CH.11 Pricing Products and Services

The money or other considerations (including other products and services) exchanged for the ownership or use of a product or service is referred to as __________.

price

Price refers to

the money or other considerations (including other products and services) exchanged for the ownership or use of a product or service.

From a marketing viewpoint, __________ is the money or other considerations (including other products and services) exchanged for the ownership or use of a product or service.

price

All of the following are synonyms for price EXCEPT:

profit.

Which of the following is an example of a price?

college tuition

Attorneys’ fees, entrance fees, train fares, and organization dues are all examples of

price.

All of the following statements about price are true EXCEPT:

For most products and services, their prices are always the same.

Susan O’Rourke hired an attorney to represent her in a court case involving an auto accident. The attorney charged O’Rourke a $2,000 retainer fee for his services. Terry Thomas needed a haircut – the local stylist charged him $12 for her services. Aaron Mathison mowed his neighbor’s lawn; in exchange, the neighbor roto-tilled Mathison’s garden. The attorney fees paid by O’Rourke, the $12 charged by the hair stylist, and the exchange of lawn mowing for garden tilling are all examples of

price.

The practice of exchanging products and services for other products and services rather than for money is referred to as __________.

barter

Barter refers to

the practice of exchanging products and services for other products and services rather than for money.

The use of special fees and surcharges is driven by consumers’ zeal for __________ combined with the ease of making price comparisons on the Internet.

low prices

The use of special fees and surcharges is driven by consumers’ zeal for low prices and __________.

the ease of making price comparisons on the Internet

According to the price equation, final price equals __________ minus incentives and allowances plus extra fees.

LIST PRICE

A company that manages apartments decides to buy 15 new dishwashers at a list price of $550 each as replacements for a small apartment complex it owns. Because the company is buying more than 10 dishwashers, it is eligible for a $150-per-unit quantity discount. Financing charges total $20 per unit. The company gets $10 per dishwasher for 15 used trade-ins. What is the final price the company will pay for EACH dishwasher?

$410

The ratio of perceived benefits to price is referred to as

value.

To increase value the most, marketers should

decrease price and increase benefits.

decrease price and increase benefits.

For some products, price influences the perception of overall quality, and ultimately value, to consumers.

A reference value involves comparing the costs and benefits of __________.

substitute items

The __________ equation = (Unit price × Quantity sold) – Total cost.

profit

A firm’s profit equation demonstrates that profit equals __________.

Total revenue – Total cost

The formula, Total revenue – Total cost or [(Unit price × Quantity sold) – (Fixed cost + Variable cost)] represents __________.

the profit equation

A firm’s profit equation equals

Total revenue – Total cost or [(Unit price × Quantity sold) – (Fixed cost + Variable cost)].

Calculate a firm’s total revenue (TR) using the following information: the unit price (P) for a product is $40; the quantity sold (Q) is 2,000; the fixed cost (FC) is $50,000; and the variable cost (VC) is $20,000.

$10000

The key to setting a final price for a product is finding an approximate price level to use as a reasonable starting point. Four common approaches to selecting an approximate price level are: (1) demand-oriented; (2) __________; (3) profit-oriented; and (4) competition-oriented approaches.

cost-oriented

The key to setting a price for a product is finding an approximate price level to use as a reasonable starting point. Four common approaches to selecting an approximate price level are: (1) demand-oriented; (2) cost-oriented; (3) __________; and (4) competition-oriented approaches.

profit-oriented

The key to setting a final price for a product is finding an approximate price level to use as a reasonable starting point. Four common approaches to selecting an approximate price level are: (1) demand-oriented; (2) cost-oriented; (3) profit-oriented; and (4) __________ approaches.

competition-oriented

Which of the following statements about the price-setting process is most accurate?

Sometimes pricing strategies overlap, and a seasoned marketer will consider several strategies when choosing an approximate price level.

Demand-oriented approaches weigh factors that underlie expected __________ more heavily than such factors as cost, profit, and competition when selecting a price level.

customer tastes

All of the following are demand-oriented approaches to selecting an approximate price level EXCEPT:

customary.

Skimming pricing is considered to be a __________ approach to pricing.

demand-oriented

Setting the highest initial price that customers really desiring the product are willing to pay when introducing a new or innovative product is referred to as a

skimming strategy.

Skimming pricing refers to

setting the highest initial price that customers really desiring the product are willing to pay when introducing a new or innovative product.

