module 9

Question 1

What are the six elements of Pricing decisions?

Answer 1

Establish pricing objectives and related strategies
Select pricing tactics
Set the exact price
Determine channel discounts and allowances
Execute price changes
Understand legal considerations in pricing

Question 2

What is penetration pricing strategy?

Answer 2

To gain as much market share as possible

Question 3

What is the main objective of Penetration pricing?

Answer 3

Attract customers to a new product/service by offering a lower price during its initial offering

Question 4

What should marketers be wary about Penetration pricing strategy?

Answer 4

Price is a cue for developing customer perceptions of product quality, the value proposition may be reduced if a low price belies the products actual quality attributes. It creates confusion about positioning and brand image.

Question 5

What is the objective of Price skimming strategy?

Answer 5

Entering a market at a relatively high price point.

marketing managers usually are convinced that a strong price-quality relationship exists for the product

Question 6

List at least four important features of Price skimming strategy?

Answer 6

There are enough prospective customers willing to buy the product at a high price
The high price does not attract competitors
Lowering the price would have only a minor effect on increasing sales volume and reducing unit costs
The high price is interpreted as a sign of high quality

Question 7

What is Target return on investment (ROI) pricing strategy? Page

Answer 7

Pricing strategy in which a bottom-line profit is established first and then pricing is set to achieve that target

Question 8

How is ROI calculated?

Answer 8

Subtracting the initial value of the investment from the final value of the investment(which equals the net return) then dividing this new number (net return) by the cost of investment, then multiply by 100

Question 9

What is the basic price elasticity equation

Answer 9

The measure of customers price sensitivity estimated by dividing relative changes in quantity sold by relative changes in price (see study guide)

Question 10

What is Competitor-based pricing strategy?

Answer 10

A firm decides to price at some market average price in context with prices of competitors

Question 11

What is Stability pricing?

Answer 11

A firm attempts to find a neutral set point for price that is neither low enough to raise the ire of competition nor high enough to put the value proposition at risk with customers.

Question 12

What is Value Pricing?

Answer 12

A firm attempts to take into account the role of price as it reflects the bundle of benefits sought by the customer.

Question 13

Product line pricing

Answer 13

A firm affords the marketing manager an opportunity to develop a rational pricing approach across a complete line of related items.

Question 14

Captive pricing or Complementary pricing

Answer 14

Gaining a commitment from a customer to a basic product or system that requires continual purchase or peripherals to operate

Question 15

Price bundling

Answer 15

Customers are given the opportunity to purchase a package deal at a reduced price

Question 16

Reference pricing

Answer 16

Firm gives customers comparative prices when considering purchase of a product so they are not viewing a price in isolation from prices of other choices.

Question 17

Prestige pricing

Answer 17

Lends prestige to a product or brand by virtue of a price relatively higher than the competition

Question 18

Odd pricing and Even pricing

Answer 18

Odd pricing: in which the price is not expressed in whole dollar increments
Even pricing: price is expressed in whole-dollar increments.

Question 19

One-price strategy

Answer 19

A pricing tactic in which the price marked on a good is what it typically sells for.

Question 20

Variable pricing

Answer 20

A pricing tactic in which customers are allowed or encouraged to haggle about prices.

Question 21

Everyday low pricing:

Answer 21

A pricing tactic that entails relatively low, constant prices and minimal spending on promotional efforts.

Question 22

High/low pricing:

Answer 22

A pricing strategy in which the retailer offers frequent discounts, primarily through sales promotions, to stated regular prices.

Question 23

Auction pricing

Answer 23

A pricing tactic in which individuals competitively bid against each other and the purchase goes to the highest bidder.

Question 24

Cost-plus pricing:

Answer 24

Building a price by adding standardized markup on top of the costs associated with the offering.

Question 25

Mark-up cost pricing

Answer 25

The addition to the price of an offering after costs have been considered.

Question 26

How do companies calculate Markup on Sales Price?

Answer 26

Using the sales price as a basis for calculating the markup percentage.
Take the sales price minus the unit cost, and divide that number by the unity cost. Then multiply by 100 to determine the markup percentage.

Question 27

Average cost pricing:

Answer 27

All costs ÷ Total number of units = Average cost of a single unit

Question 28

Target return pricing:

Answer 28

First calculate total fixed costs, then a target return must be established then a demand forecast must be made. (Fixed costs + Target return) ÷ Units =

Question 29

What are Allowances?

Answer 29

A remittance of monies to the consumer after the purchase of the product.

Question 30

Seasonal discounts:

Answer 30

Discounts that reward the purchaser for shifting part of the inventory storage function away from the manufacturer.

Question 31

Quantity discounts:

Answer 31

Discounts taken off an invoice price based on different levels of product purchased.

Question 32

Trade discounts:

Answer 32

An incentive to a channel member for performing some function in the channel that benefits the seller.

Question 33

Cash discounts:

Answer 33

A percentage discount off invoice to elicit quicker payment by the customer.

Question 34

What are Promotional allowances?

Answer 34

Sales promotions initiated by the manufacturer and carried out by the retailer, who is then compensated by the manufacturer.

Question 35

FOB

Answer 35

Determination of title transfer and freight payment based on shipping location.

Question 36

Uniform Delivered pricing:

Answer 36

When the same delivery fee is charged to customers regardless of geographic location within a set area.

Question 37

What are the laws that protect consumers and companies against unfair pricing tactics?

Answer 37

Fair trade laws: Laws designed to allow manufacturers to establish artificially high prices by limiting the ability of wholesalers and retailers to offer reduced or discounted prices.
minimum markup laws Laws that require retailers to apply a certain percentage of markup to their products for sale.