Question 1

Research has shown that consumers tend to process prices in a "left-to-right" manner rather than by rounding. With this knowledge which of the following prices for a stereo receiver would seem to be a better physiological price?
A) $110.00
B) $109.50
C) $100.00
D) $99.99
E) $150.00

Accepted Answer

Research suggests that consumers process prices from left to right and are more likely to be influenced by the first digits in the price rather than by rounding. Therefore, a price of $99.99 would seem to be a better physiological price than $100.00 or $110.00. Option B is also close but not as effective as D. Option E is not preferred as it is outside the expected price range for a stereo receiver.

Question 2

Many consumers are willing to pay $100 for a perfume that contains $10 worth of scent because the perfume is from a well-known brand. What kind of a pricing is the company depending on?
A) going-rate pricing
B) market-skimming pricing
C) target pricing
D) image pricing
E) markup pricing

Accepted Answer

The company is depending on image pricing, which means setting a high price to convey exclusivity or prestige associated with the brand. The consumer is willing to pay more for the brand image rather than the actual product value.

Question 3

Research on reference prices has found that "unpleasant surprises can have a ________ impact on purchase likelihood than pleasant surprises.
A) greater
B) more diminished
C) less significant
D) brand switching
E) lesser

Accepted Answer

Research on reference prices has shown that consumers are more likely to be influenced by negative information than positive information. Thus, unpleasant surprises (e.g. unexpected high prices) have a greater impact on purchase likelihood than pleasant surprises (e.g. unexpected low prices).

Question 4

A firm has to consider many factors in setting its pricing policy. We list these as a six-step process. Which of the following steps could involve maximum market share?
A) selecting a pricing method
B) determining demand
C) selecting the pricing objective
D) researching reference prices in the target market
E) selecting the final price

Accepted Answer

Selecting the pricing objective could involve maximum market share as one of the options. A company may choose to set prices with the objective of gaining market share, even if it means sacrificing profit margins. Therefore, this step could involve considering maximum market share as an objective. The other steps listed do not necessarily involve considering maximum market share as a factor.

Question 5

Texas Instruments builds a large plant to produce a great quantity of products, hoping that as prices decline, sales volume increases and thus costs decline. What pricing strategy has TI used in order to maximize their market share?
A) reference pricing
B) marketing skimming pricing
C) objective pricing
D) market penetration pricing
E) survival pricing

Accepted Answer

TI has used market penetration pricing strategy where prices are set low to gain a large market share. The aim of this strategy is to attract customers away from competitors and also to discourage potential new entrants into the market. The large plant built by TI is to produce a great quantity of products which will enable price reductions due to their economies of scale, resulting in increases in sales volume and lower costs for the company.

Question 6

When a retailer puts a sign on a product that says "reduced" or a retailer points a sign on a product that says "compare to XXX at $10.00 more," the retailer is encouraging what kind of pricing psychology for its shoppers?
A) price leadership
B) psychological discounting
C) reference pricing
D) going-rate pricing
E) price cues

Accepted Answer

The retailer is encouraging reference pricing, which is when the shopper compares the price of the product to a similar product or a suggested retail price. The use of the "reduced" or "compare to" sign is meant to create a reference point that the shopper can use to evaluate the price of the product.

Question 7

Companies price their products in a number of ways. Small companies prices are set by the boss, in larger companies, pricing is handled by division and product-line managers. In industries where price is a key factor, companies often establish a ________ department reporting to other internal departments.
A) financial
B) marketing
C) pricing
D) sales
E) distribution

Accepted Answer

The question specifically references a pricing department, indicating that pricing is a significant enough factor in the industry that companies create an entire department dedicated to it. Financial, marketing, sales, and distribution departments may all play a role in pricing decisions, but none of them solely focus on pricing like a pricing department would.

Question 8

Some brands adopt scarcity as a means to signify quality and justify
A) EDLP.
B) "9" endings.
C) premium pricing.
D) discounting.
E) value pricing.

Accepted Answer

Scarcity is often used as a tactic by brands to create an illusion of exclusivity and justify premium pricing. By framing their products as limited edition or in short supply, companies can increase the perceived value and desirability of their offerings, leading consumers to be willing to pay more for them. This is particularly effective for luxury and high-end brands, as scarcity can help communicate the idea that their products are rare, and thus inherently valuable.

