Quiz 8: Value Through Pricing

Price is the odd-one-out of the marketing mix because of which of the following? A)It is concerned with economics rather than marketing B)Financial controllers control price setting rather than marketing managers C)Price is determined by one's competitors D)It is a revenue earner

When a company offers low prices, it may mean that profit margins may be tight, unless firms can find ways to drive their _______ base down or find additional product or service elements that they can charge handsomely for. A)cost B)profit C)sales D)brand

Price may be a core value proposition offered by some businesses. In these cases, organizations employ a combination of cost management, yield management and _______ pricing. A)diverse B)dynamic C)standard D)customer

Organizations can use a combination of cost management, _______ management and dynamic pricing in order to generate high profitability levels, when price is a core value proposition. A)sales B)employee C)value D)yield

Cost control is critical for firms that attempt to lead on price as their success in controlling costs has a direct impact on _______ margins. A)purchase B)cost C)profit D)competitor

Low price operators tend to engage in aggressive cost management and also seek as much _______ as possible in order that fixed costs can be spread over a larger number of units and thus reduced. A)scale B)scope C)rates D)appeal

Low price competitors often use _______ management, which is the monitoring of demand and potential demand patterns. A)field B)yield C)dynamic D)profit

Low cost service businesses such as travel and hotel accommodation, use yield management to frequently adjust the price of a product in response to various market factors, such as _______ and competition. A)brands B)politics C)technology D)demand

A key reason for the success of many low-cost operators is their flexible approach to pricing, which is known as _______ pricing. A)static B)dynamic C)primary D)secondary

Dynamic pricing means that prices are continually adjusted, based on demand and _______ demand. A)potential B)primary C)express D)secondary

Cost control is critical for firms that attempt to lead on price.

Which of the following is helping to depress price levels? A)Greater levels of globalization B)Use of technology C)Retail competition D)All of the above are depressing sales levels

Which of the following is not a method of setting prices? A)Competitor-orientated pricing B)Market-led pricing C)Sales-focused pricing D)Cost-based pricing

Cost-based pricing gives an indication of which of the following? A)The maximum price that can be extracted from customers B)The minimum price that needs to be charged to break even C)The costs involved in the production D)The costs involved in the production, marketing and distribution of a product

Which of the following is not used in the calculation of cost-based pricing? A)Expected Sales B)Fixed Costs C)Mark Up D)Discounts

Which of the following is not a problem associated with cost-based pricing? A)The procedure is illogical because a sales estimate is made before a price is set B)It focuses on internal costs rather than customers' willingness to pay C)It leads to an increase in price as sales fall D)It attempts to undertake break even analysis

Why, in some cases, is marginal cost pricing (where companies will set prices below full costs) used? A)To maximize profits B)To cover direct costs plus make a contribution to overheads where supply outstrips demand C)To beat competitors' pricing by a set marginal difference D)To maximise the impact of price points

When companies set their prices at levels either above, the same as or below their competitors, this is called? A)A cartel B)Price fixing C)Benchmarking D)None of the above

Competitor-orientated pricing may take any of three forms. Which of the following is not one of these forms? A)Where companies set prices to average industry costs B)Where firms follow the prices charged by leading competitors C)Where contracts are awarded through a competitive bidding process D)Where producers take the going rate price

Going rate prices typically affect which type of product? A)Fast moving consumer goods B)Commodities C)Luxury items D)Industrial products

Which of the following is a weakness associated with competitor-oriented pricing? A)It is risky where a firm's cost position is weaker than its competitors B)It lets competitors dictate prices, therefore a loss of reputation as a market leader may emerge C)It doesn't take into account economic conditions that may affect pricing decisions D)It is too simplistic and easy to use

Which of the following is not used as a useful technique for uncovering customers' value perceptions? A)Trade-off analysis B)Break even analysis C)Economic value to the customer analysis D)Experimentation

Trade-off analysis is also known as which of the following? A)Traffic analysis B)Value analysis C)Customer analysis D)Conjoint analysis

Trade-off analysis measures which of the following? A)The trade-off between competitors' brands, so that price leaders can be established and monitored B)The trade-off between price and other product features so that their effects on product preference can be established C)The trade-off between brands in similar product categories, so that price differentials can be assessed D)The trade-offs the customers undertake every time that they consider during the consumer decision process

The limitation of trade-off analysis is which of the following? A)The trade-off between competitors' brands is irrelevant due to different features and benefits being available with various competing brands B)Product preference is not established C)Profiles do not give an accurate representation of the consumer decision process D)Respondents are not asked to back up their preferences with cash expenditure