Skimming pricing is a strategy that introduces a new or innovative product by

setting a high initial price.

A skimming pricing policy is likely to be most effective when

customers are willing to buy immediately at the high initial price.

A skimming pricing policy is likely to be most effective when

the high initial price will not attract competitors.

A skimming pricing policy is likely to be most effective when

lowering the price has only a minor effect on increasing the sales volume and reducing the unit cost.

A skimming pricing policy is likely to be most effective when

customers interpret the high price as signifying high quality.

A manufacturer of a digital video recorder (DVR) is thinking of using a skimming pricing strategy for its new product. Which of the following conditions would argue AGAINST using a skimming pricing strategy for the DVR?

increasing volume reduces production costs substantially

When microwave ovens were in the introduction stage of their product life cycle, some consumers were willing to pay exorbitant prices for these innovative ovens. Taking advantage of this strong consumer desire, marketers set the price for microwave ovens at the highest initial price possible. Marketers of microwave ovens used a __________ pricing strategy.

skimming

The first Apple iPhone was introduced in 2007 at an initial price of $600. People waited in line overnight so they could be one of the first to own this unique smartphone. Which pricing strategy did Apple use to help recoup its research and development costs for the smartphone?

skimming pricing

The first Apple iPad was introduced in 2010 at an initial price of $650 for the 16 GB version. People waited in line overnight so they could be one of the first to own this unique tablet device. Which pricing strategy did Apple use to help recoup its research and development costs for the iPad?

skimming pricing

Penetration pricing is considered to be a __________ approach to pricing.

demand-oriented

Penetration pricing refers to

setting a low initial price on a new product to appeal immediately to the mass market.

The pricing strategy that is almost the exact opposite of skimming pricing is

penetration pricing.

Penetration pricing is intended to appeal to which market?

the mass market

Which of the following statements about penetration pricing is most accurate?

Penetration pricing is more effective in a marketplace with price-sensitive consumers.

A penetration pricing policy is most likely to be effective when

many segments of the market are price sensitive.

A penetration pricing policy is most likely to be effective when

a low initial price discourages competitors from entering the market.

A penetration pricing policy is most likely to be effective when

unit production and marketing costs fall dramatically as production volumes increase.

When Amazon introduced the Kindle Fire tablet device at $199 while Apple was selling the lowest price iPad for $499, Amazon was using a __________ pricing strategy.

penetration

Wrigley recently introduced a new flavor of Orbit brand sugar free chewing gum – mint mojito. The introductory price was low so that it quickly created loyal customers for the flavor. In this example, Wrigley used

penetration pricing.

When Hallmark cards introduced a line of 99-cent cards (about half the price of the previously least expensive cards it sold), the greeting card company was trying to appeal to a mass market that was price sensitive. Hallmark was using a __________ pricing strategy.

penetration

The manufacturer of a new kind of fat-free ice cream that has the consistency and taste of regular ice cream is thinking of using a penetration pricing strategy for its new product. Which of the following conditions would argue AGAINST using a penetration pricing strategy for the tasty dessert treat?

The ice cream market exhibits inelastic demand over a fairly broad range of prices.

Prestige pricing is considered to be a __________ approach to pricing.

demand-oriented

Prestige pricing refers to

setting a high price so that quality- or status-conscious consumers will be attracted to the product and buy it.

Setting a high price so that quality- or status-conscious consumers will be attracted to the product and buy it is referred to as

prestige pricing.

A manufacturer using __________ is setting a high price so that quality- or status-conscious consumers will be attracted to the product and buy it.

prestige pricing

Hallmark was an official supplier at the Winter Olympics. Hallmark presented each Olympic winner with a special bouquet of roses designed to resemble the Olympic torch. Consumers could buy a smaller version of this bouquet at the Hallmark website for $74.95. The Olympic bouquet contained two dozen yellow roses, yet one could buy two dozen yellow roses for less than $35 at most supermarkets. With the Olympic bouquet Hallmark appealed to flower buyers that wanted to make a statement, so it used which demand-oriented pricing approach?

skimming pricing

Talbot’s sells women’s clothes. A longsleeve scoopneck t-shirt with the Talbot’s label costs $45. By comparison, you can buy a t-shirt for $5 at a Family Dollar Store, but it won’t have the prestigious Talbot’s label or quality. What kind of demand-oriented approach to pricing does Talbot’s use?

