marketing ch. 15

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the choice of a pricing strategy is specific to the target market.

19. Because market and operating conditions are different in each target market

do not recognize the role that consumers or competitors’ prices play in the marketplace.

20. A weakness associated with cost-based pricing methods is that they


21. Compared to other pricing methods, ___pricing is relatively simple.

will not vary much for different levels of production.

22. Cost-based pricing assumes costs


23. Yvonne estimates the average cost of her floral arrangements is $14 regardless of whether she is doing 5 or 20 arrangements that day. She adds a standard markup to the $14 estimate to determine her price. Yvonne is using a(n)___ pricing method.


24. Firms using a(n) pricing method set their prices relative to what other firms are charging.


25. When Greenbelt Construction Company began building houses in a large subdivision with many other builders, they priced their homes slightly higher than their competitors and promoted the added quality features in their homes. Greenbelt was using a(n)___ pricing strategy.

as perceived by the consumer

26. Value-based pricing methods include approaches to setting prices that focus on the overall value of the product offering

improvement value

27. In determining the price for his company’s new small business accounting software, Raymond is assessing how much better the software is as compared to alternative products available in the market. Raymond is using ___pricing.

improvement value

28. Each generation of cell phones has provided greater clarity, range, and multi-functionality. Marketers of cell phones can use these upgrades in__ pricing.

cost of ownership

29. In determining the price for his company’s new personal computer photography printer, Raymond is assessing the total cost of owning his printer as compared to alternative products available in the market. Raymond is using __pricing.

cost of ownership

30. Ben owns a lawn care business. From experience, Ben has found that John Deere equipment lasts almost twice as long as competitors’ machines. For John Deere, Ben’s perception about its products makes ___ pricing possible.

it necessitates a great deal of consumer research to be implemented successfully.

31. One of the difficulties associated with value-based pricing is that

the way consumers perceive value constantly changes.

32. One of the difficulties associated with value-based pricing is that

the way consumers perceived their value changed.

33. When Sony introduced its new PlayStation 3 game system, buyers who could not get them the first day bid up the price of the systems on eBay and other auction sites. As Sony provided more PlayStation 3 units to the market and early demand was satisfied, prices dropped because

the price against which buyers compare the actual selling price

a reference price is

references prices

35. In determining the price for his company’s new pocket digital camera, Matt determines what consumers consider the regular or original price for similar cameras available in the market. Matt is assessing the influence of___ on pricing strategy.

at a level somewhere between the regular price and the deep-discount sale prices competitors may offer

36. An everyday low pricing strategy stresses the continuity of retail prices

reducing their search costs

37. Everyday low pricing (EDLP) provides value to consumers by


38. In a __pricing strategy, marketers rely on the promotion of sales, during which prices are temporarily reduced to encourage purchases.

everyday low, high/low

39. It is important to Joanne to get value for her money, but she does not want to spend time comparison shopping. Joanne will likely respond to__ pricing but not ___pricing.


40. Dan is especially price sensitive. He has been known to line up on "Black Friday" (the day after Thanksgiving) at 4 a.m. in order to be among the first to buy sale items. Dan would likely respond to a ___ pricing strategy.

some consumers may associate EDLP with lower quality goods.

41. One of the problems associated with an everyday low pricing (EDLP) strategy is that

low quality

42. Odd prices often suggest to consumers.

new products

43. Developing pricing strategies for ___is one of the most challenging tasks a manager can undertake.


44. Pricing products is especially challenging because little or nothing is known about consumers’ ___perceptions of value.


45. Charging a relatively high price for new and innovative products to those consumers most willing and able to pay the high price is called price

innovators, early adopters

46. Price skimming focuses on selling products to __and __in the consumer adoption process model.

lower the price to capture the next most price sensitive market segment

47. For marketers using a price skimming strategy, once the initial demand is met for new and innovative products, they will likely

offer consumers some new benefit currently unavailable.

48. For a price skimming strategy to work, the product or service must

to gain market share quickly

49. Marketers use a price skimming strategy for any or all of the following reasons EXCEPT


50. When Burroughs-Wellcome introduced the first anti-AIDS drugs, they initially set the price at $10,000 for a year’s supply. Burroughs-Wellcome was probably pursuing a___ pricing strategy.

limit demand

51. When the first hybrid automobiles became available on the market, manufacturers had only minimal production capacity. They used a price skimming strategy primarily to

it is easier to lower prices than to raise them

52. One reason marketers of new, innovative products often start out with a price skimming strategy rather than a market penetration strategy is that

it must be difficult for competitors to enter the market.

53. For a price skimming strategy to be successful,


54. When Apple Computer Company introduced the iPhone—a combination phone, MP3 player, and Internet access device—in 2007, it was priced at $499, considerably higher than either the iPod or competing cell phones. Apple was probably pursuing a __pricing strategy.

the high costs associated with producing a small volume of cars.

