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MKTG 230/Marketing Concepts > Chapter 14 > Flashcards

Chapter 14 Flashcards

Exam 3

1
Q

______ -oriented pricing approaches weigh factors underlying expected customer tastes and preferences more heavily than other factors.

A

Demand

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2
Q

When a firm introduces an innovative new product, it may choose (?) pricing, setting the highest initial price that customers who really desire the product are willing to pay.

A

Skimming

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3
Q

Match each type of special adjustment to a list or quoted price with an example of it.

A

Discounts —> Quantity
Allowance —> Promotional
Geographical adjustment —> FOB origin pricing

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4
Q

Pricing approaches that consider the production and marketing costs and then add enough to cover direct expenses, overhead and profit are known as?

A

Cost-oriented

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5
Q

A price ____ involves successive price cutting by competitors to increase or maintain their unit sales or market share.

A

War

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6
Q

What are the two general methods for quoting prices related to transportation costs?

A

FOB origin pricing
and
Uniform delivered pricing

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7
Q

Price fixing

A

Conspiracy among firms to set prices

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8
Q

Price discrimination

A

Charging different prices to different buyers for goods of like grade and quality

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9
Q

Deceptive pricing

A

Price deals that mislead consumers

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10
Q

Predatory pricing

A

Charging a very low price for a product with the intent of driving competitors out of business

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11
Q

A ____ discount reduces the invoice total if the buyer pays the invoice prior to the end of the discount period.

A

Cash

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12
Q

The firm’s goal in offering a trade discount is to?

A

Reward wholesalers and retailers for marketing functions.

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13
Q

A price reduction offered to channel members for featuring the manufacturer’s product in their advertising or selling activities is called a?

A

Promotional allowance

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14
Q

Single-zone, multiple-zone and basing-zone pricing are all types of?

A

Uniform delivered pricing

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15
Q

Price fixing is the conspiracy among firms to?

A

Set prices for a product

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16
Q

If a firm sells the same product to different buyers at different prices, it may be considered price

A

Discrimination

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17
Q

The price deals that ____ fall into the category of deceptive pricing.

A

Mislead consumers

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18
Q

Proving practice of _____ is difficult because it must be shown that there was an explicit attempt to destroy a competitor with the use of a low price.

A

Predatory pricing

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19
Q

What are the two common options when choosing a price policy?

A

Dynamic-price policy and fixed-price policy (aka one-price policy)

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20
Q

Setting a price with no variation for product buyers is called a _____ policy.

A

One-price (aka fixed-price

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21
Q

Setting different prices for products depending on individual buyers and purchases situations is called a _____ policy.

A

Dynamic-price

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22
Q

Four common approaches to help find an approximate price level to use as a reasonable starting point are

A
  1. demand-oriented
  2. cost-oriented
  3. profit-oriented
  4. competition-oriented
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23
Q

Cost-oriented

A

Price is set by looking at the production and marketing costs, and then adding enough to cover direct expenses, overhead and profit.

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24
Q

Competition-oriented

A

Price setter stresses what “the market” is doing is determining a price.

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25
Q

Demand-oriented

A

Factors underlying customer tastes and preferences are weighed most heavily.

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26
Q

Profit-oriented

A

The price setter balances both revenues and costs to set a price.

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27
Q

_____ pricing is seen as the exact opposite of skimming pricing when introducing a new product.

A

Penetration

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28
Q

With ____ pricing, marketer must not drop the price of a product below the point where customers become skeptical of its quality and refuse to purchase it.

A

Prestige

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29
Q

A marketing manager uses price lining when he?

A

Sell several groups of the same type of product, with each group priced at different specific pricing points.

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30
Q

In _______ pricing, an organization estimates what consumers are willing to pay for a product, and works backward, accounting for markups by retailers and wholesalers, to determine what it can charge for the product.

A

Target

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31
Q

What is a characteristic of bundle pricing?

A

Consumer value is enhanced by not having to make separate purchases

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32
Q

Adding a fixed percentage to the cost of all items in a specific product class is known as ______ pricing.

A

Standard markup

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33
Q

Cost-plus pricing entails

A

summing total units costs and adding a fixed percentage or fee to arrive at a price.

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34
Q

When using competition-oriented pricing approaches, price setters stress

A

what “the market” is doing.

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35
Q

The purpose of using low prices in a loss-leader pricing strategy is?

