Marketing Exam 3 Chapter 14 - Flashcards

question

The Price Premium Marketing Dashboard above shows the dollar and unit market shares for selected energy drinks. What is the price premium for Red Bull in 2009?

answer

12.1%; (Dollar sales market share for a brand/unit volume market share for a brand) -1

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Which of the following statements regarding price lining is most accurate?

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Price lining assumes that demand is elastic at each price point but inelastic between price points.

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When using a price lining strategy, a marketer will

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set the price of a line of products at a number of different specific pricing points.

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The three major types of special adjustments to list or quoted price are

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discounts, allowances, and geographical adjustments.

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The price the seller quotes that includes all transportation costs is referred to as __________.

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uniform delivered pricing

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Consider the photo above. Family Dollar Stores, like 99¢ Stores, use what type of pricing policy?

answer

one

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As the brand manager for Red Bull, what information does the Price Premium Marketing Dashboard above give you?

answer

Red Bull has a price premium relative to Monster.

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A skimming pricing policy is likely to be most effective when: (1) lowering the price has only a minor effect on increasing sales volume and reducing unit costs; (2) when the high initial price does not attract competitors; (3) customers interpret high price as signifying high quality; and (4) __________.

answer

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

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

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target return-on-sales pricing

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Which cost-oriented pricing method holds that a product's unit costs predictably decline by 10 to 30 percent each time its production volume doubles?

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experience curve pricing

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Which of the following statements about geographical adjustments to price is most accurate?

answer

In FOB with freight-allowed pricing, the buyer deducts the transportation costs from the list price.

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When a firm divides its selling territory into geographic areas, it is referred to as

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multiple-zone pricing

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The practice of replacing promotional allowances with lower manufacturer list prices is referred to as

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everyday low pricing

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Noncumulative quantity discounts refer to

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discounts that are based on the size of an individual purchase order, rather than a series of orders.

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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 __________.

answer

below-market pricing

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

answer

experience curve pricing

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Cost-plus pricing refers to

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

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Geographical adjustments are made by manufacturers or even wholesalers to list or quoted prices to reflect

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the cost of transportation of the products from seller to buyer.

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The acronym "EDLP" stands for __________.

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everyday low pricing

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The word "Free" in relation to the acronym "FOB" signals the point or location where the seller is

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free to choose the point of loading.

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Trade discounts are offered to resellers in the marketing channel on the basis of the marketing activities they are expected to perform in the future and

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where they are in the channel.

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The Price Premium Marketing Dashboard above shows the dollar and unit market shares for selected energy drinks. What is the price premium for Monster in 2010?

answer

-5.3

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Marginal analysis refers to

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a continuing, concise trade-off of incremental costs against incremental revenues.

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Individuals can choose to purchase Microsoft stand-alone software packages, such as the Home and Student versions of Word, Excel, and PowerPoint, for $119.99 each. However, they may choose to purchase the Office Home and Student 2010 suite, which has all of these applications in the same package, for a price of $149.99. Microsoft is using a __________ pricing strategy.

answer

bundle

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

answer

bundle pricing

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Bob Biltmore owns dozens of very successful print shops throughout 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 many more competitors in the areas where his stores are located. 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 out of business. After the competition has been driven out, Biltmore plans to raise the price of his copies. Biltmore is planning to engage in the illegal and unethical practice of

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predatory pricing

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Swedish company Asko, which prides itself on manufacturing and marketing some of the best-built and most expensive appliances in the world, would probably use which competition-oriented pricing approach?

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above-market pricing

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

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yield management pricing.

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If the cash discount terms for a $500 purchase are 4/10 net 30, the number $500 refers to

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the original price owed on the merchandise.

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Price deals that mislead consumers fall into the category of

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deceptive pricing

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

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cost-plus percentage-of-cost pricing.

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What is it called when a manufacturer offers discounts to resellers in the marketing channel on the basis of where they are in the channel?

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trade discounts

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Five pricing practices are closely scrutinized because of potential unethical or illegal actions. They include: (1) predatory pricing; (2) price discrimination; (3) deceptive pricing; (4) geographical pricing; and (5) __________.

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price fixing

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Product-line pricing refers to

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setting of prices for all items in a product line to cover the total cost and produce a profit for the complete line, not necessarily for each item.

