Chapter 10

Question 1

What is price?

Answer 1

the amount of money charged for a product or service, or the sum of all the values that customers exchange for the benefits of having or using the product or service

Question 2

What element in the marketing mix produces revenue?

Answer 2

price

Question 3

What do all other elements in the marketing mix represent?

Answer 3

costs

Question 4

Why is price a flexible marketing mix element?

Answer 4

Because prices can be changed quickly

Question 5

What kind of impact does price have on a firm’s bottom line?

Answer 5

direct impact

Question 6

What are the three major pricing strategies?

Answer 6

customer value-based pricing, cost-based pricing, competition-based pricing

Question 7

What type of pricing uses the buyers’ perceptions of value rather than the seller’s cost?

Answer 7

value-based pricing

Question 8

Is value-based pricing customer driven or product driven?

Answer 8

customer driven

Question 9

Effective customer-oriented pricing involves understanding what?

Answer 9

how much value consumers place on the benefits they receive from the product and setting a price that captures that value

Question 10

Is cost-based pricing customer driven or product driven?

Answer 10

product driven

Question 11

What does cost-based pricing set a price to cover?

Answer 11

costs plus a target profit

Question 12

In cost-based pricing, what is the first step?

Answer 12

design a good product

Question 13

In cost-based pricing, what is the second step?

Answer 13

determine product costs

Question 14

In cost-based pricing, what is the third step?

Answer 14

set price based on cost

Question 15

In cost-based pricing, what is the fourth step?

Answer 15

convince buyers of product’s value

Question 16

In value-based pricing, what is the first step?

Answer 16

assess customer needs and value perceptions

Question 17

In value-based pricing, what is the second step?

Answer 17

set target price to match customer perceived value

Question 18

In value-based pricing, what is the third step?

Answer 18

determine costs that can be incurred

Question 19

In value-based pricing, what is the fourth step?

Answer 19

design product to deliver desired value at target price

Question 20

Name two types of customer value-based pricing.

Answer 20

good-value pricing, value-added pricing

Question 21

What is good-value pricing?

Answer 21

offering just the right combination of quality and good service at a fair price

Question 22

What is an example of good-value pricing using less-expensive new brand derived from established brand name products?

Answer 22

Honor (owned by Huawei)

Question 23

What is an example of good-value pricing using redesigning existing brands to offer more quality for a given price or the same quality for less?

Answer 23

iPhone SE

Question 24

What is Everyday low pricing (EDLP)?

Answer 24

supermarket chain keeps costs low so that it can offer customers “impressively high quality at impossibly low prices” every day

Question 25

What is high-low pricing?

Answer 25

charging higher prices on an everyday basis but running frequent promotions to lower prices temporarily on selected items

Question 26

What is value-added pricing?

Answer 26

attaches value-added features and services to differentiate the companies' offers, and thus companies charge higher prices

Question 27

What is cost-based pricing?

Answer 27

sets prices based on the costs for producing, distributing, and selling the product plus a fair rate of return for effort and risk

Question 28

What are fixed costs also known as?

Answer 28

overhead

Question 29

What are fixed costs?

Answer 29

costs that do not vary with production or sales level

Question 30

Give three examples of fixed costs.

Answer 30

rent, interest, executive salaries

Question 31

What are variable costs?

Answer 31

costs that vary directly with the level of production

Question 32

Give examples of variable costs.

Answer 32

raw materials, packaging, part time wages, utility cost, commissions

Question 33

What are total costs?

Answer 33

the sum of the fixed and variable costs for any given level of production

Question 34

What is competition-based pricing?

Answer 34

setting prices based on competitors' strategies, costs, prices, and market offerings, in view of consumers will compare with other competitors' offering and their prices

Question 35

When using competition-based pricing, what is the first question companies must ask?

Answer 35

How does the company's market offering compare with competitors' offerings in terms of customer value?

Question 36

When using competition-based pricing, what is the second question companies must ask?

Answer 36

How strong are current competitors and what are their current pricing strategies?