Question 1

When supermarkets and department stores drop the price on well-known brands to stimulate store traffic,this is called ________.

Accepted Answer

Dropping the price on well-known brands to stimulate store traffic is a classic example of loss-leader pricing. This tactic involves offering a product at a lower price than the competition to attract buyers, with the hope that they will purchase additional products with higher profit margins.

Question 2

Companies sometimes initiate price cuts in a drive to dominate the market through lower costs.One of the possible traps of a price-cutting strategy is ________.

Accepted Answer

The possible trap of a price-cutting strategy is that it may attract price-sensitive customers who are not loyal and only buy when prices are low. This can lead to a situation where the company's profitability is entirely dependent on low prices and cannot sustain higher prices in the long run if they have shallow pockets.

Question 3

Given strong consumer resistance to price hikes,marketers go to great lengths to find alternative approaches that will allow them to postpone a price increase.Which of the following is NOT one of these approaches

Accepted Answer

Demand upfront payment before shipping goods is not an alternative approach to postpone a price increase. It may be a payment policy, but it is not related to the postponement of a price increase.

Question 4

A major circumstance provoking price increases is ________.

Accepted Answer

Cost inflation is a major circumstance provoking price increases as it affects the cost of production, including labor, raw materials, and transportation. When the cost of production increases, companies may increase their prices to maintain or improve their profit margins. Market demand, price versus competition, profitability versus target, and stock price versus target price may also influence pricing decisions, but they are not necessarily a direct cause of price increases.

Question 5

Varying prices by time of the day,the season of the year,or the day of the week is called ________.

Accepted Answer

Time pricing refers to the strategy of varying prices based on the time of day, season, or day of the week.

Question 6

Generally,consumers prefer ________ price increases on a regular basis to sudden,sharp increases.

Accepted Answer

Consumers generally prefer small price increases on a regular basis because it allows them to adjust their budget accordingly and plan their purchases. Sudden, sharp increases can be unexpected and cause financial strain, leading to a decrease in consumer satisfaction and loyalty.

Question 7

Pricing methods narrow the range from which the company selects its final price.In selecting that price,the company must consider additional factors,including the impact of other marketing activities,company pricing policies,gain-and-risk-sharing pricing,and the impact of price on ________.

Accepted Answer

The impact of price on other parties, such as competitors, customers, and suppliers, is a crucial consideration when selecting the final price.

Question 8

________ occurs when a company sells a product or service at two or more prices that do not reflect a proportional difference in costs.

Accepted Answer

This is a clear explanation of price discrimination, which occurs when a company charges different prices for the same product or service based on various customer demographics, such as age or income, rather than cost differences.

Question 9

In ________ pricing,the company decides how to price its products to different customers in different locations and countries.

Accepted Answer

Geographical pricing involves adjusting prices for products and services based on the location or country of the customer. This strategy takes into account factors such as local competition, demand, and cost of living, which vary from one region or country to another. By using geographical pricing, companies can tailor their pricing strategy to local market conditions and increase their competitiveness in different regions.

Question 10

The seller sells a plant,equipment,or technology to another country and agrees to accept as partial payment products manufactured with the supplied equipment in a ________.

Accepted Answer

This scenario describes a buyback arrangement, where the seller agrees to accept products manufactured with the supplied equipment as partial payment from the buying country. This allows the buyer to have access to technology or equipment they may not have been able to afford otherwise, and the seller can potentially receive ongoing business from the buyer as they use the equipment to manufacture products.

Question 11

A British aircraft manufacturer sold planes to Brazil for 70% cash and the rest in coffee.This is an example of ________.

Accepted Answer

This is an example of a compensation deal, where part of the payment is made in cash and the rest in goods or services, in this case, coffee.

Question 12

A(n)________ is offered by a manufacturer to trade-channel members if they will perform certain functions,such as selling,storing,and record keeping.

Accepted Answer

A functional discount is a type of discount offered by a manufacturer to trade-channel members if they will perform certain functions such as selling, storing, and record keeping. This discount is based on the trade-channel members' performance of certain functions rather than on the quantity of products purchased or payment terms. Therefore, option A is the best choice for this question.

Question 13

When different customer groups are charged different prices for the same product or service,it is called ________.

Accepted Answer

The answer of When different customer groups are charged different...

Question 14

Some of the considerations that companies face when deciding to match a competitor's price decline include the product's importance in the company's portfolio,the competitor's intentions,and the ________.

Accepted Answer

Companies consider the market's price and quality sensitivity to understand how customers might react to price changes and to determine if matching a competitor's price decline will affect their market position and profitability.

Question 15

Most companies will ________ their list price and give discounts and allowances for early payments,volume purchases,and off-season buying.

Accepted Answer

Companies generally adjust their list price based on various factors such as market demand, production cost, and competitor prices. They then offer discounts and allowances on this adjusted price to motivate customers to buy in bulk, buy in off-season, or pay early. Therefore, option D) adjust is the most suitable choice for the given context.

Question 16

Companies often adjust their basic price to accommodate differences in customers,products,locations,and so forth.Examples of these differentiated prices include all of the following EXCEPT ________.

Accepted Answer

New-product pricing is not a form of differentiated pricing; it refers to strategies used when introducing a new product to the market, rather than adjusting prices based on customer, product, or location differences.

Question 17

In markets that are characterized by products that are highly homogenous,how should a firm react to a competitor's price decline

Accepted Answer

The answer of In markets that are characterized by products...

Question 18

Companies often raise their prices by more than the inflationary cost increases as preparation for further inflation or government price controls.This practice is known as ________.

Accepted Answer

Anticipatory pricing refers to the practice of raising prices in anticipation of future inflation or government price controls. By raising prices more than the actual cost increase due to inflation, companies can prepare for potential future increases in costs while maintaining their profit margins. This strategy is a way to hedge against future uncertainty and maintain sustainable profitability. Therefore, option A is the correct answer. Option B (delayed quotation pricing) refers to a pricing strategy where a company delays providing a quote to a customer until a later time. Option C (escalator pricing) refers to a pricing strategy where prices are automatically adjusted based on changes in the cost of production. Option D (unbundling) refers to a pricing strategy where a company breaks up a product or service and charges customers separately for each individual component. Option E (discount pricing) refers to a pricing strategy where a company offers lower prices to customers in order to encourage sales.

Question 19

One of the traps of instituting a price decrease is when that low price buys market share in the short term.The same customers will shift to any lower-priced product that may come along.This trap is called ________.

Accepted Answer

The described trap is called the "fragile-market-share trap" where market share is gained through a low price, but customers will quickly shift to any lower-priced product that comes along, making the market share gained very fragile.

Question 20

________ is the direct exchange of goods,with no money and no third party involved.

Accepted Answer

Barter is the direct exchange of goods without involving any money or third party. Co-optation typically refers to the process of bringing someone who was previously uninvolved into a group or organization, while buyback refers to the repurchasing of something that was sold previously. Offset typically involves a third party arranging for one party to compensate another for something, while compensation typically involves a payment made in exchange for services or work done.

Quiz 14: Developing Pricing Strategies and Programs