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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.

answer

prestige

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Consider the flexible pricing chart above, which shows the results of a National Bureau of Economic Research study of 750,000 car purchases. The data indicate that some groups of car buyers, on average, paid roughly $105, $423, and $483 more, respectively, for a new car in the $21,000 range than the typical purchaser. Who are the car buyers in "A?"

answer

women

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Consider the Tostitos products photo above. Frito-Lay recognizes that its tortilla chip products are partial substitutes for one another. The company's bean and cheese dips and salsa sauces complement its tortilla chips. Frito-Lay uses this knowledge to set prices for each item, which is known as

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product-line pricing.

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A pricing method where all buyers pay the same delivered price for the products, regardless of their distance from the seller, is referred to as __________.

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single-zone pricing

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Figure 14-1 above represents the six steps in the price-setting process. Which letter represents the step where a firm would establish a one price or flexible price policy?

answer

E

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A pricing method where a supplier is reimbursed for all costs, regardless of what they may be, and is allowed a fixed fee as profit that is independent of the final cost of the project is referred to as

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cost-plus fixed-fee pricing

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Figure 14-1 above represents the six steps in the price-setting process. Which letter represents the step where a firm would offer allowances?

answer

F

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Selecting one or more geographical locations from which the list price for products plus freight expenses are charged to the buyer is referred to as __________.

answer

basing-point pricing

question

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.

answer

penetration;The manufacturer quotes price as list price of $100 less 30/10/5. The first number in the percentage sequence always refers to the retail end of the channel. The last number always refers to the wholesaler or jobber closest to the manufacturer in the channel. The trade discounts are simply subtracted one at a time. $3.15 represents the jobber's trade discount. See Figure 14-7 in the textbook.

question

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

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"the market" or competitors

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Suppose a firm selects its plant in St. Louis as the location from where it will ship its products to all of the identified cities shown in Geographical Pricing Map C above. The MSRP of the product is $100 but the firm adds a freight surcharge to cover transportation/freight. This surcharge will vary according to the distance between the origin of the shipment—in this case St. Louis—and the destination or customer's location. In this pricing method, what is St. Louis called?

answer

basing point

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

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customary pricing

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Instead of everyday low prices (EDLP), supermarkets prefer a __________ approach, which is based on frequent specials where prices are temporarily lowered for a brief period of time and then raised again.

answer

hi-lo

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A skimming pricing policy is likely to be most effective when: (1) enough customers are willing to buy immediately at the high initial price; (2) when the high initial price does not attract competitors; (3) customers interpret high price as signifying high quality; and (4) __________.

answer

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

question

Which of the following statements regarding quantity discounts is most accurate?

answer

Noncumulative quantity discounts encourage large individual purchase orders, not a series of orders.

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The practice of offering a bargain that is conditional on the purchase of other products may exist when a buyer is offered the "1-Cent Sale," the "Buy 1, Get 1 Free," or the "Get 2 for the Price of 1" deal. Such pricing is legal only if

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the first items are sold at the regular price, not a price inflated for the offer.

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

answer

one-price policy

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Five pricing practices are closely scrutinized because of potential unethical or illegal actions. They include: (1) price fixing; (2) price discrimination; (3) predatory pricing; (4) geographical pricing; and (5) __________.

answer

deceptive pricing

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FOB origin pricing refers to

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a method of pricing where the price the seller quotes includes only the cost of loading the product onto the vehicle and specifies the name of the location where the loading is to occur (the seller's warehouse or factory, for example) is referred to as

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Another name for a one-price policy is

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fixed pricing

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Loss-leader pricing refers to

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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.

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

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penetration pricing.

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Trade discounts are offered to resellers in the marketing channel on the basis of where they are in the channel and

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the marketing activities they are expected to perform in the future.

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Target return-on-investment (ROI) is frequently used by

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public utilities

question

According to Figure 14-7 above, how much is the retailer trade discount?

answer

30; The manufacturer quotes price as list price of $100 less 30/10/5. The first number in the percentage sequence always refers to the retail end of the channel. The last number always refers to the wholesaler or jobber closest to the manufacturer in the channel. The trade discounts are simply subtracted one at a time. $30.00 represents the retailer's trade discount. See Figure 14-7 in the textbook.