prestige pricing

You can buy a General Electric dishwasher for $399 or you can buy a similar Bosch brand dishwasher for $989. Since Bosch uses its pricing strategy to project a high-quality product image, it is most likely using __________ pricing.

prestige

A Patek Philippe Sky Moon Tourbillion men’s wristwatch is among the most expensive in the world, costing over $1.75 million. This is an example of a __________ strategy.

prestige pricing

In response to Duracell’s introduction of the Duracell Ultra battery, Energizer introduced an Advanced Formula battery. But unlike Duracell, Energizer priced its batteries at a low initial price to attract the mass market. In this case, Energizer used

penetration pricing.

penetration pricing.

No, because consumers were unable to perceive the improved quality due to the low price.

Odd-even pricing is considered to be a __________ approach to pricing.

demand-oriented

Odd-even pricing refers to

setting prices a few dollars or cents under an even number.

To be successful, odd-even pricing depends on

customers’ perceptions of price.

Which of the following statements regarding odd-even pricing is most accurate?

Overuse of odd-ending prices tends to mute its effect on demand.

The prices for all furniture sold at American Furniture Warehouse end in $9.99, such as $599.99, $899.99, etc. American Furniture Warehouse uses

odd-even pricing.

Target pricing is considered to be a __________ approach to pricing.

demand-oriented

Target pricing refers to

estimating the price that ultimate consumers would be willing to pay for a product, then working backward through markups taken by retailers and wholesalers to determine what price to charge wholesalers.

The pricing approach that: (1) estimates the price that ultimate consumers would be willing to pay for a product; (2) works backward through markups taken by retailers and wholesalers to determine what price to charge wholesalers; and (3) results in the manufacturer deliberately adjusting the composition and features of the product to achieve the price to consumers is referred to as __________.

target pricing

Which of the following pricing techniques is most sensitive to customers’ responses to price?

target pricing

Which of the following pricing techniques results in the manufacturers deliberately adjusting the composition and features of a product to achieve the desired price for consumers?

target pricing

The Swedish manufacturer of Asko dishwashers concluded that consumers would be willing to pay approximately $1000 for a dishwasher that was quieter than any other on the market. Asko determined about $250 in markups would have to be given to wholesalers and retailers, and then designed the quietest product that it could make for $750. Asko used

target pricing.

Bundle pricing is considered to be a __________ pricing practice.

demand-oriented

Which of the following is a demand-oriented approach to pricing?

bundle pricing

Marketing two or more products in a single package price is referred to as

bundle pricing.

bundle pricing.

marketing two or more products in a single package price.

Which one of the following statements regarding bundle pricing is most accurate?

Bundle pricing often provides a lower total cost to buyers and lower marketing costs to sellers.

If you were to buy one peach tree and one apple tree from the Stark Bros. fruit trees and landscaping catalog in two separate orders, you would pay a total of $109.99. However, if you order the peach and apple tree in the same order, you pay only $89.99. When selling the two trees together for a reduced price, what pricing strategy does Stark Bros. employ?

bundle pricing

When Dell sells various laptops, it also pre-installs Microsoft Office and other software customers order at a discount before a laptop is shipped. This is an example of

bundle pricing.

A box of Cascade dishwasher detergent shrink-wrapped with a bottle of Jet Dry for 10 cents more than the regular price of the dishwasher detergent is an example of __________ pricing.

bundle

Individuals can choose to purchase Microsoft stand-alone software packages, such as the Microsoft Office 2013 Home and Student versions of Word, Excel, and PowerPoint for $109.99 each. Alternately, they may choose to purchase the Microsoft Office 2013 Home and Student Suite, which has these three applications plus OneNote in the same package for a price of $139.99. Microsoft is using a __________ pricing strategy.

bundle

Yield management pricing refers to

charging different prices to maximize revenue for a set amount of capacity at any given time.

Charging different prices to maximize revenue for a set amount of capacity at any given time is referred to as

yield management pricing.

A __________ approach often changes prices based on time, day, week, or season.

yield management pricing

Yield management pricing is most consistent with services attempting to deal with

capacity management.