Experimental pricing research uses which of the following? A)Test marketing to determine prices B)Market segmentation to determine prices C)Positioning to determine prices D)Laboratory setting to determine prices

EVC analysis stands for which of the following? A)Equivalent value to the customer analysis B)Economic variation to the customer analysis C)Economic value to the customer analysis D)Equivalent variation to the customer analysis

The main advantage of market-led pricing is that it takes into consideration_______. A)customers' perceptions and needs B)competitors' prices C)industry costs D)all of the above

Coupled with the basic dimensions of cost, competitive prices and customer value, which of the following factors influence pricing strategy? A)New product launches strategies, segmentation strategies, international marketing strategies and competitive marketing strategies B)Product & service marketing strategies, promotional strategies, competitive marketing strategies and marketing research C)Positioning strategies, new product launch strategies, product line strategies, competitive marketing strategies, channel management strategies and international marketing strategies D)Marketing research, positioning strategies, channel management strategies and promotional strategies

A combination of high price and high promotion expenditure is called which of the following? A)Rapid penetration strategy B)Slow skimming strategy C)Rapid skimming strategy D)Slow penetration strategy

A low price with low promotional expenditure is an example of which of the following? A)Rapid penetration strategy B)Slow skimming strategy C)Rapid skimming strategy D)Slow penetration strategy

A high price with low levels of promotional expenditure is an example of which of the following? A)Rapid penetration strategy B)Slow skimming strategy C)Rapid skimming strategy D)Slow penetration strategy

Companies that combine low prices with heavy promotional expenditure are practicing which of the following? A)Rapid penetration strategy B)Slow skimming strategy C)Rapid skimming strategy D)Slow penetration strategy

Which of the following product categories typically use a slow penetration strategy? A)Commodities B)Own- Label Brands C)Manufacturer Brands D)Industrial Goods

A skimming strategy is most suitable where _______. A)consumers are less price sensitive B)consumers are more price sensitive C)there are few competitors present in the segment D)there are many competitors present in the segment

A penetration pricing strategy is likely where a company_______. A)seeks to dominate the market B)seeks to create a barrier to entry for competitors C)seeks to dominate the market and to create a barrier to entry for competitors D)none of the above

Four strategic objectives are relevant to pricing, these are to _______. A)build, to harvest, to skim and to maximize B)harvest, to reposition, to maximize, to skim C)build, to hold, to harvest and to reposition D)harvest, to skim, to hold and to maximize

The "build objective" for price sensitive markets implies which of the following? A)Implies price lower than competition B)Implies price higher than competition C)Implies prices following the market leader D)Implies prices set at market rates

The "hold objective" relates to which of the following strategic objectives? A)Holding prices B)Holding sales C)Holding profits D)Holding costs

The "harvest objective" implies _______. A)the maintenance or raising of profit margins as sales and/or market share are rising B)the reduction of prices, so as stock of product in the decline stage of their product life cycle is reduced C)the reduction of prices, so as to maintain sales D)the maintenance or raising of profit margins even though sales and/or market share are falling

In which of the following circumstances would you initiate a price cut? A)Rising costs B)Excess demand C)Mature market D)Price war unlikely

In which of the following circumstances would you initiate a price rise? A)Pre-emptive competitive entry B)Rising costs C)Excess supply D)None of the above

Where products destined for an international market are re-imported back into the home market and sold through unauthorized channels at levels lower than the company wishes to charge, this is known as _______. A)stock purging B)parallel importing C)product dumping D)price discrimination

Price fixing is an ethical concern as companies _______ with each other to ensure that everyone charges the same or similar prices. A)argue B)disagree C)compete D)collude

Which of the following is not an ethical pricing issue? A)Deceptive pricing B)Parallel importing C)Price fixing D)Slow skimming

One common ethical pricing issue is price _______, which involved companies colluding with each other to ensure that everyone charges the same or similar prices. A)forcing B)fixing C)skimming D)penetration

Low-cost airlines have been significant users of _______ pricing, where the prices are not the same as they may first appear. A)deceptive B)fixing C)skimming D)penetration

Price fixing is most likely to be found in industries where brand _______ is difficult, such as oil, paper, glass and chemicals. A)protection B)standardization C)differentiation D)penetration

Which of the following circumstances may indicate a price increase? A)Harvest objective B)Excess supply C)Build objective D)Pre-empt competitive entry

Which of the following circumstances may indicate a price decrease? A)Higher value placed on product by customers B)Build objective C)Excess demand D)Harvest objective

Which of the following tactics may indicate a price increase? A)Higher discounts B)Escalator clauses C)Introduction of a fighter brand D)Price bundling

