Question 1

With regards to product-line pricing, companies normally develop product lines rather than single products and introduce price steps. The seller's task is to establish ________ quality differences between these price steps.

Accepted Answer

In product-line pricing, companies create different price steps for their product lines, and the seller's objective is to establish perceived quality differences between these price steps. This means that the seller needs to create the perception among consumers that the higher-priced products offer better quality or value than the lower-priced ones, even though the actual quality differences may not be significant.

Question 2

In ________ the seller offers goods both individually and in bundles and often charges less for the "bundle" than for the individual products.

Accepted Answer

This describes mixed bundling, where the seller offers both individual products and bundles at a discounted price. The other options are not applicable as they describe different pricing strategies. Two-part pricing involves a fixed fee and a variable fee based on usage, pirating pricing involves illegally selling products, pure bundling involves only selling products as a bundle, and captive pricing involves selling a main product at a low price and its complementary products at a high price.

Question 3

When a company positioned in the "middle" market may want to introduce a lower-priced product line this is an example of

Accepted Answer

Introducing a lower-priced product line is an example of down-market stretch, which involves introducing a new product line at a lower price point than the company's current offerings. This allows the company to reach a wider market and compete with lower-priced competitors.

Question 4

A product line can also be lengthened by adding more items within the present range. There are several motives for line filling: ________, trying to satisfy dealers who complain about lost sales because of missing items in the line, trying to utilize excess capacity, and others.

Accepted Answer

Reaching for incremental profits is a motive for line filling.

Question 5

The main point in segmenting products into different classes is that companies should recognize that these items ________ in their potential for being priced higher or advertised more as ways to increase sales, margins, or both.

Accepted Answer

The main point of segmenting products into different classes is that they differ in their potential for being priced higher or advertised more. This distinction allows companies to effectively target specific products and their corresponding customer segments with different pricing and advertising strategies.

Question 6

A benefit of product mapping is that it identifies ________.

Accepted Answer

Product mapping helps in identifying market segments by visually representing how products are positioned in the market relative to competitors, highlighting gaps and opportunities.

Question 7

Price-setting logic must be modified when the product is part of a product mix. In that case, the firm searches for a set of prices that ________ profits on the total mix.

Accepted Answer

When a product is part of a product mix, the firm must consider the impact of its price on the profits of the entire mix. Therefore, the goal would be to find a set of prices that maximizes profits on the total mix.

Question 8

A company can classify its products into four types that yield different gross margins, depending upon sales volume and promotional costs. In the case of personal computers, which of the following classifications would apply to items with lower sales volume and no promotion, such as faster CPUs?

Accepted Answer

The answer of A company can classify its products into...

Question 9

In offering a product line, companies normally develop a ________ and modules that can be added to meet different customer requirements.

Accepted Answer

Companies typically start with a basic platform, which serves as the foundation for their product line, and then develop various modules or features that can be added to meet the unique requirements of different customers. This allows for greater customization while keeping costs under control. Options A, D, and E are not typically used to describe product development strategies, and option B is too broad and generic to be a specific answer.

Question 10

In today's rapidly changing product markets, modernization of the product line is continuous. Companies plan improvements to encourage customer migration to

Accepted Answer

Companies aim to encourage customer migration to high-priced, high-valued items as these typically offer better features, quality, or status, which can justify the higher price and align with the goal of maximizing revenue and profit.

Question 11

A marketing manager has decided that the firm's newest product should also carry with it a service component the home installation. When pricing out the product, the marketing manager realizes that the service component should carry a higher margin than the basis hardware product. In terms of sales and profits, the marketing manager is capitalizing on the ________ of the home installation to increase the overall margin of his products.

Accepted Answer

The marketing manager is capitalizing on the specialty of the home installation service to increase the overall margin of the product. The service component is seen as a specialized add-on that can command a higher margin due to its expertise and exclusivity.

Question 12

Some service firms often engage in ________, consisting of a fixed fee plus a variable usage fee.

Accepted Answer

The scenario described is an example of two-part pricing, where the firm charges a fixed fee along with a variable usage fee.

Question 13

Companies that wish to enter the high end of the market can introduce products that cater to that market. This is an example of

Accepted Answer

Up-market stretch involves introducing a high-end product to cater to a higher-end market segment. This allows the company to expand its product line and reach a new market without sacrificing its existing reputation or customer base.

Question 14

Marriott Corporation now contains hotels and motels at the "budget" end of the consumer spectrum to the "premium" end with their JD Marriott flagship locations. This is an example of a firm that successfully performed a ________ to reach more consumers and ventures that are more profitable.

Accepted Answer

Marriott Corporation has expanded its offerings both upwards and downwards in the market spectrum, which is an example of a two-way stretch.

Question 15

If line filling is overdone it could result in ________ and customer confusion.

Accepted Answer

Self-cannibalization occurs when the introduction of a new product line or item cannibalizes the sales of existing products, resulting in overall lower revenue and profitability for the company. Overdoing line filling can lead to self-cannibalization and customer confusion, as customers may struggle to differentiate between the numerous similar offerings.

Question 16

________ occurs when a company lengthens its product line beyond its current range.

Accepted Answer

Line stretching occurs when a company extends its product line beyond its current range, either upwards or downwards. This strategy aims to offer a wider variety of products to existing customers or target new market segments.

Question 17

Product-line analysis provides information for two key decision areas product-line length and

Accepted Answer

The answer of Product-line analysis provides information for two key...

Question 18

When shopping for tires for your automobile, you notice that the manufacturer you have selected has tires for your car priced low-, average-, and high-based upon performance and features. This is an example of what type of product-mix pricing?

Accepted Answer

The manufacturer is pricing its product line of tires differently based on the performance and features, making it an example of product-line pricing. The prices are set according to the varying quality, characteristics, and benefits offered by the different sets of tires in the same product line.

Question 19

A manufacturer of hiking boots looks at data that indicates that their sub-segment of the market called "serious hiker" is declining and is predicted to decline into the future. The firm decides to enter the "low-price" segment with its new items. This is an example of a firm using a ________ to reach a new market.

Accepted Answer

The firm is using a down-market stretch by entering a lower-priced segment to reach a new market.

Question 20

A company with many products must ensure that each of its products possess a ________ with the consumer.

Accepted Answer

The answer of A company with many products must ensure...

Quiz 12: Setting Product Strategy