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Price discrimination refers to

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

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Everyday low pricing refers to

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the practice of replacing promotional allowances with lower manufacturer list prices.

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Southern gardeners normally pay $5 for a 2-cubit-foot bag of pine bark mulch that they buy at their local gardening-supply and home-improvement stores to keep the weeds down in their gardens. If the price being charged by a retailer is not within a narrow range that gardeners feel is appropriate, they will use substitutions—newspaper, grass clippings, or some other kind of ground covering. When pricing pine bark mulch, a garden-supply or home-improvement retailer should use

answer

customary pricing

question

Consider Figure 14-8 above. "C" represents which of the following legislative acts?

answer

the federal trade commission act

question

Consider the flexible pricing chart above, which shows the results of a National Bureau of Economic Research study of 750,000 car purchases. The data indicate that some groups of car buyers, on average, paid roughly $105, $423, and $483 more, respectively, for a new car in the $21,000 range than the typical purchaser. Who are the car buyers in "B?"

answer

African Americans

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When establishing product line pricing, the lowest-priced item is typically positioned as

answer

the traffic builder designed to capture the attention of hesitant or first-time buyers.

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Large department store chains, such as Sears, generally use _________ pricing.

answer

at-market

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A price war refers to

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the successive price cutting by competitors to increase or maintain their unit sales or market share.

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Mercedes-Benz cars and a Patek Philippe Platinum World Time wristwatch have a common characteristic—they have an element of _________.

answer

prestige pricing

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

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setting a high initial price

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Figure 14-1 above represents the six steps in the price-setting process. Which letter represents the step where a firm would consider a one price or flexible price strategy; company, customer and competitive effects; and incremental costs and revenues?

answer

E

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Figure 14-1 above represents the six steps in the price-setting process. Which letter represents the step where a firm would consider a demand-, cost-, profit-, or competition-oriented approach?

answer

D

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

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horizontal pricing

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

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demand-orientated

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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?

answer

standard markup pricing

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Price lining is considered to be a __________ approach to pricing.

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demand-oriented

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Consider the Toro ad above. What type of discount does Toro offer its channel members to carry and sell its riding lawn mowers during the winter months?

answer

seasonal discounts

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According to Vizio, "The whole goal is to ensure that we have the right product, at the right time and the right price and __________."

answer

drive a seamless end-to-end value chain

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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 $48 for a postage-paid vacuum-sealed package. What type of pricing does Lady Marion Seafood use to arrive at its final price?

answer

standard markup pricing

question

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) __________; and (4) competition-oriented approaches.

answer

profit- oriented

question

Figure 14-1 above represents the six steps in the price-setting process. Which letter represents the step where a firm would offer allowances?

answer

F

question

What is the critical assumption when using target profit pricing?

answer

a higher average price will not cause the demand to fall

question

The Apple iPhone was introduced 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?

answer

skimming

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Prestige pricing refers to

answer

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

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The manager of a small gasoline station observes that while gasoline sales have been steady, the service side of the business has fallen off, and mechanics are often idle. He decides to offer a promotion—a $20 off coupon for an oil change that is to be mailed to 800 households within a two-mile radius from the gas station. The cost of printing and mailing is $1,000. The normal cost of an oil change is $40. Materials and labor per oil change cost $15. How many additional maintenance service jobs must result for the promotion to break even?

answer

200; Incremental number of jobs = [Extra fixed cost ÷ (Price - UVC)] = [$1,000 ÷ (($40 - $20) - $15)] = 200 maintenance service jobs.

question

Which of the following statements regarding price cutting is most accurate?

answer

Marketers should only consider price cutting if the price cut is confined to customers within specific target market segments.

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

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flexible-pricing policy

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Another name for freight absorption pricing is

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FOB with freight-allowed pricing

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Five common forms of pricing include: bait and switch, bargains conditional on other purchases, comparable value comparisons, comparisons with suggested prices, and former price comparisons. What do all these practices have in common? They are all

answer

illegal and often difficult to prosecute

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Larry's Lawn Care allows customers to use a credit card for purchases. Larry pays 4 percent of the sale to the credit card company. To promote more business, Larry decides to offer a lower price to customers paying cash—that price being 3 percent less than the standard list price. Larry is giving his customers a(n)

answer

discount-for-cash

question

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

answer

cost-plus pricing

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Mike Morgan, a sales representative for a major food service distributor of General Mill Warm Delights, wanted to encourage repeat purchases by his grocery customers. In order to accomplish this objective, Morgan offered the following discounts to his customers: a 10 percent discount for buying 1-49 cases of Warm Delights within a calendar month; the discount increases to 12 percent if 50-99 cases of Warm Delights are purchased within the same calendar month; and the discount increases to 15 percent if 100 or more cases of Warm Delights are purchased within the same calendar month. What type of discount was Morgan offering his grocery customers?

