Question 1

A car manufacturer has developed different models of a car to suit the pricing needs of different classes of customers.It offers a low-end version for price conscious customers and luxury cars for high-end customers.This is an example of _____ pricing.

Accepted Answer

This scenario is an example of product-line pricing, where the company offers different products in the same product line for different price points to cater to different customer segments. The company is offering low-end and luxury versions of the same car model to target different classes of customers. Promotional pricing refers to temporary discounts or offers to attract customers, psychological pricing is based on consumer psychology and perception, and leader pricing is when a company sets a low price for a popular item to attract customers to their store. None of these options accurately describe the scenario given.

Question 2

An office supply wholesaler offers a 15 percent discount for retailers who purchase goods worth $ 20,000 over a period of nine months and a 20 percent discount for purchases worth $ 25,000 during the same time period.This is an example of a _____ discount.

Accepted Answer

This is an example of a cumulative quantity discount, where the discount increases as the quantity of purchases increases over a specific period of time.

Question 3

The chief financial officer (CFO)of an automotive manufacturer is reviewing the revenue earned from the sale of all-terrain vehicles in South America.Because the selling price of the vehicles has been changed frequently,the CFO wanted to analyze the impact of these changes particularly during the rainy season.Which global pricing strategy is being used to price these vehicles? ​

Accepted Answer

The mention of changes in selling price indicates market-differentiated pricing strategy is being used, where the pricing is based on market conditions such as demand, competition, geography, and seasonality. The CFO wants to analyze the impact of these changes, particularly during the rainy season, indicating a need to understand the impact of market factors on pricing. Therefore, option E is the best choice.

Question 4

Which of the following is a major disadvantage associated with the skimming pricing strategy?

Accepted Answer

Skimming pricing strategy involves setting high prices for innovative products to recover the high research and development costs. However, this high pricing strategy also attracts competition as potential competitors observe the high returns obtained by innovative firms. This increases the risk of losing market share and profitability in the long run. Therefore, choice C is the correct option as it highlights a major disadvantage associated with skimming pricing strategy.

Question 5

Komatsu is a global firm known for its earth moving equipment utilized in construction.Since its products are sold around the globe,Komatsu has developed a unique approach to pricing where prices are set according to the market conditions within each geographic region.For example,an excavator might be significantly less expensive in India than in the United States in order to reflect the local marketplace conditions.What type of pricing strategy is Komatsu utilizing?​

Accepted Answer

Komatsu is utilizing a market-differentiated pricing strategy by setting prices according to the market conditions within each geographic region. This allows them to adapt to local marketplace conditions and ensure that their products are competitively priced in each region.

Question 6

The process by which buyers ask a number of potential suppliers to submit price quotes on a proposed purchase or contract,of which the lowest will be accepted,is called:

Accepted Answer

The process described is competitive bidding, where multiple suppliers are asked to submit their price quotes and the lowest one is chosen. Specification refers to the detailed requirements and characteristics of the desired product or service. Noncompetitive bidding involves limited competition or a single supplier. Competitive pricing refers to pricing strategies that aim to offer prices comparable or better than competitors.

Question 7

The United States Internal Revenue Service is seeking to purchase new desk-top computers for their offices in Washington,DC.They publish a request for proposals which includes the specifications they are seeking regarding the number of units,processing speed,size of hard drive space and monitor size and invite companies to submit proposals.The company with the lowest price will be awarded the contract.This is an example of​

Accepted Answer

The IRS is requesting proposals from companies to compete for the contract based on the specifications provided. The contract will be awarded to the company with the lowest price, which is characteristic of a competitive bidding process.

Question 8

Burlan Paints,manufacturer of paints for both interiors and exteriors,prices its products differently in various international markets to suit the requirements of local customers.Burlan Paints is implementing the _____ pricing strategy for pricing products.

Accepted Answer

Burlan Paints' strategy of pricing its products differently in various international markets to suit the requirements of local customers is an example of market-differentiated pricing. This strategy involves adjusting prices to meet the specific demands of different markets. The company is responding to the different pricing sensitivities of customers in different markets, which is a central concept of this strategy.

Question 9

A committee of city council members is searching for a new vendor for trash and recyclables removal in the community.Which mechanism provides the committee with information about the prices vendors charge to perform this service? ​

Accepted Answer

Competitive bidding allows the committee to gather information about the prices that vendors charge to perform the service. This mechanism involves inviting vendors to submit bids or proposals for the service, which allows the committee to compare and evaluate each bid to determine which one offers the best value for the community.

Question 10

A _____ pricing strategy helps manufacturers to distinguish their high-end products from similar products of their competitors.

Accepted Answer

A skimming pricing strategy involves setting a high price for a new or innovative product to maximize profits while demand is high. This strategy is often used for high-end products that are unique or have high perceived value, and can help differentiate them from competitors.