Airlines, hotels, and car rental firms all engage in __________ by varying prices based on time, day, week, or season to match supply and demand.

yield management pricing

One problem in the interstate trucking industry is the number of trucks that return empty after making a delivery. There is a website where independent interstate truckers can look for loads to carry on their return trips, known as backhauls. Because the trucks would normally return empty, truckers who use this website to generate business they would not have had otherwise receive a reduced shipping rate. This reduced rate for a backhaul is an example of

yield management pricing.

Which of the following is a cost-oriented pricing method?

standard markup pricing

Which of the following is a cost-oriented approach to pricing?

cost-plus pricing

With a __________ pricing strategy, a price setter stresses the __________ side of the pricing problem.

cost-oriented; cost

With a cost-oriented pricing strategy, a price setter stresses the __________ side of the pricing problem and the price is set by looking at __________.

cost; production and marketing expenses

Which of the following statements regarding cost-oriented approaches is most accurate?

These methods focus on production and marketing expenses.

Standard markup pricing is considered to be a __________ approach to pricing.

cost-oriented

Standard markup pricing refers to

adding a fixed percentage to the cost of all items in a specific product class.

Adding a fixed percentage to the cost of all items in a specific product class is referred to as

standard markup pricing.

All of the following statements about standard markup pricing are true EXCEPT:

summing the total unit cost of providing a product or service and adding a specific amount to the cost to arrive at a price.

Creative Quilts Studio sells hundreds of colors and types of fabric and thread. To price its inventory, the owners add 50 percent to the cost of each bolt of fabric and every spool of thread. What is this pricing approach called?

standard markup pricing

Assume it costs Lady Marion Seafood, Inc. $30 to catch, process, freeze, package, and ship 5-pound packages of Alaskan salmon. The firm adds 60 percent to the cost of its salmon products and charges customers a total of $48 for a postage-paid vacuum-sealed package. What type of pricing does Lady Marion Seafood use to arrive at its final price?

standard markup pricing

Supermarket managers use standard markup pricing because it is particularly suited to situations when

there is a large number of products and estimating the demand for each would be difficult and time consuming.

Summing the total unit cost of providing a product or service and adding a specific amount to the cost to arrive at a price is referred to as __________.

cost-plus pricing

Cost-plus pricing refers to

summing the total unit cost of providing a product or service and adding a specific amount to the cost to arrive at the price.

The most commonly used pricing method for business products is __________.

cost-plus pricing

Rather than billing clients by the hour, some lawyers and their clients agree on a fixed fee based on expected costs plus an agreed upon level of profit for the law firm. Which pricing approach are they using?

cost-plus pricing

Which of the following is a profit-oriented approach to pricing?

target profit pricing

Which of the following is a profit-oriented pricing method?

target return-on-sales pricing

All of the following are profit-oriented approaches to select an approximate price level EXCEPT:

cost-plus percentage-of-cost pricing.

Target profit pricing refers to

setting an annual target of a specific dollar volume of profit.

Setting an annual target of a specific dollar volume of profit is referred to as __________.

target profit pricing

What is critical when using target profit pricing?

a lower-than average price

A custom tailor wishes to use target profit pricing to establish a price for a custom-designed business suit. Assume variable cost is $200 per suit, fixed cost is $44,000, and the target profit is $50,000 based on a volume of 50 suits. What price should be charged for a typical custom suit?

$2,080

Lady Marion Seafood, Inc. sells 5-pound packages of Alaskan salmon. Assume that its unit variable cost per package is $30 and its fixed cost is $250,000. It wants a target profit of $38,000 based on a volume of 16,000 packages. What should the firm charge for a 5-pound package of salmon?

$48.00

Target return-on-sales pricing refers to

setting prices to achieve a profit that is a specified percentage of the sales volume.

Setting a price to achieve a profit that is a specified percentage of the sales volume is referred to as __________.

target return-on-sales pricing

What pricing method is often used because of the difficulty in establishing a benchmark of sales or investment to show how much of a firm’s effort is needed to achieve the target?

target return-on-sales pricing

Target return-on-investment pricing refers to

setting a price to achieve an annual target ROI.

Setting a price to achieve an annual target return-on-investment (ROI) is referred to as

target return-on-investment pricing.

The __________ is the ratio of profit to the investment used to earn that profit.

return on investment

Which of the following companies would be most likely to use target return-on-investment pricing?

an automobile manufacturer

All of the following are competition-oriented approaches to selecting an approximate price level EXCEPT:

skimming.

