Marketing Chapter 18 – Baleja

The text says “markups
are a percentage of selling price—unless otherwise stated
A retailer pays a wholesaler $24.00 for an item and then sells it with a 25 percent markup. The retailer’s selling price is
The markup approach to price setting used by most intermediaries:
often uses the trade (functional) discount allowed by the manufacturer.
Which of the following is a TRUE statement about markups?
A firm can lose money even when using a high markup.
With respect to markups and turnover, a marketing manager should be aware that:
-a low stockturn rate increases inventory carrying costs.
-depending on the industry, a stockturn rate of 2 or 3 may be quite profitable.
-high markups don’t always mean big profits.
-speeding turnover often increases profits because the firm’s operating costs are a function of time and the volume of goods sold.
Average-cost pricing
-consists of adding a “reasonable” markup to the average cost of a product.
-does not consider cost variations at different levels of output
Average-cost pricing will result in larger than expected profit:
if the average fixed cost estimate is based on a quantity that is smaller than the actual quantity sold.
Average-cost pricing
will work out as expected when the firm’s actual average fixed cost per unit is what was estimated when prices were set
A typical break-even analysis assumes that
average variable cost is the same regardless of quantity sold
Trying to find the most profitable price and quantity to produce
requires an estimate of the firm’s demand curve.
An equipment producer is introducing a new type of paint sprayer to sell to automobile body-repair shops. The sprayer saves labor time, gives as good a job with less expensive paint, and requires less work polishing. The seller should probably use:
value in use pricing.
Which of the following statements concerning “reference prices” is FALSE?
Leader pricing is normally used with products for which consumers do not have a specific reference price.
The manager of Hot Topics Fashion Shop has concluded that her customers find certain prices very appealing. Customers see prices above or below these levels as roughly equal—and price cuts in these ranges don’t increase sales. This seems to call for
psychological pricing
The practice of setting different price levels for different quality classes of merchandise—with no prices between the classes—is called
price lining.
Good Health Co. has set a suggested retail list price of $40 on its new vitamin tablets on the assumption that its target market will find the product attractive at this price. From this suggested retail list price, Good Health has subtracted its usual chain of markups for wholesalers and retailers to obtain its own selling price of $17. This is:
demand-backward pricing.
Which of the following statements is true?
A) Prestige pricing is used to target government buyers.
B) With full-line pricing, all products in the company’s line must be targeted at the same market.
C) Demand-backward pricing is used to target industrial buyers.
D) Value pricing can only be used by mass-merchandisers.
E) None of the above is true.(CORRECT)
Regarding “full-line pricing,” which of the following statements is TRUE?
-A good marketing manager usually tries to price products in a line so that the prices will seem logically related and make sense to target customers.
-The marketing manager should try to cover all costs on the whole product line.
-Most customers seem to feel that prices in a product line should be somewhat related to cost.
-Not all companies that make a line of products must use full-line pricing.
When Walgreens Drugstores advertises one price for the cost of a roll of film and the cost of processing it, they are using
product-bundle pricing
With regard to bid pricing, a marketing manager should be aware that:
big problem is estimating all the costs—including the variable and fixed costs that apply to a particular job.
Regarding bid pricing
the big problem for sellers is estimating all the costs—including the variable and fixed costs—that apply to a particular job.
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