55. The manufacturers of the early electric cars are charging relatively high prices to consumers who are willing to pay the price. They need to use a price skimming strategy because of

economies of scale associated with a larger volume of production.

56. With a price skimming strategy, a marketer will NOT benefit from

market penetration

57. With a__ pricing strategy, marketers set a low initial price for the introduction of a new product or service.

market penetration

58. Mario is the first retailer in town to sell games for Sony’s new PlayStation 3 machine. Mario wants to quickly capture as much of the market for the new games as possible. Mario will likely use a __ pricing strategy.

market penetration

59. When HP first introduced their inkjet printers, consumers could only buy refill cartridges from HP. HP made significant profits from the sale of replacement cartridges. In this situation, HP logically used a __ pricing strategy for their printers.

quickly build sales and market share

60. The major objectives associated with a market penetration pricing strategy are to

experience curve effect

61. The____ occurs when unit cost drops as the quantity sold increases.

experience curve effect

62. Production of the DeLorean car, made famous in the film Back to the Future, never got above 25,000 units during its lifetime. Automobile industry analysts estimate that production of this car needed to reach around 300,000 units to achieve the__ , a decrease in unit cost as product volume increases.

they would likely need to quickly produce a large volume in order to compete

63. If a market penetration pricing strategy results in lower per-unit cost, competitors will be discouraged from entering the market because

she could not meet a rapid rise in demand

64. Marlie designs and manufactures specialty furniture. She has a number of unique products but can only produce in limited quantities. Marlie will probably NOT use a market penetration strategy because

a low price might signal low quality

65. Yurgen is opening a financial consulting service for high-income retirees in his area. This target market is used to paying for quality and associates high quality with high prices. Yurgen should probably NOT use a market penetration pricing strategy because

using a market penetration strategy when there is an opportunity for price skimming

66. The saying "leaving money on the table" is associated with

a long-term approach to setting prices in a companywide integrated effort

67. A pricing strategy is

a short-term approach that often is a response to a competitive threat

68. A pricing tactic is

loss leader pricing

69. Which of the following is NOT a common business-to-business pricing tactic?

pricing tactic

70. Generally, a___ represents either a short-term response to a competitive threat or a broadly accepted method of calculating a final price for the customer that is short-term in nature.

lessen inventories of finished goods

71. The primary reasons manufacturers offer seasonal discounts to retailers are to more easily plan production schedules and to

whether the cost reduction will be low enough to cover the additional inventory costs she will have to incur

72. Christina owns and operates a shop that sells home furnishings. One of her vendors has just offered her a greatly reduced price for some traditional Christmas decorations, even though it is really too early to be thinking about holiday merchandise. One of the main pricing issues Christina will have to address as she considers the offer is

based only on the amount purchased in a single order

73. A noncumulative B2B quantity discount is

a 3 percent discount if paid in full within 10 days, or the net amount is due in 30 days

3/10, n/30 means

the time value of money

75. Manufacturers use cash discounts primarily because they benefit from

advertising allowance

76. Chris works for a hardware store. His boss directs him to make a list of manufacturers whose brand names were included in the store’s recent newspaper ads and to put copies of the ads with the invoices from each manufacturer. Chris’s boss is documenting a(n)

noncumulative quantity discount

77. Jill knows her wholesaler will give an additional 20 percent off if she orders more than 100 new swimsuits at a time for her store. The wholesaler is using a pricing tactic.


78. Clark Manufactured Housing Company charges $500 for deliveries within 50 miles and $800 for deliveries 51 to 100 miles away from their factory. The company is using a __pricing tactic.

reflect more closely the cost of delivery

79. The advantage of zone pricing to the seller is the shipping charges typically

price lining

80. When a marketer establishes a price floor and a price ceiling for an entire line of similar products and then sets price points in between for differences in quality among the products, he or she is using a __ pricing approach.

price lining

81. When Toyota introduced its Scion line of cars, the lowest priced model was listed for $15,000 while the highest priced model was listed for $21,000, with two or three other list prices in between. Toyota used a __pricing approach.

price bundling

82. Cosmetic retailers often have one price for each item but another price for three or four similar items with the same brand, all attractively packaged together. These retailers are using

price bundling

83. Mona is selling her artwork at a local festival. Her art is selling well, but t-shirts she had made up with her artwork are not selling. She decides to offer a package price for her art with a t-shirt included. Mona is using


84. Supermarkets often offer great deals on milk, beef, or eggs to get customers into their stores, knowing that many customers will also purchase items that have higher markups for the store. These supermarkets are using a __pricing tactic.