Rather than emphasize demand, cost, or profit factors, a price setter can stress what __________ is (are) doing.

the market or competitors

Customary pricing refers to

setting a price that is dictated by tradition, a standardized channel of distribution, or other competitive factors.

Setting a price that is dictated by tradition, a standardized channel of distribution, or other competitive factors is referred to as __________.

customary pricing

According to the textbook, clothing manufacturer Hart Schaffner & Marx and retailer Bloomingdale’s use __________ pricing.

above-market

According to the textbook, Revlon cosmetics uses __________ pricing.

at-market

Manufacturers of generic brands use which method of competition-oriented pricing?

below-market pricing

An ad campaign by Suave shampoo asked television viewers to identify the heads of hair of women who used Suave shampoo and conditioner and those that used the much more expensive salon hair-care products. The idea of the ad was that no one could tell which woman used the much cheaper Suave brand. By making price its selling point, Suave is most likely using __________.

below-market pricing

Loss-leader pricing refers to

deliberately selling a product below its customary price, not to increase sales, but to attract customers’ attention in hopes that they will buy other products as well.

Deliberately selling a product below its customary price, not to increase sales, but to attract customers’ attention in hopes that they will buy other products as well, is referred to as

loss-leader pricing.

Using __________, many retailers deliberately sell products below their normal prices (and sometimes below cost) to attract attention and additional store traffic.

loss-leader pricing

Basic to setting a product’s price is the extent of __________. This information is used in estimating the revenues the firm expects to receive.

customer demand for it

Marketing executives must translate estimates of customer demand into estimates of

revenues the firm expects to receive.

A demand curve refers to a graph that relates

the quantity sold and price, which shows the maximum number of units that will be sold at a given price.

The maximum quantity of products consumers will buy at given price is shown by

a demand curve.

The horizontal axis of a demand curve graph represents __________.

quantity demanded

The vertical axis of a demand curve graph represents __________.

price per unit

A demand curve graph typically appears as

a diagonal line going from upper left to lower right demonstrating that as price goes down, demand goes up.

tFactors that determine consumers’ willingness and ability to pay for products and services are referred to as

demand factors.

Demand factors refer to

consumers’ willingness and ability to pay for products and services.

All of the following are demand factors EXCEPT:

the number of distribution outlets carrying the product.

When estimating demand, price is not the only factor to be considered. Three other elements emphasized by economists are consumer tastes, price and availability of similar products, and

consumer income.

While the demand factors of consumer tastes and price and availability of similar products determine what consumers want to buy, consumer income determines

what they can buy.

Which of the following statements about the factors that influence demand is true?

As real consumer income increases, the demand for a product increases.

There are a lot of skateboards on the market, but the BMW Streetcarver is the only one with stabilizers and wheel design based on BMW’s automobiles. This technology gives the BMW Streetcarver better control at high speeds and around sharp turns than any other brand. The skateboard is priced at $495, which leaves many consumers who might want to buy the Streetcarver (especially young males) unable to afford it. This inability to pay for the high-priced BMW-made skateboard shows the affect of __________ on sales.

demand factors

Elastic demand exists when

a small percentage decrease in price produces a larger percentage increase in quantity demanded.

Several companies produce latex gloves that are used in a variety of different industries. If one of the glove manufacturers decreases its price by just a few percentage points, it will result in a significant increase in quantity demanded. The demand for latex gloves is

elastic.

Inelastic demand exists when

a small percentage decrease in price produces a smaller percentage increase in quantity demanded.

If a firm finds the demand for one of its products is inelastic, it can increase its total revenues by

raising its price.

Recently, much of the western U.S. experienced a drought condition and water usage was restricted in Denver. Yet, even though most people used less water, the price of water did not drop. When the drought was declared over, the water company raised water prices. However, the residents of Denver did not use less water. Here, water is

price inelastic.

The total money received from the sale of a product is referred to as __________.

total revenue

Total revenue refers to

the total money received from the sale of a product.

Four cost concepts are important in pricing decisions: total cost, variable cost, unit variable cost, and __________.

fixed cost

The total expense incurred by a firm in producing and marketing a product, which equals the sum of fixed cost and variable cost, is referred to as

total cost.

Total cost refers to

the total expense incurred by a firm in producing and marketing a product, which equals the sum of fixed cost and variable cost.

Fixed cost refers to

the sum of the expenses of the firm that are stable and do not change with the quantity of a product that is produced and sold.