answer

a quantity discount

question

The Robinson-Patman Act covers promotional allowances as well as discounts. To legally offer promotional allowances to buyers, the seller must do so on a(n) __________ to all buyers businesses distributing the seller's products.

answer

proportionally equal basis

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Cash payments or an extra amount of "free goods" awarded sellers in the channel for undertaking certain advertising or selling activities to promote the product is referred to as a

answer

promotional allowance

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

answer

loss-leader pricing

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

answer

target profit pricing

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A unique feature of the Robinson-Patman Act is that it allows for price differentials to different customers under several conditions. Which of the following practices would be permitted?

answer

Using price differentials when price differences charged to different customers do not exceed the differences in the cost of manufacture, sale, or delivery resulting from different methods or quantities in which such goods are sold or delivered to buyers.

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Price fixing is illegal per se under the Sherman Act. What does "per se" mean?

answer

in and of itself

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Predatory pricing refers to

answer

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

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To reward wholesalers and retailers for the risk they accept in assuming increased inventory carrying costs, manufacturers offer

answer

seasonal discounts

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If the cash discount terms for a $500 purchase are 4/10 net 30, the number 4 refers to

answer

the percentage discount if the bill is paid within 10 days.

question

When establishing product line pricing, the highest priced item is typically positioned as

answer

the premium item in terms of quality and features.

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Which of the following statements about a flexible-price policy is most accurate?

answer

When using a flexible-price policy, the seller may risk violating the Robinson-Patman Act.

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To encourage retailers to pay their bills quickly, manufacturers offer them

answer

cash discounts

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The two forms of cost-plus pricing are

answer

cost-plus percentage-of-cost pricing and cost-plus fixed-fee pricing.

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The two general methods for quoting prices related to transportation costs are FOB origin pricing and __________.

answer

uniform delivered pricing

question

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.

answer

bundle pricing

question

Setting the price of a line of products at a number of different specific price points is referred to as __________.

answer

price lining

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

answer

demand oriented

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Functional discounts are offered to resellers in the marketing channel on the basis of where they are in the channel and

answer

the marketing activities they are expected to perform in the future

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Standard markup pricing refers to

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

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Reductions in unit costs for a larger order are referred to as

answer

quantity discounts

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

answer

These methods focus on production and marketing expenses.

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Target pricing refers to

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a method of 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.

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Price lining refers to

answer

setting the price of a line of products at a number of different specific price points.

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

answer

demand oriented

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The successive price cutting by competitors to increase or maintain their unit sales or market share is referred to as

answer

a price war

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Which of the following statements about everyday low pricing (EDLP) is most accurate?

answer

Some argue that EDLP without price specials is boring for many grocery shoppers.

question

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 target price to consumers is referred to as __________.

answer

target pricing

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A skimming pricing policy is likely to be most effective when

answer

the high initial price will not attract competitors.

question

The Price Premium Marketing Dashboard above shows the dollar and unit market shares for selected energy drinks. What is the price premium for Monster in 2010?

answer

-5.3%; Monster price premium = [(18% ÷ 19%) - 1] = -0.0526 × 100 = (5.3%)

question

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

answer

price discrimination

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

answer

FOB origin pricing is legal.

question

Tendollars.com offers thousands of gifts, all priced at $10. This is an example of two pricing methods working in tandem. The firm is MOST LIKELY using a(n) __________ and a(n) __________.

answer

below-market pricing approach; one-price policy

question

A skimming pricing policy is likely to be most effective when: (1) lowering the price has only a minor effect on increasing sales volume and reducing unit costs; (2) when the high initial price does not attract competitors; (3) customers interpret high price as signifying high quality; and (4) __________.