A

To attract customers that will hopefully buy other products too, at higher margins

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36
Q

In target pricing,

A

manufacturers deliberately adjust the composition of a product to achieve the estimated price that consumers are willing to pay for it.

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37
Q

Reductions in unit costs for a larger order are known as ______ discounts.

A

Quantity

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38
Q

Which of the following is a type of quantity discount that is likely to encourage repeat buying by a single customer?

Functional
Seasonal
Cumulative
Noncumulative

A

Cumulative

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39
Q

Seasonal discounts specifically do which two of the following?

A

They contribute to more efficient production for the manufacturer.

and

They reward channel members for accepting the risk of increased inventory.

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40
Q

_____ discounts are price reductions offered on products to stimulate purchasing during times of low consumer demand, allowing a manufacturer to smooth out manufacturing highs and lows.

A

Seasonal

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41
Q

The motivation for offering quantity discounts

A

To encourage customers to place larger orders

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42
Q

The motivation for offering seasonal discounts

A

To encourage buyers to stock inventory earlier than demand would require

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43
Q

The motivation for offering trade discounts

A

To reward channel members for future marketing efforts

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44
Q

The motivation for offering cash discounts

A

To encourage retailers to pay their bill quickly

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45
Q

What are the benefits of a penetration pricing strategy?

A

Production costs drop with increased volume

Discourage competitors

and

Potential to gain market share

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46
Q

What are two types of allowances offered to buyers?

A

Promotional allowances and trade-in allowances

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47
Q

Give an example of a cost-oriented pricing approach

A

Target priced its new patio furniture sets by adding 15 percent to the invoice price it paid for those products

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48
Q

Give an example of a competition-oriented pricing approach

A

Intel slashes its prices to be more similar to those of AMD, a rival computer chip maker

49
Q

Give an example of a demand-oriented pricing approach

A

A new energy efficient light bulb was introduced at $3.00 (about three times the price of a conventional bulb) and will last 6,000 hours (about four times the conventional bulb)

50
Q

A price reduction given when a used product is part of the payment on a new product is known as a _____ allowance.

A

Trade-in

51
Q

Experience curve pricing entails

A

reducing prices in a systematic way over time based on the learning effect.

52
Q

For _____ pricing to be effective, there must be sufficient customers willing to buy the product at the high initial price, they should interpret that high price as signifying high quality, and that high price should not attract competition.

A

Skimming

53
Q

Customary pricing entails

A

setting a price at a certain level based on factors like tradition or a standardized channel of distribution.

54
Q

Kmart has a new pricing special that states if the customer buys five boxes of cereal, then the cereal is discounted 10 percent. This type of discount is called a?

A

Quantity discount

55
Q

The ability to attract price sensitive customers and discourage competitors from entering a market make which pricing strategy appealing?

A

Penetration

56
Q

What is an example of a demand-oriented approach to setting an approximate price?

A

Prestige

57
Q

What represents an order of demand-oriented pricing approaches that may be used for a new product?

A

Skimming, then penetration

58
Q

In what way does the demand curve for prestige pricing differ from the typical demand curve?

A

This is a point below which a reduced price reduces sales volume, resulting in a backwards C-shaped curve.

59
Q

When Swiss watchmaker TAG Heuer increased the average price of its watches from $250 to $1,000, its sales volume jumped sevenfold. This is evidence that ______ pricing is important in this product category.

A

Prestige

60
Q

When Brooks Brothers prices its line of umbrellas at three price points, $60, $298 and $1,198 (or good, better and best) it is using a _______ approach.

A

Price Lining

61
Q

In _______ pricing, an organization sets a price a few dollars or cents under an even number, such as at $3.99.

A

Odd-even

62
Q

Odd-even pricing is used to ________, although overuse of this approach may mute its effect.

A

Increase demand for products

63
Q

Charging different prices for a product in order to maximize revenue for a set amount of capacity at any given time is known as _______ pricing.

A

Yield management

64
Q

Which two of the following are the common forms of cost-plus pricing?

Target profit
Percentage-of-cost
Standard markup
Fixed-fee

A

Percentage-of-cost

Fixed-fee

65
Q

When a lawyer and her client agree on a fixed fee based on expected costs plus a profit for the law firm, rather than billing on an hourly basis, this is an example of ______ pricing.