Which of the following tactics may indicate a price decrease? A)Price bundling B)Price unbundling C)Lower discounts D)Escalator clauses

Where a contract allows the supplier to stipulate price increases in line with a specified index, this is called which of the following? A)Escalator clause B)Price inflation C)Wage inflation D)Price parity

Competitive price increases are more likely to be followed by a company when _______. A)falling cost levels occur B)excess supply exist C)build or hold objective exist D)rising cost levels occur

Competitive price decreases are more likely to be followed by a company when _______. A)excess demand exists B)brand fall compatible with image C)there are price insensitive customers D)harvest or hold objective exist

Competitive price increases are more likely to be followed by a company when _______. A)price sensitive customers are present B)price insensitive customers are present C)falling costs levels occur D)excess supply exists

Competitive price increases are more likely to be ignored by a company when _______. A)price rise is compatible with brand image B)price rise is incompatible with brand image C)harvest objective exists D)none of the above

Competitive price decreases are more likely to be ignored by a company when _______. A)excess supply exists B)there are price sensitive customers C)build objective exists D)none of the above

Competitive price decreases are more likely to be ignored by a company when _______. A)excess demand exists B)falling costs occur C)build objective exists D)none of the above

A quick response to a competitor's price fall will _______. A)nullify competitor's potential sales gains B)help ward off a competitive threat C)build the company's image as value conscious D)all of the above

Price setting can be based on which of the following? A)Market-orientated B)Cost-orientated C)Competitor-orientated D)All of the above

A firm adopting an aggressive pricing strategy is in danger when _______. A)faced with competitors who are in a cartel B)faced by a competitor who has huge resources and market share C)they do not have a cost advantage D)all of the above

Which of the following is the most criticized ethical issue affecting pricing? A)Product dumping B)Price fixing C)Fair trade D)Predatory pricing

Which of the following is a disadvantage associated with experimentation in assessing consumers willingness to pay? A)Fails to take into account customer preferences B)The test needs to back up their preferences with cash expenditure C)The test needs to be long enough so that trial and repeat purchase at each price can be measured D)Fails to impact pricing strategies

Pricing the calculation of only those costs that are likely to rise as output increases is referred to as which of the following? A)Output cost B)Variable costs C)Full cost D)Marginal cost

Going rate pricing is which of the following? A)An approach to pricing which takes a range of marketing factors into account when setting prices B)Pricing at the rate generally applicable in the market, focusing on competitors offerings rather than on company costs C)Pricing strategy that follows the market leaders set price, rather than focus on customer value or costs D)An approach to pricing which takes costs, competitors prices and what consumers perceive as true value

The amount a customer would have to pay to make the total life cycle costs of a new and a reference product the same is referred to as which of the following? A)Referral Pricing B)Lifecycle costs C)Economic value to customer D)Trade off analysis

Positioning refers to which of the following? A)The choice of pricing and the quality associations that arise as a result B)The choice of target market and differential advantage C)The choice of pricing and how the company wishes to compete D)Where the company wishes to compete and pricing strategy

Price _______ refers to the fact that additional cots of shipping and transportation costs to a foreign market, may lead to the price charged in a foreign market being very different to that charged in the home market. A)collusion B)fixing C)escalation D)control

While most firms seek to standardize as many elements of the marketing mix as possible when operating internationally, pricing is one of the most difficult to standardize due to _______. A)price escalation B)parallel importing C)differing exchange rates D)all of these factors

How competitors react to pricing changes depends on which of the following? A)Their past reputation for price changes B)Depends on their competitive situation C)Their strategic objectives D)All of the above

Pricing strategies which have a strong internal orientation are usually which of the following? A)Market based B)Competitor based C)Cost based D)Customer based

Price setting and price management influences which of the following? A)Fixed costs B)Marginal costs C)Profitability D)Average costs

Price settings send which of the following signals to customers? A)Durability Cues B)Quality Cues C)Technology Cues D)Satisfaction Cues

Which of the following is a problem associated with cost-based pricing? A)Time consuming & difficult to calculate fixed and variable costs B)Focuses on external issues rather than those internal C)May be hard to allocate costs in multi-product firms D)All of the above

Which of the following is the most common form of "competitive bidding"? A)Auctions B)Sales C)Price bundling D)Putting out to tender

Companies usually "benchmark" their prices against which of the following? A)Government price regulations B)World class manufacturers C)Major competitors D)Customers

Which of the following is the core difficulty for companies involved in "competitive bidding"? A)Leads to price inflation B)May have to guess where their competitors' prices are set C)Competitors may price fix, setting up a cartel to control prices D)All of the above

During competitive bidding, companies draw up and submit detailed specifications for the requested product and which of the following? A)Discount structure B)Escalator clauses C)Legal Contracts D)Sealed bids