Question 9

To maximize market share, a firm may use ________ pricing which sits on the theory that as sales volume increases, unit costs will decrease.
A) value pricing
B) market-penetration
C) price bands
D) market-skimming
E) demand pricing

Accepted Answer

Market-penetration pricing is the strategy that involves offering the product at a low price to gain a high market share. It is based on the assumptions that as sales volume increases, unit costs will decrease due to economies of scale. This pricing strategy aims to attract a large number of customers and increase sales quickly, which can help the firm establish itself in the market and drive out competitors.

Question 10

A firm must set a price for the first time when it develops a new product, when it introduces its regular product into a new distribution channel or geographical area, and when it ________.
A) rolls out an improved product.
B) changes styles.
C) needs to increase bottom line results.
D) enters bids on new contract work.
E) raises prices due to cost escalation.

Accepted Answer

When a firm enters bids on new contract work, it must set a price for the first time specific to that contract.

Question 11

A firm first decides where it wants to position its market offering. A company can pursue any of five major objectives through pricing. Which of the following objectives is a major one if a company is plagued with overcapacity, intense competition, or changing consumer wants?
A) product-quality leadership
B) survival
C) predatory pricing
D) maximum current profit
E) maximum market share

Accepted Answer

In situations where a company is facing overcapacity, intense competition, or changing consumer wants, survival becomes a major pricing objective. The company will have to set prices that are low enough to stay in business while still covering costs. The focus here is not on maximizing profit or market share, but on staying afloat in a challenging environment.

Question 12

________ communicates to the market the company's intended value positioning of its product or brand.
A) Physical evidence
B) Price
C) Packaging
D) Promotion
E) Place

Accepted Answer

The answer of ________ communicates to the market the company's...

Question 13

Which of the following is the first step in setting a pricing policy?
A) selecting the pricing objective
B) selecting a pricing method
C) determining demand
D) estimating cost
E) analyzing competitors' costs, prices, and offers

Accepted Answer

Selecting the pricing objective is the first step in setting a pricing policy as it lays the foundation for all subsequent pricing decisions. The pricing objective can be to maximize profits, increase market share, maintain market leadership or simply survive in the market. Once the objective is set, the company can then determine the pricing method, estimate costs, determine demand and analyze competitors' costs, prices, and offers to arrive at an optimal price.

Question 14

Executives often complain that pricing is a big headache. One of the common mistakes made are: Price is not revised often enough to capitalize on market changes; price is set ________ of the rest of the marketing program rather than an intrinsic element of a marketing-positioning strategy.
A) independently
B) too high
C) intrinsically
D) concurrently
E) divergently

Accepted Answer

"Independently" best fits the blank, as it contrasts with "intrinsic element of a marketing-positioning strategy" in the latter part of the sentence. It highlights the mistake where pricing is set without considering other elements of the marketing program, such as the target audience, competition, and product positioning.

Question 15

The Internet is partially reversing the fixed pricing trend. Sellers can customize offers and prices, and buyers can compare prices through
A) chat rooms.
B) negotiation.
C) email.
D) shopbots.
E) online auctions.

Accepted Answer

Shopbots, also known as comparison shopping engines, allow buyers to compare prices from multiple sellers for a specific product. This means that sellers cannot necessarily set a fixed price and expect it to be the only option for buyers. As a result, the Internet is partially reversing the fixed pricing trend.

Question 16

The definition of ________ prices is: In considering an observed price, consumers often compare it to an internal memory reference price or an external frame of reference (such as a posted "regular retail price").
A) historical
B) overvalued
C) reference
D) everyday low price
E) promotional

Accepted Answer

The definition describes reference prices, which are internal or external benchmarks used by consumers to evaluate an observed price. The other choices do not accurately describe this concept.

Question 17

Purchase decisions are based on how consumers perceive prices and what they consider to be the ________ price not the marketer's stated price.
A) current actual
B) current sale price
C) referent price
D) last purchased price
E) quality price

Accepted Answer

The answer of Purchase decisions are based on how consumers...