A

Cost-plus

66
Q

Which of the following are profit-oriented approaches to setting a price?

Customary pricing
Target profit pricing
Skimming pricing
Target return pricing

A

Target profit pricing

Target return pricing

67
Q

When a firm has a particular profit goal in the form of specific dollar amount as its overriding concern, it is likely to implement

A

Target profit pricing

68
Q

Firms that set prices to give them a profit that is a specified percentage of the sale volume are using?

A

Target return-on-sales pricing

69
Q

When an organization deliberately prices a product above the prices set for competing products, to entice those customers for whom pricing doesn’t matter, the firm is engaging in?

A

Above-market pricing

70
Q

Store chains like JC Penny often establish the going market price for products in the minds of their competitors. JC Penny uses?

A

At-market pricing

71
Q

Manufacturers and retailers that offer private brands (store brands) of products deliberately price these products about 8 to 10 percent below the prices of national brands, using a ______ pricing approach.

A

Below-market

72
Q

Gillette’s five-blade Fusion shaving system has 70 patents protecting its product technology, making it more likely that ______ pricing can be used successfully.

A

Skimming

73
Q

Penetration, price lining and bundle pricing are all types of which of the following pricing approaches?

Profit
Demand
Competition
Cost

A

Demand

74
Q

What is the focal point of the cost-oriented pricing approach?

A

Price is set by looking at the production and marketing costs, and then adding enough to cover direct expenses, overhead and profit.

75
Q

What is the focal point of the competition-oriented pricing approach?

A

Price setter stresses what “the market” is doing is determining a price.

76
Q

What is the focal point of the demand-oriented pricing approach?

A

Factors underlying customer tastes and preferences are weighed most heavily.

77
Q

What is the focal point of the profit-oriented pricing approach?

A

The price setter balances both revenues and costs to set a price.

78
Q

What are two types of allowances offered to buyers?

A

Promotional allowances

Trade-in allowances

79
Q

_______ promises to reduce the average price to consumers while minimizing promotional allowances that cost manufacturers billions of dollars every year.

A

Everyday low pricing

80
Q

When a seller pays the cost of loading a product onto a vehicle and transfers title to the buyer at this time, so that the buyer responsible for the remainder of the transportation costs, it is known as?

A

FOB origin pricing

81
Q

Organizations choosing competitor-oriented approaches to set prices might use which of the following strategies?

Prestige pricing
Customary pricing
Loss-leader pricing
Target profit pricing

A

Customary pricing

Loss-leader pricing

82
Q

Single-zone pricing

A

All buyers pay the same delivered price for products, regardless of their distance from the seller.

83
Q

Multiple-zone pricing

A

A firm divides its selling territories into geographic areas, and the delivered price is the same for all buyers within one zone.

84
Q

FOB with freight-allowed pricing

A

The buyer is allowed to deduct freight expenses from the goods’ list price, so seller pays the transportation costs.

85
Q

Basing-point pricing

A

The seller selects one or more geographic locations from which freight charges are added.

86
Q

What are reasons that firms engage in price wars?

A

To respond to changes in competitors’ prices

To preserve or grow their market share

87
Q

A ______ quantity discount is based on the amount purchased in a single order, and encourages a large individual purchase.

A

Noncumulative

88
Q

Though it may not call it by its name, a company that asks how many extra units it must sell in order to pay for a $1,000 advertisement is using

A

Marginal analysis

89
Q

When a manufacturer produces several products that are substitutes for one another and others that complement these products, it should use

A

Product-line pricing

90
Q

For some products where tradition, a standardized channel of distribution, or other competitive factors dictate the price, _______ pricing is used.

A

Customary

91
Q

Organizations can be most effective using skimming pricing under which two of the following conditions?

Customers are very price sensitive

The customer understands and highly values the product

The product is protected by patent

Production costs are increasing over time

A

The customer understands and highly values the product

and

The product is protected by patent

92
Q

McDonald’s offers extra value meals, which include a hamburger, fries, and soft drink. The total price is lower than if each item were purchased individually, and the consumer just has to mention one item when ordering. This is an example of _______ pricing.

A

Bundle

93
Q

Grocery stores use standard markup pricing because

A

They have so many products that it is impossible to estimate demand for each

94
Q

Although it is not always the case, many firms expect the unit cost of a product to drop significantly as the accumulated volume sold increases, an effect known as the ________ effect.

