Marketing Exam 4 – Ch. 14 – Flashcards
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Which of the following is NOT one of the five Cs of pricing?
A. Company objectives
B. Competition
C. Commissions
D. Costs
E. Channel members
answer
Commissions
The five Cs of pricing are:
-company objectives
-customers
-competition
-costs
-channel members
question
As the marketing vice president of her firm, Jana is considering implementing a companywide pricing policy that all products must achieve a target profit margin of 15 percent so the firm can achieve its overall growth objectives. What type of company objective is this?
A. Profit-orientation
B. Sales-orientation
C. Competitor-orientation
D. Customer-orientation
E. Market-orientation
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Profit-orientation
Even though all company methods and objectives may ultimately be oriented toward making a profit, firms implement a profit orientation specifically by focusing on target profit pricing, maximizing profits, or target return pricing.
question
Jana's firm is entering a new market and she plans to set prices to take sales away from the established market leader even though it will mean profits might suffer. This corresponds to which of the following company objectives?
A. Profit-orientation
B. Sales-orientation
C. Competitor-orientation
D. Customer-orientation
E. Market-orientation
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Sales-Orientation
Firms using a sales orientation to set prices believe that increasing sales in a particular situation will help the firm more than will increasing profits.
question
_____ is a tactic in which a firm deliberately prices a product above the prices set for competing products to capture those customers who always shop for the best, or for whom price does not matter.
A. Target return pricing
B. Target profit pricing
C. Status quo pricing
D. Competitive parity
E. Premium pricing
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Premium pricing
When a company deliberately prices a product above the prices set for competing products to capture those customers who always shop for the best, or for who price does not matter, it is using premium pricing.
question
Best Buy will match competitor prices for customers who bring in proof that a particular product is being sold at a lower price by a competitor, thus using
A. premium pricing.
B. competitive parity.
C. status quo pricing.
D. target return pricing.
E. target profit pricing.
answer
Status quo pricing
Status quo pricing is a competitor-oriented strategy where a company changes prices to meet those of the competition.
question
Jack works for a firm in the northwestern region that is clearly the market leader, and has determined he must implement a regionwide price reduction of all product lines to discourage new firms from entering the lucrative market. Which of the following company objectives is involved?
A. Profit orientation
B. Sales orientation
C. Competitor orientation
D. Customer orientation
E. Market orientation
answer
Competitor Orientation
When firms take a competitor orientation, they strategize according to the premise that they should measure themselves primarily against their competitors, in this case in terms of market share.
question
A _____ orientation explicitly invokes the concept of value such as when a firm uses a "no-haggle" pricing structure to make the purchase process simpler and easier.
A. profit
B. sales
C. competitor
D. customer
E. market
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Customer
A customer orientation explicitly invokes the concept of value. Sometimes a firm might attempt to increase value by focusing on customer satisfaction and setting prices to match consumer expectations. Or a firm can use a "no-haggle" price structure to make the purchase process simpler and easier for consumers, thereby lowering the overall price and ultimately increasing value.
question
A _______ shows how many units of a product or service consumers will demand during a specific period of time at different prices.
A. price point analysis
B. break-even analysis
C. demand curve
D. product curve
E. price elasticity curve
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Demand Curve
A demand curve shows how many units of a product or service consumers will demand during a specific period of time at different prices. Although they are called "curves," demand curves can be either straight or curved.
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In the classic downward-sloping demand curve, as price increases, the demand for the product or service
A. increases.
b. stays the same.
C. decreases.
D. levels off.
E. doubles.
answer
Decreases
question
With _____ products and services, a higher price might lead to a greater quantity sold, but only up to a certain point.
A. status quo
B. prestige
C. predatory
D. price elastic
E. substitute
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Prestige
question
_____ measures how changes in price affect the quantity of the product demanded.
A. Break-even analysis
B. Competitive parity
C. Target return pricing
D. Market-oriented pricing
E. Price elasticity of demand
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Price elasticity of demand
Price elasticity of demand measures how changes in price affect the quantity of the product demanded. Specifically, it is the ratio of the percentage change in quantity demanded to the percentage change in price.
