Chapter 14 | Arriving at the Final Price

Question 1

4 Approaches for Selecting an Approximate Price Level

Answer 1

1. Demand-Oriented Approaches
2. Cost-Oriented Approaches
3. Profit-Oriented Approaches
4. Competition-Oriented Approaches

Question 2

Step 4: Demand-Oriented Pricing Approaches

Answer 2

-Skimming Pricing
-Penetration Pricing
-Prestige Pricing
-Price Lining
-Odd-Even Pricing
-Target Pricing
-Bundle Pricing
-Yield Management Pricing

Question 3

Step 4: Cost-Oriented Pricing Approaches

Answer 3

Price is set by looking at the production and marketing costs -
1. standard markup pricing
2. cost-plus pricing
3. experience curve pricing

Question 4

Step 4: Profit-Oriented Pricing Approaches

Answer 4

*setting a target of a specific dollar volume of profit
1. target profit pricing
-target return-on-sales pricing
-target return-on-investement pricing

Question 5

Step 4: Competition-Oriented Pricing Approaches

Answer 5

*stress what competitors or “the market” is doing
-Customary Pricing
-Above-,At-, or Below-Market Pricing
-Loss-Leader Pricing

Question 6

Step 5: Set the List or Quoted Price (Choosing a Price Policy)

Answer 6

-One-Price Policy
-Flexible-Price Policy
– dynamic pricing
–clickstream

Question 7

Step 6: DISCOUNTS

Answer 7

1. Quantity Discounts
2. Seasonal Discounts
3. Trade (Functional) Discounts
4. Cash Discounts

Question 8

Step 6: ALLOWANCES

Answer 8

1. Trade-In Allowances
2. Promotional Allowances (every day low pricing EDLP)

Question 9

Step 6: GEOGRAPHICAL ADJUSTMENTS

Answer 9

-FOB origin Pricing
-Uniform Delivered

Question 10

SINGLE-ZONE PRICING

Answer 10

ALL BUYERS PAY THE SAME DELIVERED PRICE FOR THE PRODUCTS REGARDLESS OF THEIR DISTANCE FROM THE SELLER

Question 11

Multiple-Zone Pricing

Answer 11

The delivered price to all buyer within any one zone is the same

Question 12

Freight Absorption Pricing

Answer 12

The buyer can deduct freight expenses from the list price of the goods so the seller agrees to pay, or “absorb,” the transportation costs.

Question 13

Basing-Point Pricing

Answer 13

Involves selecting one or more geographical locations (basing point) from which the list prices for products plus freight expenses are charged to the buyer.

Question 14

Deceptive Pricing

Answer 14

Price deals that mislead consumers and is outlawed by the Federal Trade Commission Act

Question 15

5 Most Common Deceptive Pricing Practices

Answer 15

1. Bait & Switch
2. Bargains Conditional on other purchases
3. Comparable Value Comparisons
4. Comparisons with suggested prices
5. Former Price Comparisons

Question 16

Bait and Switch

Answer 16

A deceptive practice exists when a firm offers a very low price on a product (the bait) to attract customers to a store. Once in the store, the customer is persuaded to purchase a higher-priced item (the switch) using a variety of tricks, including, (1) downgrading the promoted item, (2) not having the item in stock, or (3) refusing to take orders for the item.