A

Learning

95
Q

Hershey changes the amount of chocolate in its candy bars depending on the price of raw chocolate rather than changing the price of the product because this product is sold with _______ pricing.

A

Customary

96
Q

What is an example of loss-leader pricing?

A

Selling Clorox bleach for $0.99 which is way below cost.

97
Q

Which two of the following acts make predatory pricing illegal?

Federal Trade Commission Act

Robinson-Patman Act

Advertising Act

Sherman Antitrust Act

A

Federal Trade Commission Act

Sherman Antitrust Act

98
Q

What is essential to prove a complaint for predatory pricing in the market?

A

The prices charged are below the defendant’s average cost

A firm’s intent to drive out competition must be proved

(Proving these things are both difficult and expensive)

99
Q

Under which of the following circumstances is it legal to charge different prices to different customers?

Never; this practice is always illegal

When the price differences do not lessen competition

When the price differences are due to changing market conditions

When the price difference allows a superior reseller to gain an advantage

A

When the price differences do not lessen competition

When the price differences are due to changing market conditions

100
Q

A used car dealer advertises a $5,000 SUV for sale in the local paper. When prospective customers arrive at the dealership they are told that the $5,000 SUV is sold and are offered a $15,000 SUV instead. This is an example of?

A

Bait and switch

101
Q

One can find hotel rooms, ski lift tickets, snowmobiles, lawn mowers, barbecue grills, vacation packages, flights to certain destinations and Christmas cards at discounts during a time of year when they are desirable. These are called ______ discounts.

A

Seasonal

102
Q

When a new-car dealer offers a price reduction to a buyer for a used car as part of the payment on a new car, this is considered a ______ allowance.

A

Trade-in

103
Q

Walmart promotes that its average price for products will be lower than the competition. Walmart is able to offer low prices to its customers when its suppliers utilize ________, minimizing expensive promotional allowances.

A

Everyday low pricing

104
Q

Which of the following acts makes price fixing illegal?

Clayton Act
Federal Trade Commission Act
Robinson-Patman Act
Sherman Antitrust Act

A

Sherman Antitrust Act

105
Q

When two or more competitors explicitly or implicitly set prices, this practice is called _______ price fixing.

A

Horizontal

106
Q

Despite the Sherman Act and its implications for price fixing, a “manufacturer’s suggested retail price” (MSRP) is?

A

Illegal only when enforced through coercion

107
Q

Cash discounts are offered because they encourage customers to?

A

Pay their bills quickly

108
Q

Companies should avoid price wars because

A

They often lead to a reduction in the company’s profits.

109
Q

_______ is only advisable when the company has a cost or technological advantage over competitors, demand for the product will grow, and this action is limited in scope.

A

Price cutting

110
Q

When Lexmark sells a printer for slightly below its cost, but prices its printer cartridges with a large profit margin that makes up for the loss on the printer, it is using

A

Product-line pricing

111
Q

Retailers have found that they should not price their store brands 20 to 25 percent below manufacturer’s brands because

A

Consumers then believe them to be of inferior quality and won’t buy them

112
Q

If a manufacturer quotes a price as $100 less 30/10/5, the retailer can expect to retain _______ of the suggested retail price to cover its costs and provide a profit.

A

$30

113
Q

A seasoned marketing manager will use the pricing approaches in what way?

A

She will consider several approaches together in setting an approximate price level.

114
Q

Vertical price fixing might occur between

A

A manufacturer and a retailer in the same channel

115
Q

Which of the following acts makes deceptive pricing illegal?

Robinson-Patman Act
Clayton Act
Federal Trade Commission Act
Sherman Antitrust Act

A

Federal Trade Commission Act

116
Q

According to critics, which of the following may be a negative outcome of a dynamic-price policy?

Shorter product life cycle
Decreased customer satisfaction
Price discrimination
Lower overall profits

A

Price discrimination

117
Q

Geographical pricing methods will be viewed as illegal if

A

There is a conspiracy to set prices

118
Q

CarMax uses a _______ policy by selling its cars with a “no haggle” price that offers no variation for different customers.

A

One-price

119
Q

Dell Inc. continually adjusts its personal computer prices in response to changes in its own costs, competitive pressures, and demand from customers, using a pricing policy known as?

A

Dynamic price

MKTG 230/Marketing Concepts (5 decks)

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