Which of the following is a major risk associated with competitor-orientated pricing? A)Can lead to a price war with competitors, which can impact the overall bottom line B)Can lead to allegations of price fixing from government regulators and consumer groups C)Fails to take into account general economic conditions, such as wage inflation D)Fails to take into account any differential advantages that may exist

Which of the following statements is true? A)The more value that a product gives compared to the competition, the price should be the same as competitors' prices B)The less value that a product gives compared to the competition, the higher the price that can be charged C)The more value that a product gives compared to the competition, the lower the price that can be charged D)The more value that a product gives compared to the competition, the higher the price that can be charged

Where product profiles consisting of product features and price are described to consumers and respondents are asked to name their preferred profile, this is called which of the following? A)Product profiling B)Experimentation C)Trade off analysis D)Price profiling

When products are sold through intermediaries such as distributors or retailers, which of the following must be reflected in the list price to the customer? A)Their costs B)Their margins C)Their market share D)Their buying power

In order to secure distribution channels when a product is being launched, organizations must ensure that retailers obtain which of the following? A)Reduced costs B)Good value to the customer C)Good margins D)Reduced variable costs

Penetration pricing strategies are more likely in which of the following situations: A)Where the company is seeking to dominate the market B)Where they are comfortable to establish a position in the market initially and make money later C)Where they seek to create a barrier to entry by competitors D)All of the above situations are more likely

Price increases are likely when _______. A)price bundling is being used B)a price war is unlikely C)a build objective is being followed D)a harvest objective is being followed

Price decreases are likely when there is _______. A)price unbundling B)escalator clauses C)a build objective D)a harvest objective

When estimating a competitor's reaction to a price change which of the following should be assessed? A)Their strategic objectives B)Their past history C)Their self interest D)All of the above should be considered

"Fighter brands" are which of the following? A)When a brand continues to be a success, even though it has reached the maturity phase of its product life cycle B)When a company is defending a premium-priced brand that is under attack from a cut-price competitor, they may choose to launch a brand to directly compete against the cut-price brand C)When a new brand is competing against a dominant brand leader that has been well established D)None of the above

Marketing-orientated companies need to take account of where the price of a new product fits into its existing _______ line. A)brand B)product C)company D)competitive

By producing a range of brands at different price points, companies can cover the varying price _______ of consumers and encourage them to trade up to the more expensive, higher-margin brands. A)supply B)specialities C)sensitivities D)causes

How can discount terms be made more attractive? A)By increasing the number of discounts B)By decreasing the percentage C)By lowering the qualifying levels D)All of the above

It may be necessary to follow a competitor's price rise when there is(are) _______. A)falling costs B)excess demand C)excess supply D)price insensitive customers

It may be necessary to ignore a competitor's price rise when there is(are) _______. A)rising costs B)excess demand C)excess supply D)price sensitive customers

Which of the following is crucial to a company's image when a competitor undertakes a price change? A)Pre-empting the competitor's price change B)Matching the competitor's price change C)The timing of the response D)Not following the competitor's price change

Which of the following influences price levels? A)Competitive marketing strategies B)New product launch strategies C)Positioning strategies D)All of the above

Trade-off analysis (otherwise known as conjoint analysis) measures the trade-off between price and other product features so that their effects on product preference can be established.

Competitor-orientated pricing is risky where a firm's cost position is stronger than its competitors.

Greater price competition is due to the use of technology helping to drive down costs and greater levels of globalization and retail competition is helping to depress price levels.

Competitor-oriented pricing may take any of three forms, namely, where firms follow the prices charged by leading competitors, where producers take the going rate price or where contracts are awarded through a competitive bidding process.

It is sensible for a company to adopt an integrated approach to pricing, paying attention not only to customer needs but also to cost levels and competitor prices.

A combination of high price and high promotion expenditure is called a rapid penetration strategy.

A slow skimming strategy combines a low price with low promotional expenditure.

A "build objective" implies the maintenance or raising of profit margins even though sales and/or market share are falling.

Price cuts are likely to be pursued when the company has a build or hold strategic objective.

Companies may decide to raise prices when embarking on a harvest objective.

A price rise is less likely to be followed when a company is pursuing a harvest or hold objective because, in both cases, the emphasis is more on profit margin than sales/market share gain.

Price unbundling allows each element in the offering to be separately priced in such a way that the total price is raised.

Price cuts are likely to be ignored in conditions of rising costs, excess demand and when servicing price insensitive customers.

Many organizational purchases are motivated by economic value considerations since reducing costs and increasing revenue are prime objectives of many companies.