Since it involves the use of a high price relative to prices of competing products or services, the skimming pricing strategy is sometimes referred to as _____ pricing.
a. penetration
b. competitive
c. market-plus
d. functional
A skimming pricing strategy is more commonly used by firms to:
a. reduce the raised prices of products to the original level.
b. set a market-entry price for distinctive goods or services with little or no initial competition.
c. set a relatively low price for a product when they enter new markets characterized by dozens of competing brands.
d. set stable wholesale prices that undercut offers competitors make to retailers.
A _____ pricing strategy helps manufacturers to distinguish their high-end products from similar products of their competitors.
a. skimming
b. market share
c. competitive
d. penetration
A _____ pricing strategy permits marketers to control demand in the introductory stages of a product’s life cycle and then adjust productive capacity to match changing demand.
a. penetration
b. value-added
c. skimming
d. competitive
In order to recover research and development costs rapidly and earn high initial profits, SenseTV is setting a high price for its plasma TVs. The pricing strategy SenseTV is using is called _____ pricing strategy.
a. market-minus
b. skimming
c. penetration
d. competitive
Which of the following is a major disadvantage associated with the skimming pricing strategy?
a. It is not effective for higher-end goods.
b. It is not effective in recovering the high research and development costs.
c. It attracts competition as potential competitors enter into the market observing the high financial returns obtained by innovative firms.
d. It leads to fulfillment problems if the demand for the product outstrips the firm’s production capacity.
A step out is a pricing practice in which a firm:
a. maintains a high price for a product throughout its life cycle.
b. offers an extremely low price on a single product purchase to reach the mass market quickly and capture a large market share.
c. markets a product at a low price compared to competitive offerings to secure market acceptance.
d. raises the price of a product and then waits to see if others follow suit.
A penetration pricing strategy is called _____ pricing when it implements the premise that a lower-than-market price will attract buyers and move a brand from an unknown newcomer to brand-recognition or brand-preference stage.
a. market-plus
b. market-minus
d. FOB
Penetration pricing works best for goods or services:
a. that offer a unique advantage over competitors’ brands.
b. that are characterized by highly elastic demand.
c. that face little or no competition in the market place.
d. that involve high production and operational costs.
When General Motors introduced the Saturn, it priced the SL sports sedan at $2,000 less than the Toyota Corolla DLX and $1,500 less than comparable Nissan and Honda automobiles. This is an example of the _____ pricing strategy.
a. skimming
b. penetration
c. competitive
d. leader
_____ pricing is the pricing strategy of continuously offering low prices rather than relying on short-term price-cutting tactics such as cents-off coupons, rebates, and special sales.
a. Minimum advertised
b. Skimming
c. Everyday low
d. Competitive
Everyday low pricing is a strategy devoted to continuous low prices as opposed to:
a. seasonal changes in prices based on current demand.
b. purely cost-based prices that vary as the manufacturer’s costs vary.
c. relying on short-term price-cutting tactics such as cents-off coupons, rebates, and special sales.
d. prices that are set on a weekly or monthly basis in reaction to competitors’ actions.
Which of the following pricing strategies tries to reduce the emphasis on price as a competitive weapon?
a. Penetration pricing
b. Everyday low pricing
c. Skimming pricing
d. Competitive pricing
Retailers such as Home Depot and Lowe’s, who offer to meet and beat the best price offered by their competitors, use the strategy of _____ pricing.
a. skimming
b. penetration
c. competitive
d. cost-plus
The price normally quoted to potential buyers before any discounts or allowances are allowed is called the _____ price.
a. market
b. list
c. cash
d. trade
The price a consumer or marketing intermediary actually pays for a product after subtracting any discounts, allowances, or rebates from the list price is called _____ price.
a. retail
b. market
c. functional
d. sticker
The price reduction offered to a customer, business user, or marketing intermediary in return for prompt payment of a bill is called a _____ discount.
a. functional
b. trade
c. quantity
d. cash
A negative cash discount is used by a seller to:
a. reduce prices on a one-time-only basis.
b. improve its liquidity position and cut collection expenses.
c. return the costs incurred by channel members in performing marketing functions.
d. reduce prices in an attempt to integrate promotional strategies within distribution channels.
The payment offered to a channel member for performing marketing functions is called a _____.
a. cash discount
b. trade discount
c. quantity discount
d. rebate
If a manufacturer offered an intermediary a percentage discount off the list price of products it handled in exchange for performing certain wholesaling activities, this would be classified as a:
a. cash rebate.
b. list price.
c. cumulative discount.
d. trade discount.
