $10,000 for a year's supply.Burroughs Wellcome was probably pursuing a(n) __________ pricing strategy.

Developing pricing strategies for __________ is one of the most challenging tasks a manager can undertake.

Pricing _______ products is especially challenging because little or nothing is known about consumers' perceptions of its value.

In a(n) _______ pricing strategy,marketers rely on the promotion of sales,during which prices are temporarily reduced to encourage purchases.

The major objectives associated with a market penetration pricing strategy are to

What is one of the drawbacks of using a price skimming strategy?

Price skimming focuses on selling products to and in the consumer adoption process model.

The __________ occurs when unit cost drops as the quantity sold increases.

Mario is the first retailer in town to sell games for Sony's new PlayStation 4 machine.Mario wants to quickly capture as much of the market for the new games as possible.Mario will likely use a __________ pricing strategy.

It is important to Joanne to get value for her money,but she does not want to spend time comparison shopping.Joanne will likely respond to _ pricing,but not to _ pricing.

With a __________ pricing strategy,marketers set a low initial price for the introduction of a new product or service.

Charging a relatively high price for new and innovative products to those consumers most willing and able to pay the high price is called price

In determining the price for his company's new pocket digital camera,Matt determines what consumers consider the regular or original price for similar cameras available in the market.Matt is assessing the influence of __________ on pricing strategy.

One reason marketers of new,innovative products often start out with a price skimming strategy rather than a market penetration strategy is that

A reference price is

What makes a high / low pricing strategy appealing to sellers?

For marketers using a price skimming strategy,once the initial demand is met for new and innovative products,they will likely