Question 18

You are introducing a new product to the market; in fact, you are first with this new product to the marketplace. In developing your pricing strategy, it was decided that the price of the product should be at the maximum the market would bear. This is an example of what type of pricing strategy?
A) going-rate pricing
B) prestige pricing
C) product-quality leadership
D) market-skimming pricing
E) market-penetration pricing

Accepted Answer

Market-skimming pricing is a strategy where a new product is launched at a high price to maximize profits while the product is new and innovative. Since the product is the first of its kind in the market, the company can take advantage of the initial demand to charge a higher price. This strategy is often used to recover research and development costs quickly.

Question 19

Many consumers use price as an indicator of ________. Image pricing is especially effective with ego-sensitive products such as perfumes and expensive cars.
A) quality
B) size
C) status
D) capability
E) ability

Accepted Answer

Price is often used by consumers as an indicator of quality, especially for products where the quality is not easily assessed before purchase, such as perfumes and expensive cars.

Question 20

When a consumer buys a $100 bottle of perfume containing $10.00 worth of materials, the gift giver is communicating their high regard to the receiver and this represents the concept of ________ in pricing.
A) reference prices
B) maximum current profit
C) price leadership
D) price cues
E) price-quality relationship

Accepted Answer

The price-quality relationship is the concept that consumers associate higher prices with higher quality products. In this scenario, the gift giver is willing to pay a premium price for the perfume, indicating their belief in its high quality, which communicates their high regard for the receiver.

Quiz 14: Developing Pricing Strategies and Programs

Research has shown that consumers tend to process prices in a "left-to-right" manner rather than by rounding. With this knowledge which of the following prices for a stereo receiver would seem to be a better physiological price?

Many consumers are willing to pay $100 for a perfume that contains $10 worth of scent because the perfume is from a well-known brand. What kind of a pricing is the company depending on?

Research on reference prices has found that "unpleasant surprises can have a ________ impact on purchase likelihood than pleasant surprises.

A firm has to consider many factors in setting its pricing policy. We list these as a six-step process. Which of the following steps could involve maximum market share?

Texas Instruments builds a large plant to produce a great quantity of products, hoping that as prices decline, sales volume increases and thus costs decline. What pricing strategy has TI used in order to maximize their market share?

When a retailer puts a sign on a product that says "reduced" or a retailer points a sign on a product that says "compare to XXX at $10.00 more," the retailer is encouraging what kind of pricing psychology for its shoppers?

Some brands adopt scarcity as a means to signify quality and justify

To maximize market share, a firm may use ________ pricing which sits on the theory that as sales volume increases, unit costs will decrease.

A firm must set a price for the first time when it develops a new product, when it introduces its regular product into a new distribution channel or geographical area, and when it ________.

A firm first decides where it wants to position its market offering. A company can pursue any of five major objectives through pricing. Which of the following objectives is a major one if a company is plagued with overcapacity, intense competition, or changing consumer wants?

________ communicates to the market the company's intended value positioning of its product or brand.

Which of the following is the first step in setting a pricing policy?

Executives often complain that pricing is a big headache. One of the common mistakes made are: Price is not revised often enough to capitalize on market changes; price is set ________ of the rest of the marketing program rather than an intrinsic element of a marketing-positioning strategy.

The Internet is partially reversing the fixed pricing trend. Sellers can customize offers and prices, and buyers can compare prices through

The definition of ________ prices is: In considering an observed price, consumers often compare it to an internal memory reference price or an external frame of reference (such as a posted "regular retail price") .

Purchase decisions are based on how consumers perceive prices and what they consider to be the ________ price not the marketer's stated price.

You are introducing a new product to the market; in fact, you are first with this new product to the marketplace. In developing your pricing strategy, it was decided that the price of the product should be at the maximum the market would bear. This is an example of what type of pricing strategy?

Many consumers use price as an indicator of ________. Image pricing is especially effective with ego-sensitive products such as perfumes and expensive cars.

When a consumer buys a $100 bottle of perfume containing $10.00 worth of materials, the gift giver is communicating their high regard to the receiver and this represents the concept of ________ in pricing.