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In the trucking industry, demand for fuel remains relatively stable even in times when the price of fuel increases, indicating that demand for fuel in this segment is
A. elastic
B. inelastic
C. price sensitive
D. expandable
E. flexible
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inelastic
In situations where the demand for a particular product remains relatively stable despite price fluctuations, demand is considered to be inelastic because in such a market, customers will not significantly alter their purchases.
question
In a(n) _______ demand scenario, relatively small changes in price will generate fairly large changes in the quantity demanded.
A. elastic
B. inelastic
C. target profit
D. target return
E. competitive party
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Elastic
In general, the market for a product or service is price sensitive (or elastic) when the price elasticity is less than -1; that is when a 1% decrease in price produces more than a 1% increase in quantity sold. in an elastic scenario, relatively small changes in price will generate fairly large changes in quantity demanded, so if a firm is trying to increase its sales, it can do so by lowering the prices.
question
Airlines that offer lower fares on seats shortly before the flight's departure date to fill empty seats are utilizing what type of pricing tactic?
A. Status quo pricing
B. Premium pricing
C. Cross-pricing
D. Complementary pricing
E. Dynamic pricing
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Dynamic Pricing
Dynamic Pricing, also known as individualized pricing, refers to the process of changing different prices of good or services based on the type of customer, time of the day, week, ore even season, and level of demand.
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In the past, Jaleel's vacation time has been spent at home catching a few local attractions when she could afford them. This year, she received a big bonus at work and has decided to finally take the trip to Europe that she has always dreamed about. Jaleel's purchasing behavior has changed due to
A.the income effect.
B. the substitution effect.
C. cross-price elasticity.
D. the complementary products effect.
E. the substitute products effect.
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The Income Effect
The income effect refers to the change in the quantity of a product demanded by a customer due to a change in their income. Generally, as people's income increases, their spending behavior changes: They tend to shift their demand from low-priced products to higher-priced alternatives.
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Which of the following explains why the demand for Blu-ray discs increases when the demand for Blu-ray players increases?
A. The income effect
B. The substitution effect
C. Cross-price elasticity
D. The complementary products effect
E. The substitute products effect
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The complementary products effect
Blu-ray discs and Blu-Ray players are considered complementary products, because their demand is positively related, such that they rise or fall together.
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_____ indicates that the demand for related products can either be positively or negatively related.
A. The income effect
B. The substitution effect
C. Cross-price elasticity
D. Complementary products effect
E. The supply curve
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Cross-price elasticity
Cross-price elasticity is the percentage change in the quantity of a product demanded compared with the percentage change in price in a related product. For complementary products, demand is positively related, such that they rise or fall together. For substitute products changes in demand are negatively related.
question
Variable Costs are affected by
A. profit margins.
B. production levels.
C. marketing outlays.
D. contribution per unit.
E. the break-even point.
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Production levels
Variable costs are those costs - primarily labor and materials - that vary with production volume. As a firm produces more or less of a good or service, the total variable costs increases or decreases at the same time.
question
Marta estimates that the fixed costs associated with opening her new hair salon are $100,000. She expects the salon to attract 500 new customers in the first year, each of which will cost $25 to service. Marta expects to generate $50,000 per year in revenue. For Marta, the total cost of opening her hair salon and staying in business for one year will be
A. $50,000.
B. $87,500.
C. $100,000.
D. $112,500.
E. $150,000.
answer
$112,500
Total costs = Fixed costs + Variable costs, or 100,000 + (500 × 25) = $112,500. Revenues are not a factor when calculating total costs.
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In break-even analysis, when the break-even point is reached _______ is (are) zero.