answer

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

question

Hallmark was the official supplier of flowers at the last Winter Olympics. Hallmark presented each Olympic winner with a special bouquet of roses designed to resemble the Olympic torch. Consumers were able to buy a smaller version of this same bouquet at the Hallmark website for $74.95. The Olympic bouquet that consumers could buy contained two dozen yellow roses, yet you could buy the same two dozen yellow roses for less than $35 at most supermarkets. If Hallmark is treating the Olympic bouquet as an innovative product, then it is using which demand-oriented pricing approach?

answer

skimming pricing

question

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

answer

skimming strategy

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A discount that is based on the size of an individual purchase order rather than a series of repeat orders is referred to as a(n)

answer

noncumulative quanitity discount

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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 __________.

answer

cost-plus pricing

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Resale price maintenance was declared illegal in 1975 under the

answer

consumer goods pricing act

question

A hardware store advertises a ?" 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 deceptive pricing?

answer

bait and switch

question

A flexible-price policy refers to

answer

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

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Which of the following statements regarding a trade-in allowance is most accurate?

answer

A trade-in allowance is an effective way to lower the price a buyer has to pay without formally reducing the list price.

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A promotional allowance refers to

answer

the cash payments or an extra amount of "free goods" awarded sellers in the marketing channel for undertaking certain advertising or selling activities to promote the product.

question

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

answer

bundle pricing

question

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

answer

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

question

A company placing an order from the Lab Safety Supply catalog is instructed to add $25.00 to the total cost of the order to pay for shipping. Which method of shipping does this catalog supplier use?

answer

single-zone pricing

question

A penetration pricing policy is MOST LIKELY to be effective when

answer

many segments of the market are price sensitive.

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Which of the following statements regarding new car purchases in the U.S. is most accurate?

answer

African Americans, women, and Hispanics pay higher than the average price for a new car.

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When a seller represents a price as reduced, the item must have been offered in good faith at a higher price for a substantial previous period. Former price comparisons are deceptive if

answer

a high price was set for the purpose of establishing a reference for a price reduction.

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Odd-even pricing is most closely related to

answer

customers' perceptions of price.

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Discounts refer to reductions from the __________ that a seller gives a buyer as a reward for some activity of the buyer that is favorable to the seller.

answer

list price

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The __________ of a product is what customers are generally willing to pay.

answer

market price

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

answer

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

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Manufacturers use seasonal discounts to

answer

encourage buyers to stock inventory earlier than their normal demand would require.

question

With cost-oriented approaches, a price setter stresses the cost side of the pricing problem, not the __________ side.

answer

demand

question

A unique feature of the Robinson-Patman Act is that it allows for price differentials to different customers under several conditions. Which of the following practices would be permitted?

answer

When price differences are quoted to selected buyers in good faith to meet competitors' prices and are not intended to injure competition.

question

Setting the price of a product or service by adding a fixed percentage to the total unit cost is referred to as

answer

cost-plus percentage-of-cost pricing.

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Target return-on-investment pricing refers to

answer

setting a price to achieve an annual target ROI.

question

Five pricing practices are closely scrutinized because of potential unethical or illegal actions. They include: (1) price fixing; (2) price discrimination; (3) deceptive pricing; (4) predatory pricing; and (5) __________.

answer

geographical pricing

question

The prices for all furniture sold at American Furniture Warehouse end in $9, such as $599.99, $899.99, etc. American Furniture Warehouse uses

answer

odd-even pricing.

question

A glass blowing studio makes fine pieces of art glass. It has decided on a retail list price of $2,000 for one of its vases. They sell only to wholesalers and retailers who receive 50/10 terms. How much will the studio receive from selling this vase?

answer

$900 $2,000 - $1,000 = $1,000, which is the amount the retailer pays the wholesaler. $1,000 less 10 percent = $100; = $1,000 - $100 = $900, which is the manufacturer's selling price to the wholesaler.

question

The Brazilian government wants to build a global positioning satellite (GPS) system. The satellite manufacturer will receive a mutually agreed upon profit over and above all costs associated with the project. The pricing approach the satellite manufacturer uses is called

answer

cost-plus fixed-fee pricing.

