Question 1

Pricing __________ products is especially challenging because little or nothing is known about consumers' perceptions of value.
A) cost-based
B) seasonal
C) large-quantity
D) new-to-the-world
E) zone pricing

Accepted Answer

New-to-the-world products are those that are completely new and have not been introduced in the market before. As a result, there is little or no information available about consumers' perception of value. Therefore, determining the right price for such products is particularly challenging.

Question 2

Mario is the first retailer in town to sell games for Sony's new PlayStation 3 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

Market penetration pricing strategy aims to quickly capture a large share of the market by setting a low initial price for a new product. This strategy is commonly used by businesses introducing a new product to the market. Mario, as the first retailer to sell games for Sony's new PlayStation 3, will likely use this strategy to gain a competitive advantage and capture as much of the market for the new games as possible.

Question 3

With a price skimming strategy,a marketer will NOT benefit from
A) increased consumer value associated with price increases.
B) the ability to use seasonal discounts.
C) the opportunity to offer advertising allowances.
D) economies of scale associated with a larger volume of production.
E) market substitution price elasticity.

Accepted Answer

Price skimming typically involves setting a high initial price for a new product or service, which is then gradually lowered over time. This strategy can be effective for generating high profits early on, but it may not be optimized for achieving economies of scale associated with larger production volumes. Therefore, the marketer may not benefit from producing more units at a lower cost, which is typically required for long-term profitability.

Question 4

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 in order to obtain a more desirable product.
E) match competitors' prices and communicate high quality.

Accepted Answer

The major objectives associated with a market penetration pricing strategy are to quickly build sales and market share. This strategy involves setting low prices to attract new customers and gain a foothold in the market. By doing so, the company aims to increase its customer base and brand awareness, which can ultimately lead to greater profits in the long run.

Question 5

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

Accepted Answer

Burroughs-Wellcome set a high price for their anti-AIDS drugs during their initial launch, which suggests a skimming pricing strategy. Skimming involves setting a high price for a new product to capture maximum revenue and profit from early adopters before gradually lowering the price to reach a broader market.

Question 6

Marketers use a price skimming strategy for any or all of the following reasons EXCEPT
A) to recoup high research and development costs.
B) to signal high quality.
C) to limit demand.
D) to gain market share quickly.
E) to test consumers' price sensitivity.

Accepted Answer

Price skimming is not used to gain market share quickly; it is used to maximize profits from early adopters willing to pay a higher price before gradually lowering the price to attract more price-sensitive customers.

Question 7

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 learning curve effect, refers to the phenomenon of reduction in unit cost as the cumulative quantity of production increases due to improved efficiency and increased knowledge and skill of the workforce. As more units are produced, the process becomes more familiar and streamlined, which reduces the time and cost involved in production. This effect is commonly observed in manufacturing industries, where workers become more adept at their tasks over time, resulting in lower costs per unit.

Question 8

When HP first introduced their inkjet printers,consumers could only buy refill cartridges from HP.HP made significant profits from the sale of replacement cartridges.In this situation,HP logically used a __________ pricing strategy for their printers.
A) market penetration
B) loss leader
C) price fixing
D) reference
E) skimming

Accepted Answer

The answer of When HP first introduced their inkjet printers,consumers...

Question 9

When the first hybrid automobiles became available on the market,manufacturers had only minimal production capacity.They used a price skimming strategy primarily to
A) recoup high research and development costs.
B) signal high quality.
C) limit demand.
D) penetrate a market.
E) test consumers' price sensitivity.

Accepted Answer

The answer of When the first hybrid automobiles became available...

Question 10

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 typically little information available on market demand, customers' willingness to pay, and competitors' pricing strategies. Additionally, managers must consider factors such as production costs, profit margins, and the product's unique value proposition in order to set a price that maximizes profitability and supports long-term growth.

Question 11

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

With a market penetration pricing strategy, the marketer sets a low initial price for the introduction of a new product or service in order to penetrate the market quickly and gain market share. The goal is to attract a large number of customers quickly by offering a lower price than competitors, and then gradually raising the price as the product or service gains acceptance in the market. This strategy is often used to achieve economies of scale and establish the product or service as a market leader.

Question 12

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.Apple was probably pursuing a __________ pricing strategy.
A) market penetration
B) slotting allowance
C) price fixing
D) reference price
E) skimming

Accepted Answer

Apple was following a skimming pricing strategy by initially setting a high price for the iPhone to appeal to early adopters and technology enthusiasts who are willing to pay a premium price for the latest and greatest technology. This strategy allows Apple to recover its high initial development and marketing costs and then gradually lower the price over time to attract a wider audience.

