Final Exam

Question 1

Pricing strategy by which a firm charges the highest initial price that customers will pay. As the demand of the first customers is satisfied, the firm lowers the price to attract another, more price-sensitive segment.

Answer 1

Skim Pricing

Question 2

A strategy in which investment in a particular line of business is reduced or eliminated because the revenue brought in by additional investment would not warrant the expense.is employed when a line of business is considered to be a cash cow, meaning that the brand is mature and is unlikely to grow if more investment is added. The company will instead siphon off the revenue that the cash cow brings in until the brand is no longer profitable.

Answer 2

Harvest Pricing

Question 3

What is the goal of penetration pricing?

Answer 3

Discourage competition and gain market share.

• Strategy where the price of a product is set low to rapidly reach a wide fraction of the market and initiate word of mouth.

Question 4

Why use cost-based pricing?

Answer 4

Attract consumers who are looking for inexpensive products and services.

Question 5

A fixed sum or percentage of the total cost is added (as income or profit) to the cost of the product to arrive at its selling price.

Answer 5

Cost-Based Pricing

Question 6

What is value-based pricing and why use it?

Answer 6

Sets prices primarily, but not exclusively, on the value, perceived or estimated, to the customer rather than on the cost of the product or historical prices.
-companies that produce medications, chemicals, and computer programs and software and artwork.

Question 7

How should firms think of social media?

Answer 7

Tool for: 
•  track communications, feedback
•  customer engagement
•  communication
•  relationship development
•  deeping relationships
•  long-term attachment

Question 8

When should companies use twitter?

Answer 8

Use if your goal is to communicate with your following

Question 9

Why should companies use Facebook?

Answer 9

Great platform for companies to engage with their customers, visitors, and fans alike.

Question 10

What is corporate social responsibility?

Answer 10

Company code of ethics

Question 11

Why should marketing be concerned with CSR?

Answer 11

• Positive brand image
• Minimize government intrusion
• Acquire better employees

Question 12

Why do firms engage in CSR?

Answer 12

1. Innovation
2. Cost savings
3. Brand differentiation
4. Long-term thinking
5. Customer engagement
6. Employee engagement

Question 13

What is an elastic good or service?

Answer 13

• Small changes in price will cause large changes in quantity consumed.
• Demand is very elastic if consumers will only pay a certain price, or a narrow range of prices, for the product.

Question 14

What is an inelastic good or service?

Answer 14

• Takes large changes in price to effect a change in quantity consumed.
• Inelastic demand means a producer can raise prices without much hurting demand for its product.

Question 15

How do you know if a product is a compliment?

Answer 15

Have a negative cross-price elasticity: as the price of one good increases, the demand for the second good decreases.

Question 16

How do you know if a product is a substitute?

Answer 16

Have a positive cross-price elasticity: as the price of one good increases, the demand for the other good increases.