ADS stores, a supermarket chain, receives discounts from its suppliers for the bulk purchases of the merchandise at its stores. This is an example of a _____ discount.
a. cash
b. trade
c. quantity
d. functional
An office supply wholesaler offers a 15 percent discount for retailers who purchase goods worth $ 20,000 over a period of nine months and a 20 percent discount for purchases worth $ 25,000 during the same time period. This is an example of a _____ discount.
a. trade
b. noncumulative quantity
c. cumulative quantity
d. recurring
A one-time reduction in list price typically offered at the time of sale is referred to as a(n):
a. allowance.
b. rebate.
c. cumulative discount.
d. noncumulative discount.
Which of the following statements best describes allowances?
a. Allowances are used in conjunction with quantity and cash discounts.
b. Allowances are the same as transfer prices.
c. Allowances are offered only to marketing channel members in order to increase sales.
d. Allowances result in reduction of the list price quoted on a product.
A promotional allowance is an incentive offered by manufacturers to retailers to:
a. reward a retailer for not advertising a product below a certain price.
b. provide one-time reductions in the list price of products for purchasers of large quantities.
c. refund the shipping costs paid by the retailer for home-delivery of products.
d. return a certain amount spent by the retailers on advertising and providing sales support.
A cosmetics company offers incentives to its retailers for advertising its new shampoo by placing it in a special display unit near the billing counters. This incentive offered by the manufacturer is an example of a _____.
a. rebate
b. promotional allowance
c. cash discount
d. trade-in
A credit allowance given for a used item when a customer purchases a new item is known as a _____.
a. rebate
b. trade-in
c. functional discount
d. cash discount
In a recent special offer, any customer who brought in a toaster oven, working or not, was given a $50 credit toward the purchase of a new Amana microwave oven. This is an example of a:
a. functional discount.
b. promotional allowance.
c. cash discount.
d. trade-in.
A refund of a portion of the purchase price usually granted by the product’s manufacturer to consumers is known as a _____.
a. cash discount
b. rebate
c. functional discount
d. trade-in
Marketers offer rebates in order to:
a. cover the costs spent by the retailers on advertising the products.
b. reward the retailer for prompt payment of bills.
c. reward a retailer who agrees not to advertise products below set prices.
d. reduce the price paid for a product by customers.
A firm that manufactures TVs sells them at prices of $750, $1,000, and $1,250. The manufacturer will return $75, $100, or $125 respectively, by mail, to those who purchase its brand of TV. This reduction in price is an example of a:
a. promotion allowance.
b. trade-in.
c. rebate.
d. quantity discount.
Which of the following is an example of a rebate offered to buyers?
a. Getting $25 off a $100 purchase on exchange of a used product.
b. Getting $3 off a $100 purchase for paying the bill within 10 days.
c. Getting $5 returned by mail after a $100 purchase for making the purchase.
d. Getting $100 off a $1,000 purchase for buying in bulk quantities.
Which of the following is true of products priced as “FOB origin”?
a. The purchase of these products permits the buyers to subtract transportation expenses from their bills.
b. The transportation costs of these products are uniformly distributed among all channel members including the final purchaser.
c. The legal title and responsibility of these products lies with the seller until it is delivered to the buyer.
d. The buyer pays all the freight charges to transport the product from the manufacturer’s loading dock.
A price quotation system that allows the buyer to deduct shipping expenses from the cost of purchases is known as _____ pricing.
a. uniform-delivered
b. basing-point
c. freight absorption
d. FOB plant
Firms with high fixed costs often expand their markets, quoting the same prices to all customers regardless of shipping expenses, under the plan called:
a. zone pricing.
b. freight absorption pricing.
c. uniform-delivered pricing.
d. the basing-point system.
A _____ is the amount by which the average transportation charge exceeds the actual cost of shipping.
a. rebate
b. list price
c. phantom freight
d. transfer price
Which of the following pricing systems is sometimes referred to as postage-stamp pricing since it resembles the pricing structure for mail service?
a. Zone pricing
b. Freight absorption pricing
c. Uniform-delivered pricing
d. The basing-point system
When a manufacturer quotes the same price for goods (including freight charges) to a buyer in Miami, another in Los Angeles, and a third in Dallas, the seller is quoting a _____ price.
a. uniform-delivered
b. destination
c. zone
d. basing-point
A(n) _____ is a general guideline that reflects marketing objectives and influences specific pricing decisions.
a. MAP
b. pricing policy
c. leader pricing strategy
Psychological pricing is based on the premise that:
a. certain prices or price ranges make products more appealing to buyers than others.
b. one-price policies appeal to most people and suit mass-marketing programs.
c. setting a limited number of prices for a selection of merchandise has a certain appeal.
d. lower-than-normal prices as part of recurring marketing initiatives creates demand.