Question 13

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) few marketers understand pricing.
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 target early adopters who are willing to pay a higher price for innovative products, which helps companies recover their development and launch costs quickly. As the product matures and competition increases, the marketer can then gradually reduce the price to attract a larger market share and stay competitive in the market. Lowering prices is often easier than raising them, making a price skimming strategy a more feasible approach for companies launching innovative products.

Question 14

For a price skimming strategy to be successful,
A) price need to be reduced on a slow,uniform basis.
B) horizontal zone pricing needs to be employed.
C) marketers need to somehow get consumers to redeem coupons.
D) the price should be odd,not even.
E) it must be difficult for competitors to enter the market.

Accepted Answer

For a price skimming strategy to be successful, it must be difficult for competitors to enter the market. This is because the skimming strategy involves charging a high price initially to maximize profits before competitors enter and drive prices down. If competitors are able to easily enter the market, they can quickly drive down prices and make the strategy ineffective. Therefore, option E is the correct choice.

Question 15

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

The strategy described is called price skimming. This involves setting a high price initially for a new and innovative product in order to recover development costs, target early adopters who are willing to pay a premium, and establish a premium image for the product. As the market becomes saturated and competitors enter, the price may be gradually lowered to appeal to a broader segment of consumers.

Question 16

The manufacturers of the early electric cars are charging relatively high prices to consumers who are willing to pay the price.They need to use a price skimming strategy because of
A) the relatively high emissions produced by electric cars.
B) the potential benefits of price bundling.
C) the high costs associated with producing a small volume of cars.
D) the slotting allowances needed to gain greater distribution.
E) a vertical price fixing arrangement among vendors supplying the needed components.

Accepted Answer

The high costs associated with producing a small volume of cars is the most likely reason why manufacturers of early electric cars are charging relatively high prices to consumers. These manufacturers may not have achieved economies of scale to bring down production costs. Therefore, by using a price skimming strategy, they can recover their production costs and make a profit.

Question 17

Odd prices often suggest __________ to consumers.
A) low quality
B) superior quality
C) uniqueness
D) expired merchandise
E) foreign-made goods

Accepted Answer

The answer of Odd prices often suggest __________ to consumers.
A)...

Question 18

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

Accepted Answer

Price skimming is a pricing strategy where a product is launched at a high price and gradually lowered as it reaches different stages of the consumer adoption process model. Innovators and early adopters are typically willing to pay a premium price for new and innovative products, which makes them the ideal target for price skimming. As the product becomes more mainstream, the price is gradually lowered to appeal to the early majority, late majority, and laggards.

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 in order to create a loss leader pricing strategy.
D) lower the price to capture the next most price sensitive market segment.
E) use zone pricing to maximize differences.

Accepted Answer

Once the initial demand is met for new and innovative products, price skimming marketers usually lower the price to capture the next most price-sensitive market segment. This allows them to keep the product relevant and attractive to a wider range of customers. Discontinuing the product or offering deep discounts is counterproductive to the strategy of price skimming. Zone pricing has nothing to do with this strategy. Leaving the market is also not a typical outcome unless the product is no longer profitable or sustainable.

Question 20

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.

Accepted Answer

A price skimming strategy requires a product or service to offer consumers some new benefit currently unavailable. This new benefit justifies the high initial price, and over time, the price can be lowered as the product becomes more common in the market. Wide market appeal is not essential for a price skimming strategy, as it is targeted at a select group of customers who are willing to pay a premium for the unique benefit provided by the product or service. The product or service may have high production costs due to its unique features, but this does not necessarily prevent a price skimming strategy from being effective.

Quiz 15: Strategic Pricing Methods

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

Mario is the first retailer in town to sell games for Sony's new PlayStation 3 machine.Mario wants to quickly capture as much of the market for the new games as possible.Mario will likely use a __________ pricing strategy.

With a price skimming strategy,a marketer will NOT benefit from

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

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

Marketers use a price skimming strategy for any or all of the following reasons EXCEPT

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

When HP first introduced their inkjet printers,consumers could only buy refill cartridges from HP.HP made significant profits from the sale of replacement cartridges.In this situation,HP logically used a __________ pricing strategy for their printers.

When the first hybrid automobiles became available on the market,manufacturers had only minimal production capacity.They used a price skimming strategy primarily to

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

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

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.Apple was probably pursuing a __________ 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

For a price skimming strategy to be successful,

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

The manufacturers of the early electric cars are charging relatively high prices to consumers who are willing to pay the price.They need to use a price skimming strategy because of

Odd prices often suggest __________ to consumers.

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

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

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