85. Retailers use__ to get rid of slow moving or obsolete merchandise.

size discount

86. The most common form of a quantity discount for consumers is a

will be less likely to switch brands

87. One of the benefits of offering a size discount to consumers is they will purchase more of a marketer’s product and

take advantage of seasonal discounts

88. Some consumers make it a point to go shopping the day after Christmas in order to


89. Retailers use ___because they believe the use will induce customers to try new products, convert first-time users to regular users, increase purchases, and protect market share.

the retailer handles coupons while manufacturers handle most rebates

90. The difference between a coupon and a rebate is that

valuable customer information

91. Rebates provide manufacturers with greater control than coupons and provide the firm with

their redemption rates are low

92. One important reason manufacturers like rebates is that

deceive customers to the point of doing harm

93. Price advertisements should never

regular price

94. For marketers to advertise a price as their __, the Better Business Bureau recommends that at least 50 percent of the sales of a product occur at that price.

reference price

95. Marketers advertising an artificially high "regular price" are unethically attempting to influence consumers’ ___perceptions.

loss leader

96. ___ pricing tactics lower the price of a product below cost.

bait and switch

97. In a __pricing tactic, sellers advertise low prices and then aggressively pressure customers to purchase higher-priced versions of the product advertised with the low price.

the reference point has been inflated or is fictitious

98. A reference price might be considered deceptive if

loss leader pricing

___lowers the price below the store’s cost.

bait and switch

100. Bill desperately needed tires for his car, and he found an ad with an incredibly low price. When he got there, he found out that those had been sold out, and he was pressured into buying tires that were more expensive than he wanted. Bill found out later that Marcelo had had the same experience at the store a few weeks earlier. It’s quite possible that both Bill and Marcelo had become the victim of a deceptive pricing tactic known as

the discounts are available to all customers

101. B2B quantity discounts are legal if

predatory pricing

102. If a telecommunications company drastically cuts the price for cellular phone service in order to eliminate local competitors, the company could be charged with

the seller is trying to match a competitor’s price

103. It is legitimate for a manufacturer to charge a retailer a lower price than its usual price if

price fixing

104. is the practice of colluding with other firms to control prices.

horizontal, vertical

__price fixing occurs when competitors collude to control prices, and __price fixing occurs within a marketing channel to control prices passed on to consumers.

marketers themselves

106. It is the responsibility of ___to determine the ethical approach to setting prices so consumers find value and the firm can make a profit.

horizontal price fixing

107. If the Amador County Pest Control Association got together and all members agreed to charge 3 percent of the value of a home for a termite inspection letter, the association members would be engaging in

vertical price fixing

108. __ occurs when members of the marketing channel collude to control the prices passed on to consumers.

price skimming

109. A mobile carrier decides to introduce a new cellular phone at a high price. This is known as

price bundling

110. A video gaming system is being sold. The package includes one game console, two gaming accessories, and one video game for $200, which is $60 less than what it would cost to purchase the items separately. This type of pricing is known as

uniform delivered pricing

111. Betty’s Bird Seed Company charges $50 for 10 pounds of bird feed, including shipping. Betty is using__ to determine shipping costs.

value-based pricing

112. Despite the economic downturn, Alban-Turner Advertising Agency has a reputation for developing campaigns that increase sales at least 10 percent. In sales presentations, Alban-Turner emphasizes its track record in order to demonstrate that its services are worth the cost. This is an example of which pricing strategy?

competitor-based pricing

113. Supermarket A always waits until Thursday to price their canned beans in an effort to match Supermarket B’s prices, which are advertised on Wednesday. This demonstrates what type of pricing strategy?

predatory pricing

114. A major airline sells an aggressively low priced ticket compared to a new low-fare airline, which is trying to enter the market. The airline may be accused of engaging in the unethical practice of

price discrimination

115. The Clayton Act and the Robinson-Patman Act forbid certain types of

slotting allowances

116. Retailers often require manufacturers to pay__ in order to obtain shelf space for new products.

zone pricing

117. When Sheila decided to sell her shoe racks on eBay, she stated the price and a shipping rate according to delivery area. Which method of pricing was Sheila using?

seasonal discount

118. The local furniture store will only purchase outdoor furniture during winter months because the manufacturer offers a better price to the furniture store. This type of pricing tactic is known as a


119. Many stores now e-mail codes to their customers that can be used on their websites or printed and brought into the store to receive discounts. The customer is using a__ to receive the discount.


120. Mary decided to purchase an electronic toothbrush priced at $100 because of a special offer from the manufacturer. By sending proof of purchase and the receipt to the manufacturer, she could receive a $40 check in return, making the final price $60. This pricing tactic is known as a

horizontal price fixing

121. What type of pricing tactic is being used when several airlines agree to charge the same fare for a single route?


122. When a new product is not being sold at the rate originally forecasted, the retailer may reduce the price in order to reduce the inventory of the product. This reduction is known as a

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