A pricing policy that assumes that some prices are more appealing than others is known as _____ pricing.
a. leader
b. product-line
c. psychological
d. prestige
An example of odd pricing would be:
a. a buy-two-get-one-free promotion.
b. selling a radar detector for $129.99 instead of $130.
c. subtracting trade-ins from the list price.
d. rebates that lower total price.
When the price of Cheerios cereal is displayed as 14.7 cents per ounce, this is an example of _____ pricing.
a. odd
b. commodity
c. unit
d. penetration
Which of the following pricing policies began to be widely used during the late 1960s to make price comparisons more convenient between products packaged in different sizes?
a. Odd pricing
b. Promotional pricing
c. Unit pricing
d. Product-line pricing
A firm that permits variable prices for different customers is adopting _____.
a. promotional pricing
b. price flexibility
c. odd pricing
d. product-line pricing
Which of the following pricing policies is more likely to be applied in marketing programs based on individual bargaining?
a. Product-line pricing
b. Promotional pricing
c. Price flexibility
d. Odd pricing
The practice of marketing merchandise at a limited number of prices is called _____ pricing.
a. product-line
b. odd
c. one-price
d. unit
When a men’s clothing store sells suits at four price levels ($295, $455, $525, $650), the store’s retail policy is _____ pricing.
a. unit
b. promotional
c. product-line
d. psychological
A car manufacturer has developed different models of a car to suit the pricing needs of different classes of customers. It offers a low-end version for price conscious customers and luxury cars for high-end customers. This is an example of _____ pricing.
a. promotional
b. psychological
c. leader
d. product-line
Which of the following is a disadvantage associated with product-line pricing?
a. It does not provide flexibility for making price changes on individual items.
b. It results in consumers having difficulty in making purchase decisions.
c. It is ineffective in differentiating between products.
d. It does not allow shoppers to choose desired price ranges.
Which of the following is true of promotional pricing?
a. It promotes goods and services at specific price ranges based on the belief that certain prices are more appealing to consumers.
b. It uses lower-than-normal price as a temporary component in the selling strategy.
c. It sets a high price for products that offer unique potential ability.
d. It uses extensive promotional allowances to get channel members to promote the product.
A retailer wants to increase the number of customers shopping in her store. Which of the following has the greatest potential for success?
a. Promotional pricing
b. Price flexibility
c. Prestige pricing
d. Unit pricing
“Buy three shock absorbers and get the fourth free,” as advertised by an auto repair shop, is an example of _____ pricing.
a. unit
b. variable
c. promotional
d. product-line
A newly opened seafood restaurant advertises various deals on meal packages and special prices on dinner packages to attract customers. This is an example of _____ pricing.
a. leader
b. promotional
c. competitive
d. list
_____ pricing is a pricing policy in which products are offered to consumers at less than cost to attract them to stores in the hope that they will buy other merchandise at regular prices.
a. Skimming
b. Loss leader
c. Odd
d. Variable
_____ pricing refers to a pricing strategy in which marketers offer prices slightly above cost to avoid violating minimum-markup regulations and to earn a minimal return on promotional sales.
a. Competitive
b. Leader
c. Penetration
d. Psychological
In the absence of other cues:
a. many buyers interpret low prices as signals of high-quality products.
b. price offers no clue of a product’s quality to prospective purchasers.
c. price is an important indicator of product quality to consumers.
d. the relationship between price and quality holds true only in declining economies.
Consumers today perceive that, within price limits, there is:
a. a need for discounts and incentives.
b. obvious opportunity for psychological pricing.
c. a direct relationship between the quality and price of a product.
d. no perceivable difference in major product brands.
Consumers have a certain range within which their product-quality perceptions vary directly with price. This range reflects the concept of price:
a. limits.
b. variations.
c. controls.
d. resistance.
Many government and organizational procurement departments do not pay set prices for their purchases. Instead, they:
a. always negotiate with favored suppliers to get exactly what they want.
b. approach the supplying industry and get an average estimate of price from all producers.
c. determine the lowest prices available for items that meet specifications through competitive bidding.
d. call the federal supply agency and place an order with this government-run factory.
The process by which buyers ask a number of potential suppliers to submit price quotes on a proposed purchase or contract, of which the lowest will be accepted, is called:
a. specification.
b. competitive bidding.
c. noncompetitive bidding.
d. competitive pricing.
Which of the following is one of the most important aspects of a government or organizational procurement?
a. The bidder’s profit on the product
b. The payment schedule for the product
c. Provisions for deflation or inflation
d. Development of accurate descriptions of products to buy.
