Chapter 13

Question 1

The amount of funds required to purchase a product

Answer 1

Price

Question 2

The three foundations when considering a pricing strategy

Answer 2

Costs
Potential demand
Competition

Question 3

Pricing objective classifications

Answer 3

Volume or sales
Competition
Prestige

Question 4

Sales maximization

Answer 4

A car manufacturer pricing to ensure they sell through their production capacity for the year

Question 5

Market share

Answer 5

Vita Coco temporarily cutting prices on coconut water to gain market share in the category

Question 6

Competitive parity

Answer 6

Airlines and neighboring gas stations often match each other’s prices

Question 7

Value pricing

Answer 7

Apple adds new features to the iPhone to justify its higher price compared to Samsung’s Galaxy

Question 8

Lifestyle

Answer 8

High-priced luxury apparel and accessories

Question 9

Image

Answer 9

Premium-price free-trade coffee

Question 10

pricing practices aimed at achieving a particular sales volume or market share

Answer 10

volume or sales objectives

Question 11

Companies may price to drive a particular amount of sales volume related to:

Answer 11

Production capacity
Distribution opportunities
Profit requirements
Previous year sales

Question 12

What is an additional pricing strategy?

Answer 12

The practice of reducing prices (at least temporarily) to gain market share.

Question 13

Pricing practices intended to maintain pricing parity or emphasize overall product value to avoid direct price comparison

Answer 13

Competition objectives

Question 14

value pricing

Answer 14

a firm emphasizes the benefits of a product compared to the price and quality of competing products.

Question 15

establishing a relatively high price to develop and maintain an image of quality and exclusiveness

Answer 15

prestige pricing

Question 16

cost-based pricing

Answer 16

using the product cost plus a target markup percentage to calculate the sales price

Question 17

markup

Answer 17

the cost multiplied by one plus the target markup percentage

Question 18

the portion of sales revenue left over after paying product costs

Answer 18

margin

Question 19

variable costs

Answer 19

costs that change with the level of production

Examples: raw materials, labor costs

Question 20

fixed costs

Answer 20

costs that remain stable at any production level within a certain range.
Examples: lease payments, administrative staffing, insurance costs

Question 21

Breakeven analysis

Answer 21

an effective tool for marketers in assessing the sales required for covering costs and achieving certain profit levels.

Question 22

Shortcomings of Breakeven Analysis

Answer 22

It assumes that costs can be clearly divided into fixed and variable categories.
It assumes that per-unit variable costs don’t change at different levels of operation.
It is a cost-based model that doesn’t directly address whether consumers will purchase the product at the specified price.

Question 23

cost-volume-profit (CVP):

Answer 23

the relationship between prices, demand, and overall profitability