A. profits
B. demand
C. supply
D. the contribution per unit
E. costs
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Profits
The break-even point is the point at which the number of units sold generates just enough revenue to equal the total costs. At this point, profits are zero.
question
If the fixed costs of manufacturing a new jet ski are $24,000, the sales price is $9,000, and the variable cost per unit is $1,000, the break-even point is
A. 1 unit.
B. 2 units.
C. 3 units.
D. 4 units.
E. 5 units.
answer
3 units
Contribution per unit is $9,000 − $1,000 = $8,000. Then we divide the fixed costs by the contribution per unit: $24,000 ÷ $8,000 = 3 units.
question
The _____ is the price less the variable cost per unit.
A. profit margin
B. break-even point
C. target return price
D. contribution per unit
E. fixed cost
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Contribution per unit
Used to determine the break-even point in units, the contribution per unit is the price less the variable cost per unit.
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_____ involves determining the point at which the number of units sold generates just enough revenue to equal the total costs.
A. Contribution margin analysis
B. Break-even analysis
C. Predatory pricing
D. Total cost calculation
E. Fixed cost analysis
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Break-even analysis
Central to a break-even analysis is the determination of the break-even point, or the point at which the number of units sold generates just enough revenue to equal the total costs. At this point, profits are zero.
question
In _____, one firm provides the product or service in a particular industry, which results in less price competition.
A. a monopoly
B. an oligopoly
C. monopolistic competition
D. oligopolistic competition
E. pure competition
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Monopoly
Monopolies are said to exist when one firm provides the product or service in a particular industry, and as such results in less price competition.
question
In the soft drink industry only a few firms dominate, which is characterized as
A. a monopoly.
B. an oligopoly.
C. pure competition.
D. competitive parity.
E. monopolistic competition.
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oligopoly
When a market is characterized by oligopolistic competition, only a few firms dominate. Firms typically change their prices in reaction to competition to avoid upsetting an otherwise stable competitive environment. Examples of oligopolistic markets include the soft drink market and commercial airline travel.
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When a firm sets a very low price for one or more of its products with the intent to drive its competition out of business, it is engaged in
A. monopolistic competition.
B. gray market pricing.
C. predatory pricing.
D. competitive parity.
E. the substitution effect.
answer
Predatory Pricing
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The most common form of competition is _____ where many firms compete for customers in a given market but with differentiated products.
A. oligopolistic competition
B. market saturation
C. pure competition
D. competitive parity
E. monopolistic competition
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Monopolistic Competition
question
Standardized products such as grains and chemical products, where consumers perceive them as substitutable, are characteristic of
A. monopolies.
B. oligopolies.
C. pure competition.
D. competitive parity.
E. monopolistic competition.
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Pure Competition
With pure competition, there are a large number of sellers of standardized products or commodities that consumers perceive as substitutable, such as grains, gold, meat, spices, or minerals. In such markets, price usually is set according to the laws of supply and demand.
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_____ employs irregular but not necessarily illegal methods; generally, it legally circumvents authorized channels of distribution to sell goods at prices lower than those intended by the manufacturer.
A. A monopoly
B. A gray market
C. Pure competition
D. A black market
E. A price war
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A gray market
question
What tactic have manufacturers taken to reduce gray market distribution?
A. Refusing to grant distribution rights to companies overseas
B. Nullifying warranties on products that are not purchased from authorized dealers
C. Bringing lawsuits against distributors that carry competing product lines
D. Engaging in price wars with manufacturers of competing products
E. Refusing to allow substitute products
answer
Nullifying warranties on products that are not purchased from authorized dealers
Gray market distribution is not an illegal practice, so manufacturers have little authority to "punish" those who engage in it. To discourage gray market distribution, however, many manufacturers have resorted to large disclaimers on their websites, packaging, and other communications to warn consumers that the manufacturer's product warranty becomes null and void unless the item has been purchased from an authorized dealer.
