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
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
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
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
5
Q
A price ____ involves successive price cutting by competitors to increase or maintain their unit sales or market share.
A
War
6
Q
What are the two general methods for quoting prices related to transportation costs?
A
FOB origin pricing
and
Uniform delivered pricing
7
Q
Price fixing
A
Conspiracy among firms to set prices
8
Q
Price discrimination
A
Charging different prices to different buyers for goods of like grade and quality
9
Q
Deceptive pricing
A
Price deals that mislead consumers
10
Q
Predatory pricing
A
Charging a very low price for a product with the intent of driving competitors out of business
11
Q
A ____ discount reduces the invoice total if the buyer pays the invoice prior to the end of the discount period.
A
Cash
12
Q
The firm’s goal in offering a trade discount is to?
A
Reward wholesalers and retailers for marketing functions.
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
14
Q
Single-zone, multiple-zone and basing-zone pricing are all types of?
A
Uniform delivered pricing
15
Q
Price fixing is the conspiracy among firms to?
A
Set prices for a product
16
Q
If a firm sells the same product to different buyers at different prices, it may be considered price
A
Discrimination
17
Q
The price deals that ____ fall into the category of deceptive pricing.
A
Mislead consumers
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
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)
20
Q
Setting a price with no variation for product buyers is called a _____ policy.
A
One-price (aka fixed-price
21
Q
Setting different prices for products depending on individual buyers and purchases situations is called a _____ policy.
A
Dynamic-price
22
Q
Four common approaches to help find an approximate price level to use as a reasonable starting point are
A
- demand-oriented
- cost-oriented
- profit-oriented
- competition-oriented
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.
24
Q
Competition-oriented
A
Price setter stresses what “the market” is doing is determining a price.
25
Demand-oriented
Factors underlying customer tastes and preferences are weighed most heavily.
26
Profit-oriented
The price setter balances both revenues and costs to set a price.
27
_____ pricing is seen as the exact opposite of skimming pricing when introducing a new product.
Penetration
28
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.
Prestige
29
A marketing manager uses price lining when he?
Sell several groups of the same type of product, with each group priced at different specific pricing points.
30
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.
Target
31
What is a characteristic of bundle pricing?
Consumer value is enhanced by not having to make separate purchases
32
Adding a fixed percentage to the cost of all items in a specific product class is known as ______ pricing.
Standard markup
33
Cost-plus pricing entails
summing total units costs and adding a fixed percentage or fee to arrive at a price.
34
When using competition-oriented pricing approaches, price setters stress
what "the market" is doing.
35
The purpose of using low prices in a loss-leader pricing strategy is?
To attract customers that will hopefully buy other products too, at higher margins
36
In target pricing,
manufacturers deliberately adjust the composition of a product to achieve the estimated price that consumers are willing to pay for it.
37
Reductions in unit costs for a larger order are known as ______ discounts.
Quantity
38
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
Cumulative
39
Seasonal discounts specifically do which two of the following?
They contribute to more efficient production for the manufacturer.
and
They reward channel members for accepting the risk of increased inventory.
40
_____ 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.
Seasonal
41
The motivation for offering quantity discounts
To encourage customers to place larger orders
42
The motivation for offering seasonal discounts
To encourage buyers to stock inventory earlier than demand would require
43
The motivation for offering trade discounts
To reward channel members for future marketing efforts
44
The motivation for offering cash discounts
To encourage retailers to pay their bill quickly
45
What are the benefits of a penetration pricing strategy?
Production costs drop with increased volume
Discourage competitors
and
Potential to gain market share
46
What are two types of allowances offered to buyers?
Promotional allowances and trade-in allowances
47
Give an example of a cost-oriented pricing approach
Target priced its new patio furniture sets by adding 15 percent to the invoice price it paid for those products
48
Give an example of a competition-oriented pricing approach
Intel slashes its prices to be more similar to those of AMD, a rival computer chip maker
49
Give an example of a demand-oriented pricing approach
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
A price reduction given when a used product is part of the payment on a new product is known as a _____ allowance.
Trade-in
51
Experience curve pricing entails
reducing prices in a systematic way over time based on the learning effect.
52
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.
Skimming
53
Customary pricing entails
setting a price at a certain level based on factors like tradition or a standardized channel of distribution.
54
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?
Quantity discount
55
The ability to attract price sensitive customers and discourage competitors from entering a market make which pricing strategy appealing?
Penetration
56
What is an example of a demand-oriented approach to setting an approximate price?
Prestige
57
What represents an order of demand-oriented pricing approaches that may be used for a new product?
Skimming, then penetration
58
In what way does the demand curve for prestige pricing differ from the typical demand curve?
This is a point below which a reduced price reduces sales volume, resulting in a backwards C-shaped curve.
59
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.
Prestige
60
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.
Price Lining
61
In _______ pricing, an organization sets a price a few dollars or cents under an even number, such as at $3.99.
Odd-even
62
Odd-even pricing is used to ________, although overuse of this approach may mute its effect.
Increase demand for products
63
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.
Yield management
64
Which two of the following are the common forms of cost-plus pricing?
