Chapter 11

Question 1

What are the 2 new product pricing strategies?

Answer 1

Market skimming pricing

Market penetration strategy

Question 2

Market skimming pricing

Answer 2

Involves setting a high price for a new product to skim maximum revenues layer by layer from the segments willing to pay the high price

The company makes fewer but more profitable sales

Question 3

Market penetration strategy

Answer 3

Involves setting a low price for a new product in order to attract a large number of buyers and a large market share

Question 4

What are the 5 product mix pricing situations?

Answer 4

Product line pricing

Optional product pricing

Captive product pricing

By product pricing

Product bundle pricing

Question 5

Product line pricing

Answer 5

Involves setting the price steps between various products in a product line based on cost differences between the products, customer evaluations of different features and competitor’s prices

Question 6

Optional product pricing

Answer 6

The pricing of optional or accessory products along with a main product

Question 7

Captive product pricing

Answer 7

Involves setting a price for product that must be used along with a main product,

Such as blades for a razor and games for a video game console

Question 8

By product pricing

Answer 8

Involves setting a price for by products to help offset the costs of disposing of them and help make the main product’s price more competitive

Question 9

What are the 7 price adjustment strategies?

Answer 9

Discount pricing

Segmented pricing

Psychological pricing

Promotional pricing

Geographical pricing

Dynamic pricing

International pricing

Question 10

Discount pricing

Answer 10

A straight reduction in price on purchases during a stated period of time or of larger quantities

Question 11

Allowance pricing (part of discount pricing)

Answer 11

Involves promotional money paid by manufacturers to retailers in return for an agreement to feature the manufacturer’s products in some way

Question 12

Segmented pricing

Answer 12

Involves selling a product or service at two or more prices, where the difference in prices is not based on differences in costs

Question 13

Psychological pricing

Answer 13

Considers the psychology of prices and not simply the economics

The price is used to say something about the profits another aspect of psychological pricing is reference pricing

Question 14

Reference pricing (part of psychological pricing)

Answer 14

Prices that buyers carry in their minds and refer to when they look at a given product

Question 15

Promotional pricing

Answer 15

Temporarily pricing products below the list price, and sometimes even below cost, to increase short-run sales

Question 16

Geographical pricing

Answer 16

Involves setting prices for customers located in different parts of the country or world

Question 17

What are the 5 strategy types of geographical pricing?

Answer 17

FOB-origin pricing

Uniform delivered pricing

Zone pricing

Basing point pricing

Freight absorption pricing

Question 18

FOB origin pricing

Answer 18

Good are placed free on board a carrier

The customer pays the freight from the factory to a destination

Question 19

Uniform delivered pricing

Answer 19

The company charges the same price plus freight to all customers, regardless of their location

Question 20

Zone pricing

Answer 20

The company sets up two or more zones

All customers within a zone pay the same total price

The more distant the zone the higher the price

Question 21

Basing point pricing

Answer 21

The seller absorbs all or part of the freight charges in order to get the desired business

Question 22

Dynamic pricing

Answer 22

Adjusting prices continually to meet the characteristics and needs of individual customers and situations

Question 23

International pricing

Answer 23

Depends on many factors, such as economic conditions, competitive situations, laws and regulations, and the nature of the wholesaling and retailing system

Question 24

What are the situations that may lead to a firm considering cutting its price

Answer 24

Excess capacity

Falling demand in the face of strong price competition or a weakened economy

Having a drive to dominate the market through lower costs

Question 25

What are the situations that may lead to a firm considering increasing its price

Answer 25

Inflation

Rising costs

Over-demand