Buyers and sellers often set purchase terms using negotiated contracts when:
a. only one supplier offers the desired product.
b. there are multiple interested parties.
c. research and development work is not necessary.
d. purchases exceed $5,000.
Large-scale enterprises often have a dilemma with setting the _____ price, which is the price they charge themselves when sending goods from one company profit center to another.
a. list
b. transfer
c. removal
d. basing
For the purpose of transfer pricing, any part of the organization to which revenue and controllable costs can be assigned, such as a department, is referred to as a:
a. sales department.
b. revenue center.
c. controllable costs center.
d. profit center.
A major problem facing company decision makers when setting transfer prices is:
a. how to determine the product-service attributes of the transfer.
b. when to complete the transfer.
c. how to assign the controllable costs to the profit centers.
d. what price to actually charge the receiving profit center.
Transfer pricing becomes especially complex when the global market is involved because:
a. shipping materials across national lines involves payment of duties and taxes, and these become part of the total price of the goods.
b. issues of quality control can be serious, even when divisions of the same firm are involved.
c. a firm with activities in several countries can use transfer pricing as a tax-avoidance device and governments frown upon such activities.
d. the temperature and humidity differences between origins and destinations often damage the products.
A Swedish telephone maker transfers phones costing $10 to produce to its U.S. subsidiary for a transfer price of $20. The U.S. subsidiary sells the phones to retailers for $25 each and spends $5 per phone in promotion and distribution expense. The U.S. subsidiary:
a. makes $10, on which it pays U.S. taxes.
b. makes $15, all of which is taxable in the United States.
c. breaks even on the deal because it spends all its revenues.
d. makes a total of $25 on the deal because the phones are effectively free.
Which of the following pricing approaches is best suited for a company that is expanding into the global market and will be facing rather low foreign marketing costs?
a. Standard worldwide price
b. Dual pricing
c. Market-differentiated pricing
d. Transfer pricing
If foreign marketing costs are so low they do not impact overall costs, the pricing strategy to recommend is:
a. promotional pricing.
b. dual pricing.
c. market-differentiated pricing.
d. standard worldwide pricing.
Makson’s, a manufacturer of fertilizers and pesticides used for agricultural purposes, modifies the prices of its products exported to foreign markets to include the marketing costs in foreign markets but maintains the same price in all its domestic markets. Its products are more expensive in international markets compared to its domestic market where it is sold at a lower price. This pricing strategy used by Makson’s to differently price its products is known as:
a. market-differentiated pricing.
b. competitive pricing.
c. dual pricing.
d. standard worldwide pricing.
Aken Laboratories, a chemical manufacturer for laboratory use, exports its products to various countries in South Asia. The company does not alter the prices of its products in these countries. Aken is adopting a _____ pricing strategy.
a. market-differentiated
b. variable
c. standard worldwide
d. dual
The global pricing strategy that allows the greatest flexibility in setting prices to reflect local marketplace conditions is:
a. standard worldwide pricing.
b. dual pricing.
c. market-differentiated pricing.
d. everyday low pricing.
A _____ pricing strategy makes more flexible arrangements, compared to other strategies, to set prices according to local marketplace conditions.
a. standard
b. product-line
c. market-differentiated
d. dual
Burlan Paints, manufacturer of paints for both interiors and exteriors, prices its products differently in different international markets to suit the requirements of the local customers. Burlan Paints is implementing the _____ pricing strategy for pricing products.
a. dual
b. standard
c. zone
d. market-differentiated
Online marketers run the risk of cannibalization when they:
a. compete with off-price houses on the Internet.
b. differently price the same products sold in their retail outlets to be sold online.
c. construct new stores alongside their websites.
d. hold on to tradition in the face of new technology.
Charles Schwab, a trading company, will face the risk of cannibalization from its e-tail channel e.Schwab if:
a. it attempts to lure customers with the Schwab database.
b. it branches out into mutual funds and tax-deferred investments.
c. it makes price cuts and creates competition with the parent company.
d. it allots all its best personnel to work at the online firm.
The use of bots to search out price quotes on specified products forces Internet marketers to:
a. keep their prices low.
b. install “bot-stoppers.”
c. use printer-disabling viruses.
d. close their websites.
_____ pricing occurs when a company offers two or more complementary products and sells them for a single price.
a. Psychological
b. Bundle
c. Protective
d. Combination
Perfect Digitals offers a UV lens and a sun protection cover for the camera lens for a wide range of its digital cameras, all at a single price. This strategy used by the company is referred to as:
a. unit pricing.
b. price flexibility policy.
c. bundle pricing.
d. competitive pricing.
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