Chapter 11

Question 1

Market Skimming pricing

Answer 1

Sets high initial prices to “skim” revenue layers from the market

Question 2

Market-penetration pricing

Answer 2

Setting a low price for a new product to attract buyers and a large market share.

Question 3

Product line pricing

Answer 3

Setting the price steps between various products in a product line based on cost differences between the products, customer evaluations of different features, and competitors´ prices.
- Airplane business class, comfort class, economy class, etc

Question 4

Optional-product pricing

Answer 4

Optional or accessory products along with the main product

- Airpods for the iphone

Question 5

Captive Product Pricing

Answer 5

Prices of products that must be used along with the main product
- Content for the kindle or E-readers

Question 6

By-Product pricing

Answer 6

Price for by-products in order to make the price more competitive

Question 7

Product bundle pricing

Answer 7

Combines several products at a reduced price

- Mcdonalds combo or bundle

Question 8

Discount

Answer 8

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

Question 9

Allowance

Answer 9

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

Question 10

Segmented Pricing

Answer 10

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

Question 11

Psychological Pricing

Answer 11

Pricing that considers the psychology of prices and not simply the economics; the price is used to say something about the product.

Question 12

Reference prices

Answer 12

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

Question 13

Promotional pricing

Answer 13

Temporarily pricing products below the list price to increase short-run sales

Question 14

Geographical pricing

Answer 14

Setting prices for customers located in different parts of the country or world.

Question 15

FOB-origin

Answer 15

(free on board) pricing is a geographical pricing strategy in which goods are placed free on board a carrier; the customer pays the freight from the factory to the destination.

Question 16

Uniform-delivered pricing

Answer 16

This is a geographical pricing strategy in which the company charges the same price plus freight to all customers, regardless of their location.

Question 17

Zone pricing

Answer 17

This is a strategy in which the company sets up two or more zones where customers within a given zone pay the same price.

Question 18

Basing-point pricing

Answer 18

means that a seller selects a given city as a “basing point” and charges all customers the freight cost from that city to the customer.

Question 19

Freight-absorption pricing

Answer 19

This is a strategy in which the seller absorbs all or part of the freight charges in order to get the desired business.

Question 20

Dynamic pricing

Answer 20

This involves adjusting prices continually to meet the characteristics and needs of individual customers and situations

Question 21

International pricing

Answer 21

sets prices in a specific country based on

Economic conditions
Competitive situations
Laws and regulations
Wholesaling and retail

Question 22

Price fixing

Answer 22

Legislation requires sellers to set prices without talking to competitors.

Question 23

Predatory pricing

Answer 23

The legislation prohibits selling below cost with the intention of punishing a competitor or gaining higher long-term profits by putting competitors out of business.

Question 24

Price discrimination

Answer 24

This is allowed if the seller: can prove that costs differ when selling to different retailers.

Question 25

Retail (or resale) price maintenance

Answer 25

This is when a manufacturer requires a dealer to charge a specific retail price for its product, which is prohibited by law.

Question 26

Deceptive pricing

Answer 26

This occurs when a seller states prices or price savings that mislead consumers or are not actually available to consumers.