The sum of the expenses of a firm that is stable and does not change with the quantity of the product that is produced and sold is referred to as

fixed cost.

Rent, executive salaries, and insurance are typical examples of

fixed costs.

Which of the following is a typical example of a fixed cost?

building rental expense

Variable cost refers to

the sum of the expenses of the firm that change with the quantity of a product that is produced and sold.

The sum of the expenses of the firm that change with the quantity of the product that is produced and sold is referred to as

variable cost.

Which of the following is a typical example of a variable cost?

shipping costs

Unit variable cost refers to variable cost expressed

on a per unit basis for a product.

The unit variable cost (UVC) equals variable cost (VC) divided by __________.

quantity (Q)

Break-even analysis refers to

a technique that analyzes the relationship between total revenue and total cost to determine profitability at various levels of output.

A technique that analyzes the relationship between total revenue and total cost to determine profitability at various levels of output is referred to as __________.

break-even analysis

The quantity at which total revenue and total cost are equal is referred to as (the)

break-even point.

The break-even point (BEP) = [Fixed cost ÷ (Unit price – __________)].

Unit variable cost

The break-even point (BEP) = [__________ ÷ (Unit price – Unit variable cost)].

Fixed cost

The break-even point (BEP) = [Fixed cost ÷ (__________ – Unit variable cost)].

Unit price

A graphic presentation of the break-even analysis that shows when total revenue and total cost intersect to identify profit or loss for a given quantity sold is referred to as a(n) __________.

break-even chart

A break-even chart refers to a graphic presentation

that shows when total revenue and total cost intersect to identify profit or loss for a given quantity sold.

Assuming there is no change in a product’s price or the quantity demanded, if a business owner wants to increase her advertising expenses to a by $500 monthly, this would cause total costs to __________ and the break-even quantity to __________.

increase; increase

While pricing objectives frequently reflect corporate goals, pricing constraints often relate to

conditions existing in the marketplace.

Specifying the role of price in an organization’s marketing and strategic plans is referred to as

setting pricing objectives.

Pricing objectives refer to

specifying the role of price in an organization’s marketing and strategic plans.

Which of the following statements regarding pricing objectives is most accurate?

Pricing objectives may change depending on the financial position of the company.

All of the following are examples of pricing objectives EXCEPT:

competitors’ prices.

A firm’s profit objective is often measured in terms of ROI. The acronym ROI stands for __________.

return on investment

A firm’s profit objective is often measured in terms of ROA. The acronym ROA stands for __________.

return on assets

Three pricing objectives relate to a firm’s profit. In one known as __________, a company gives up immediate profit in exchange for achieving a higher market share in the hopes of penetrating competitive markets.

managing for long-run profits

Three different objectives relate to a firm’s profit, which have different implications for pricing strategy. The three profit-oriented objectives include __________, managing current profit, and achieving a target return.

managing for long-run profits

Managing for long-run profits as a pricing objective implies that a company will

give up immediate profit in exchange for achieving a higher market share in hopes of penetrating competitive markets.

Three different objectives relate to a firm’s profit, which is often measured in terms of return on investment. One objective, known as _________, is common in many firms because the targets can be set and performance measured quickly.

maximizing current profit

Three different objectives relate to a firm’s profit, which is often measured in terms of return on investment. One objective, known as _________, is common in many firms because the targets can be set and performance measured quickly.

maximizing current profit

A maximizing current profit objective implies that a company chooses to

set targets whose performance can be measured quickly.

Three different objectives relate to a firm’s profit, which is often measured in terms of return on investment. One objective, known as _________, occurs when a firm sets a profit goal, usually determined by its board of directors.

target return

Three different objectives relate to a firm’s profit, which have different implications for pricing strategy. The three profit-oriented objectives include managing for long-run profits, maximizing current profit objectives, and __________.

achieving a target return

A target return profit objective implies that a company chooses to

set a profit goal that is often determined by its board of directors.

Given that a firm’s profit is high enough for it to remain in business, an objective may be to __________, which will in turn lead to increases in market share and profit.

increase dollar sales revenue

Which of the following statements regarding sales goals is most accurate?

For marketing managers, sales revenue or unit sales can be easily translated into meaningful targets for a product line or brand.

The ratio of the firm’s sales revenues or unit sales to those of the industry (competitors plus the firm itself) is referred to as

market share.