question

The manager of a small gasoline station observes that while gasoline sales have been steady, the service side of the business has fallen off, and mechanics are often idle. He decides to offer a promotion—a $20 off coupon for an oil change that is to be mailed to 800 households within a two-mile radius from the gas station. The cost of printing and mailing is $1,000. The normal cost of an oil change is $40. Materials and labor per oil change costs $15. If 200 customers use the coupon, what will be the total profit of the promotion based on the profit equation?

answer

$0

question

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

answer

cost-oriented

question

Suppose a manufacturer quotes price in the following form: List price—$100 less 30/10/5. When calculating this trade discount, the first number "30" in the percentage sequence always refers to the

answer

retail end of the channel. The first number "30" in the percentage sequence always refers to the retail end of the channel and the last number "5" always refers to the wholesaler or jobber closest to the manufacturer in the channel. The trade discounts are simply subtracted one at a time. This price quote shows $100 is the manufacturer's suggested retail price; 30 percent of the suggested retail price is available to the retailer to cover costs and provide a profit of $30 ($100 × 0.3 = $30); wholesalers closest to the retailer in the channel get 10 percent of their selling price ($70 × 0.1 = $7); and the final group of wholesalers in the channel (probably jobbers) that are closest to the manufacturer get 5 percent of their selling price ($63 × 0.05 = $3.15). Thus, starting with the manufacturer's suggested retail price and subtracting the three trade discounts shows that the manufacturer's selling price to the wholesaler or jobber closest to it is $59.85.

question

Product-line pricing involves determining: (1) the lowest-priced product and price; (2) the highest-priced product and price; and (3) __________.

answer

the price differentials for all other products in the line

question

Cumulative quantity discounts refer to

answer

discounts that apply to the accumulation of purchases of a product over a given time period, typically a year.

question

In order to deliver a product that the average consumer can afford, Vizio

answer

handles product design and marketing in the United States and relies on contract manufacturers in Taiwan to build the product.

question

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

answer

target pricing

question

Which of the following type of business is most likely to use cost-plus percentage-of-cost pricing?

answer

architect

question

Your local instant photocopying service charges 10 cents a copy up to 25 copies, 9 cents a copy for 26 to 99 copies, and 8 cents a copy for 100 copies or more. What kind of adjustment to these list or quoted prices is the photocopying service using?

answer

a quantity discount

question

The retail price of a fax machine has decreased from more than $10,000 in the early 1970s to less than $100 today. This is due in large part to

answer

experience curve pricing.

question

price premium

answer

The percentage by which the actual price charged for a specific brand exceeds or falls short of a benchmark established for a similar product or basket of products price premium% = (dollar sales market share for a brand / unit volume market share for a brand) - 1

question

Price fixing refers to

answer

a conspiracy among firms to set prices for a product.

question

Vizio, Inc. is an up-and-coming contender in the __________ market.

answer

HDTV

question

Yield management pricing is a form of

answer

dynamic pricing.

question

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.

answer

competition-oriented

question

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

answer

prestige pricing.

question

Basing-point pricing refers to

answer

selecting one or more geographical locations from which the list price for products plus freight expenses are charged to the buyer.

question

In some cases, manufacturers design products for different price points and retailers apply __________ to achieve the three or four different price points offered to consumers.

answer

approximately the same markup percentages

question

After offering a promotional allowance, the price of a product returns to its regular price level. When this happens, the retail store's gross margin on that product __________ on those items that were bought with the allowance but not sold during the special price promotion.

answer

increases substantially

question

If the terms of the trade discount are listed 20/10/5, the number "5" represents

answer

5 percent of the wholesale price that is available to the jobber to cover costs and provide a profit.

question

Family Dollar Stores, like 99¢ Stores, use what type of pricing policy?

answer

on price policy

question

A penetration pricing policy is MOST LIKELY to be effective when: (1) a low initial price discourages competitors from entering the market; (2) unit production and marketing costs fall dramatically as production volume increases; and (3) __________.

answer

many segments of the market are price sensitive

question

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

answer

an automobile manufacturer Target return-on-investment pricing is used to set prices to achieve a particular return on investment. Automobile manufacturers such as General Motors set annual return-on-investment pricing targets.

question

For which of the following products is a manufacturer most likely to use basing-point pricing?

answer

coal Basing-point pricing is commonly used in industries where freight expenses are a significant part of the total cost to the buyer and the products are largely undifferentiated.

Marketing Exam 3 Chapter 14 – Flashcards

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