Week 6

Question 1

value

Answer 1

perceived benefits divide by price
pricing practices establish ‘reference value’ (internal and external)

Question 2

profit equation

Answer 2

total revenue - total cost

Question 3

value pricing

Answer 3

increasing product/service benefits while maintaining or decreasing costs

Question 4

four approaches for selecting an approximate price level

Answer 4

demand-oriented approaches
cost-oriented approaches
profit-oriented approaches
competition-oriented approaches

Question 5

demand-oriented approaches

Answer 5

skimming, penetration, prestige, price lining, odd-even, target, yield management

Question 6

cost-oriented approches

Answer 6

standard markup, cost-plus, experience curve

Question 7

profit-oriented approaches

Answer 7

target profit, target return on sales, target return on investment

Question 8

competition-oriented approaches

Answer 8

customary, above at or below market, loss leader

Question 9

skimming VS penetration pricing

Answer 9

skimming: firm tries to sell at a high price before aiming at more price-sensitive consumers
penetration: firm tries to sell the whole market at one low price

Question 10

standard markup pricing

Answer 10

adding a fixed % to the cost of a product

Question 11

cost-plus pricing

Answer 11

sum total costs of providing a G/S and add a specific amount to the cost to arrive at a price

Question 12

competition-oriented approaches

Answer 12

Rolex is the most expensive watches you can buy - a clear example of above-market pricing

Question 13

below-market price strategy

Answer 13

Walmart uses a below-market price strategy for many of its products

Question 14

forecasting

Answer 14

determining customer demand, both quantitative and qualitative analysis are used to make projections

Question 15

estimating demand and revenue

Answer 15

consider past sales, competitive sales, marketing support, consumer trends and behaviour

Question 16

fixed costs

Answer 16

expenses that are stable and do not change with the quantity produced (salaries, mortgage)

Question 17

variable cost

Answer 17

expenses that vary with the quantity produced and sold (materials/unit)

Question 18

identifying pricing OBJECTIVES and constraints

Answer 18

expectations that specify the role of price in an organization’s marketing and strategic plans

Question 19

identifying pricing objectives and CONSTRAINTS

Answer 19

pricing constraints are factors that limit the range of prices a firm may set (demand for the product class, product, brand, newness of the product)

Question 20

other constraints

Answer 20

cost of changing prices and time period they apply, types of competitive markets & competitors’ prices

Question 21

setting the final price

Answer 21

1. select an approximate price level
2. set the list or quoted price (one-price policy, flexible-price policy)
3. make special adjustments to the list or quoted price (discounts)
4. monitor and adjust prices

Question 22

discounts

Answer 22

reductions from list price that a seller gives a buyer as a reward for some favourable activity

Question 23

allowances

Answer 23

reductions from list or quoted price that a seller gives a buyer for performing some activity

Question 24

geographic adjustments

Answer 24

price reflects transportation component

Question 25

price fixing

Answer 25

competitors collaborate and conspire to set prices

Question 26

price discrimination

Answer 26

different customers get different prices

Question 27

deceptive pricing

Answer 27

price offers that mislead

Question 28

predatory pricing

Answer 28

low price set to drive competitors out of business