Market share is the ratio of the __________ to those of the industry, including the firm itself.

firm’s sales revenues or unit sales

Companies often pursue a market share objective when __________.

industry sales are flat or declining

Which of the following statements regarding a market share pricing objective is most accurate?

Although increased market share is a primary goal of some firms, others see it as a means to other ends, such as increased sales or profits.

Netflix used to charge $14.99 per month for its movie rental service. However, when Blockbuster introduced the same service at $13.99, Netflix then dropped its price to $13.99. Netflix most likely made this price reduction in an attempt to

maintain market share.

If the CEO of the Clorox Company were to say, "We want to control 60 percent of the bleach market within the next five years," he would have set a __________ pricing objective.

market share

Unit volume as a pricing objective refers to

the quantity of products to be produced or sold.

A negative aspect of selecting unit volume as a pricing objective is that

if price reductions are used to achieve volume objectives, it can sometimes come at the expense of profits.

Some specialty-toy retailers pursue a __________ pricing objective to generate cash to ward off bankruptcy.

survival

A firm may forgo higher profit on sales and follow which of the following pricing objectives because it wants to recognize its stakeholder obligations?

social responsibility

Factors that limit the range of prices a firm may set are referred to as __________.

pricing constraints

Pricing constraints are

factors that limit the range of prices a firm may set.

Pricing constraints refer to

factors that limit the range of prices a firm may set.

Which term describes factors that limit the range of prices a firm may set?

pricing constraints

All of the following are examples of pricing constraints EXCEPT:

social responsibility.

Which of these statements about consumer demand as a pricing constraint is most accurate?

The number of potential buyers generally affects the price a seller can charge.

Which of the following statements regarding pricing constraints is most accurate?

Generally, the greater the demand for a product, the higher the price that can be set.

The newer a product and the earlier it is in its life cycle,

the higher is the price that can usually be charged.

Which of the following statements about the product life cycle as a pricing constraint is most accurate?

The newer a product is, the higher the price that can usually be charged.

Which of the following statements regarding pricing constraints is most accurate?

A company has more latitude in setting an initial price if the product is in the introductory stage of its life cycle.

Which of the following statements is most accurate?

Marketers must ensure that firms in their channels of distribution make an adequate profit or they will be cut off from their customers.

A manufacturing company that introduces a product must know or anticipate what specific price its __________ currently charge or may charge in the future.

present and potential competitors

All of the following are legal or ethical considerations when setting a final price EXCEPT:

showrooming.

Four pricing practices are closely scrutinized because of potential unethical or illegal actions. They include: (1) price fixing; (2) price discrimination; (3) deceptive pricing; and (4) __________.

predatory pricing

Four pricing practices are closely scrutinized because of potential unethical or illegal actions. They include: (1) price fixing; (2) price discrimination; (3) predatory pricing; and (4) __________.

deceptive pricing

Four pricing practices are closely scrutinized because of potential unethical or illegal actions. They include: (1) price fixing; (2) predatory pricing; (3) deceptive pricing; and (4) __________.

price discrimination

Four pricing practices are closely scrutinized because of potential unethical or illegal actions. They include: (1) predatory pricing; (2) price discrimination; (3) deceptive pricing; and (4) __________.

price fixing

A conspiracy among firms to set prices for a product is referred to as

price fixing.

Price fixing refers to

a conspiracy among firms to set prices for a product.

Price fixing is illegal under the

Sherman Act.

Two or more competitors explicitly or implicitly setting prices is referred to as __________.

horizontal price fixing

Controlling agreements between independent buyers and sellers whereby sellers are required to not sell products below a minimum retail price is called

vertical price fixing.

Vertical price fixing refers to

controlling agreements between independent buyers and sellers whereby sellers are required not to sell products below a minimum retail price.

Mark Johnson, the manager of a discount consumer electronics store, was approached by the manufacturer’s representative on behalf of a marketer of a popular and profitable line of storage racks. The manufacturer’s representative implied that if Johnson doesn’t raise the retail prices for the storage racks to those paid by the marketer’s non-discount customers, Johnson’s supply of racks may be severely curtailed. The manufacturer’s representative is guilty of attempting

vertical price-fixing.

Price discrimination refers to

the practice of charging different prices to different buyers for goods of like grade and quality.