Target profit
Percentage-of-cost
Standard markup
Fixed-fee
Percentage-of-cost
Fixed-fee
65
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.
Cost-plus
66
Which of the following are profit-oriented approaches to setting a price?
Customary pricing
Target profit pricing
Skimming pricing
Target return pricing
Target profit pricing
Target return pricing
67
When a firm has a particular profit goal in the form of specific dollar amount as its overriding concern, it is likely to implement
Target profit pricing
68
Firms that set prices to give them a profit that is a specified percentage of the sale volume are using?
Target return-on-sales pricing
69
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?
Above-market pricing
70
Store chains like JC Penny often establish the going market price for products in the minds of their competitors. JC Penny uses?
At-market pricing
71
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.
Below-market
72
Gillette's five-blade Fusion shaving system has 70 patents protecting its product technology, making it more likely that ______ pricing can be used successfully.
Skimming
73
Penetration, price lining and bundle pricing are all types of which of the following pricing approaches?
Profit
Demand
Competition
Cost
Demand
74
What is the focal point of the cost-oriented pricing approach?
Price is set by looking at the production and marketing costs, and then adding enough to cover direct expenses, overhead and profit.
75
What is the focal point of the competition-oriented pricing approach?
Price setter stresses what "the market" is doing is determining a price.
76
What is the focal point of the demand-oriented pricing approach?
Factors underlying customer tastes and preferences are weighed most heavily.
77
What is the focal point of the profit-oriented pricing approach?
The price setter balances both revenues and costs to set a price.
78
What are two types of allowances offered to buyers?
Promotional allowances
Trade-in allowances
79
_______ promises to reduce the average price to consumers while minimizing promotional allowances that cost manufacturers billions of dollars every year.
Everyday low pricing
80
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?
FOB origin pricing
81
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
Customary pricing
Loss-leader pricing
82
Single-zone pricing
All buyers pay the same delivered price for products, regardless of their distance from the seller.
83
Multiple-zone pricing
A firm divides its selling territories into geographic areas, and the delivered price is the same for all buyers within one zone.
84
FOB with freight-allowed pricing
The buyer is allowed to deduct freight expenses from the goods' list price, so seller pays the transportation costs.
85
Basing-point pricing
The seller selects one or more geographic locations from which freight charges are added.
86
What are reasons that firms engage in price wars?
To respond to changes in competitors' prices
To preserve or grow their market share
87
A ______ quantity discount is based on the amount purchased in a single order, and encourages a large individual purchase.
Noncumulative
88
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
Marginal analysis
89
When a manufacturer produces several products that are substitutes for one another and others that complement these products, it should use
Product-line pricing
90
For some products where tradition, a standardized channel of distribution, or other competitive factors dictate the price, _______ pricing is used.
Customary
91
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
The customer understands and highly values the product
and
The product is protected by patent
92
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.
Bundle
93
Grocery stores use standard markup pricing because
They have so many products that it is impossible to estimate demand for each
94
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.
Learning
95
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.
Customary
96
What is an example of loss-leader pricing?
Selling Clorox bleach for $0.99 which is way below cost.
97
Which two of the following acts make predatory pricing illegal?
Federal Trade Commission Act
Robinson-Patman Act
Advertising Act
Sherman Antitrust Act
Federal Trade Commission Act
Sherman Antitrust Act
98
What is essential to prove a complaint for predatory pricing in the market?
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
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
When the price differences do not lessen competition
When the price differences are due to changing market conditions
100
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?
Bait and switch
101
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.
Seasonal
102
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.
Trade-in
103
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.
Everyday low pricing
104
Which of the following acts makes price fixing illegal?
Clayton Act
Federal Trade Commission Act
Robinson-Patman Act
Sherman Antitrust Act
Sherman Antitrust Act
105
When two or more competitors explicitly or implicitly set prices, this practice is called _______ price fixing.
Horizontal
106
Despite the Sherman Act and its implications for price fixing, a "manufacturer's suggested retail price" (MSRP) is?
Illegal only when enforced through coercion
107
Cash discounts are offered because they encourage customers to?
Pay their bills quickly
108
Companies should avoid price wars because
They often lead to a reduction in the company's profits.
109
_______ 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.
Price cutting
110
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
Product-line pricing
111
Retailers have found that they should not price their store brands 20 to 25 percent below manufacturer's brands because
Consumers then believe them to be of inferior quality and won't buy them
112
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.
$30
113
A seasoned marketing manager will use the pricing approaches in what way?
She will consider several approaches together in setting an approximate price level.
114
Vertical price fixing might occur between
A manufacturer and a retailer in the same channel
115
Which of the following acts makes deceptive pricing illegal?
Robinson-Patman Act
Clayton Act
Federal Trade Commission Act
Sherman Antitrust Act
Federal Trade Commission Act
116
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
Price discrimination
117
Geographical pricing methods will be viewed as illegal if
There is a conspiracy to set prices
118
CarMax uses a _______ policy by selling its cars with a "no haggle" price that offers no variation for different customers.
One-price
119
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?
Dynamic price