Question 11

If a manufacturer offered an intermediary a percentage discount off the list price of products it handled in exchange for performing certain wholesaling activities,this would be classified as a:

Accepted Answer

Trade discount is a discount offered by a manufacturer or supplier to an intermediary (such as a wholesaler or retailer) for performing certain functions such as bulk ordering, storing inventory, and promoting the products. This discount is not usually listed on the invoice or receipt, and is instead deducted from the list price of the products before the intermediary pays for them.

Question 12

A newly opened seafood restaurant advertises various deals on meal packages and special prices on dinner packages to attract customers.This is an example of _____ pricing.

Accepted Answer

The restaurant is using promotional pricing to attract customers with deals and special prices. Leader pricing refers to offering products at low prices to attract customers to the store, competitive pricing refers to setting prices based on the competition, and list pricing refers to setting prices based on a predetermined list or catalogue. None of these describe the pricing strategy used by this seafood restaurant.

Question 13

_____ pricing is a pricing policy in which products are offered to consumers at less than cost to attract them to stores in the hope that they will buy other merchandise at regular prices.

Accepted Answer

Loss leader pricing is a strategy where products are sold at a price lower than their cost to attract customers to come to the store and buy other products at regular prices. The aim is to increase footfall and sales of other high-margin products.

Question 14

Perfect Digitals offers a UV lens and a sun protection cover for its camera lens for a wide range of its digital cameras,all at a single price.This strategy used by the company is referred to as:

Accepted Answer

The strategy used by the company, offering a UV lens and a sun protection cover for its camera lens for a single price, is referred to as bundle pricing. This involves offering complementary products or services together for a single price, which is often a better deal for customers compared to buying each item separately. Unit pricing refers to pricing products based on a standard unit of measurement, price flexibility policy refers to changing prices based on market conditions or demand, and competitive pricing refers to setting prices based on the prices of competitors. Therefore, the best choice is C - bundle pricing.

Question 15

Which of the following is an example of a rebate offered to buyers?

Accepted Answer

Option C is an example of a rebate offered to buyers. The buyer is promised to receive $5 returned by mail after making a $100 purchase. This encourages customers to make future purchases from the same retailer as they will be eligible to receive discount/offer for their purchase.

Question 16

A flooring manufacturer has experienced an increase in sales of laminate flooring in the stores located in the southeastern region of the United States.A recent marketing plan identifies that cork flooring will be introduced in the same stores before rolling out to the rest of the country.What effect is this manufacturer at risk of experiencing with this strategy? ​

Accepted Answer

The manufacturer is at risk of experiencing cannibalization, which is when sales of a new product reduce sales of an existing product. Since the manufacturer has experienced an increase in sales of laminate flooring in the southeastern region of the United States, introducing a new product (cork flooring) in the same stores before rolling out to the rest of the country may cannibalize the sales of laminate flooring in that region.

Question 17

Everyday low pricing is a strategy devoted to continuous low prices as opposed to:

Accepted Answer

Everyday low pricing is a long-term pricing strategy that focuses on keeping prices low consistently rather than relying on short-term tactics like coupons and sales. Seasonal changes, cost-based prices, and reacting to competitors' actions are not part of the everyday low pricing strategy.

Question 18

Paisley Lane Soaps recently contracted with a chain of grocery stores to provide organic bar soap to the chain.These volume orders are the company's first commercial venture as they have primarily sold directly to consumers.Typically,Paisley Lane Soaps charges $6 per bar of soap but has contracted with the grocery store chain for $3.50 per bar.In addition,Paisley Lane Soaps has negotiated a 2% discount on the order if the grocery store chain pays in full within 10 days of product delivery.This practice is called: ​

Accepted Answer

The practice described in the scenario is a cash discount. It is a discount given to customers who pay their invoice within a specific time frame, and it is often used to encourage prompt payment and improve cash flow. The other options, such as promotional allowances, noncumulative quantity discounts, and trade discounts, do not fit the scenario.

Question 19

The price normally quoted to potential buyers before any discounts or allowances are allowed is called the _____ price.

Accepted Answer

The price quoted to potential buyers before any discounts or allowances are allowed is called the list price. This is also sometimes referred to as the manufacturer's suggested retail price (MSRP).

Question 20

A pricing policy that assumes that some prices are more appealing than others is known as _____ pricing.

Accepted Answer

The policy that assumes that some prices are more appealing than others is known as psychological pricing. This type of pricing takes into account the emotional response that consumers have to different price points, and aims to price products in a way that maximizes their appeal to buyers. This might mean pricing products just below a round number (e.g. $9.99 rather than $10.00), or using pricing tactics like discounts or sales to create a sense of urgency or exclusivity.

Quiz 19: Pricing Strategies