The practice of charging different prices to different buyers for goods of like grade and quality is referred to as

price discrimination.

Price discrimination is illegal under the

Robinson-Patman Act.

In one of its least favorite actions, Amazon.com was caught fiddling with its prices. Avid DVD buyers, buying in quantity for resale, found that the online retailer was offering different customers different prices for the same DVD, and complained vociferously. Company officials admitted that the company was trying to see how much it could charge for an item before buyers balked. Amazon was caught attempting

price discrimination.

Price deals that mislead consumers fall into the category of

deceptive pricing.

Deceptive pricing practices are outlawed by legislation and enforced by which federal agency?

Federal Trade Commission

To promote their business, some psychics advertise free tarot-card readings and other insights into their customers’ futures on television. Unfortunately, this "free reading" has cost some unsuspecting callers as much as $700 in phone charges. This sort of pricing practice would be primarily monitored by the

Federal Trade Commission.

When a firm offers a very low price on a product to attract customers to a store, and once in the store, the customer is persuaded to purchase a higher-priced item, the practice is referred to as

bait and switch.

A hardware store advertises a 3/8" Black and Decker Power Drill for $29.95. You enter the store intending to purchase the drill. The salesperson informs you that they are all sold out. She tells you that the sale drills were factory seconds and that if you are going to be doing any kind of serious woodworking, you should buy the Model 3309, which sells for $49.99. This scenario has elements of which type of illegal pricing practice?

bait and switch

The practice of charging a very low price for a product with the intent of driving competitors out of business is referred to as

predatory pricing.

Predatory pricing refers to

the practice of charging a very low price for a product with the intent of driving competitors out of business.

Predatory pricing is

the practice of charging a very low price for a product with the intent of driving competitors out of business.

Predatory pricing is

illegal but often difficult to prosecute.

In the early 1980s, typical round-trip coach airfares from the East Coast to London were more than $500. Then Freddie Laker introduced the People’s Express, a competing service into Newark at $350. Major airlines matched his price and did so until they drove People’s Express out of business. Then prices shot back up to over $500. A lawsuit filed under the Sherman Act resulted in a judgment that the major airlines had explicitly tried to destroy a competitor. The People’s Express case is an example of __________ on the part of the major airlines.

predatory pricing

Bob Biltmore owns dozens of successful print shops in the Midwest. Biltmore’s shops specialize in low-cost black-and-white copies and feature user-friendly machines consumers can easily operate. In recent months, Biltmore has noticed more competition near his stores. In an attempt to eliminate the competition, Biltmore has decided to charge a very low price for his black-and-white copies, a price so low his competitors will be forced to close. After that, Biltmore plans to raise copy prices. He plans to engage in the illegal and unethical practice of

predatory pricing.

Identifying pricing objectives and constraints would occur during which stage of the price-setting process?

Selecting an approximate price level

Estimating a break-even point would occur during which stage of the price-setting process?

Selecting an approximate price level

Determining cost, volume, and profit relationships would occur during which stage of the price-setting process?

Selecting an approximate price level

After setting an approximate price level, the marketer proceeds to which step of the price-setting process?

Setting the list or quoted price

Setting one price for all buyers of a product or service is referred to as __________.

a one-price policy

A one-price policy refers to

setting one price for all buyers of a product or service.

Another name for a one-price policy is

fixed pricing.

When you buy a used car from a CarMax dealership, you are offered the car at a single, no-haggle price. You can buy it or not, but there is no negotiating the published price because of the seller’s

one-price policy.

Family Dollar Stores, Dollar Value Stores, and 99′ Only Stores sell everything in their stores for $2 or less, using what type of pricing policy?

one-price

Tendollars.com offers thousands of gifts, all priced at $10. This is an example of a(n) __________.

one-price policy

Setting different prices for products and depending on individual buyers and purchase situations is referred to as

a flexible-price policy.

A flexible-price policy refers to

setting different prices for products and services depending on individual buyers and purchase situations.

A flexible-price policy allows marketers to respond to

changes in demand, cost, and competitive factors.

Marketers using a flexible-price policy should take care to avoid

price discrimination.

Which of the following is a form of flexible pricing?

yield management pricing

Yield management pricing is a form of

flexible pricing.

What do 60 percent of prospective buyers dread about looking for a new car?

negotiating the price

When buying a car, __________ may result in discriminatory practices.

a flexible-price policy