Setting Prices

1. Describe the six steps of the process that marketers can use to establish prices.  

2. What are some of the objectives a firm might hope to achieve when setting prices?  

3. How are pricing objectives similar to a corporation's overall goals? How are they different? 

4. How can a marketer use product quality as a pricing objective to influence purchasing decisions? 

5. How might a marketer find information about a competitor's prices? Why is this information important? 

6. Explain the difference between cost-plus and markup pricing. 

7. Describe, compare, and contrast the three major bases for setting prices. 

8. Explain differential pricing and then describe the four major types. 

9. Compare and contrast price skimming and penetration pricing. 

10. Identify and describe the four types of product-line pricing. 

11. Identify and describe six types of psychological pricing. 

 12. What is bundle pricing? Give three examples, each one from a different industry.  

13. Explain the ethical implications of professional pricing.  14. Under what conditions would a marketer most likely use a price leader strategy? 

15. What are some issues to consider when determining a specific price? 

16. When establishing prices, a marketer's first step is to A. determine demand.B. develop pricing objectives.C. select a pricing policy.D. evaluate competitors' prices.E. determine a pricing method.

 

17. Marketers must take steps to make sure that the pricing objectives they set are consistent with the organization's ___________ objectives and ___________ objectives. A. advertising; marketingB. overall; marketingC. marketing; promotionalD. overall; promotionalE. overall; revenue

 

18. If Wrigley set its pricing objective as attaining 38 percent of the chewing gum market, what else would be needed to make this a true pricing objective? A. Statement of demand elasticitiesB. Identification of cost structureC. Breakeven analysisD. Identification of a time period for accomplishmentE. Establishment of a subsequent pricing policy

 

19. Which of the following is a requirement for setting pricing objectives? A. The objectives should be short-term oriented.B. There should be only one pricing objective.C. An evaluation of competitors' prices should be made.D. The cost structure should be identified.E. The objectives should be explicitly stated.

 

20. When a company adjusts price levels so that it can increase sales volume to levels that match the organization's expenses, it is said to employ a _________ objective. A. market shareB. cash flowC. return on investmentD. survivalE. profit

 

21. Which of the following pricing objectives is rarely operational because its achievement is difficult to measure? A. Return on investmentB. Cash flowC. Profit maximizationD. Market shareE. Survival

 

22. Westin Inc. has an objective of achieving a 25 percent return from its overall sales. This is an example of a ______ pricing objective. A. market shareB. cash flowC. return on investmentD. profitE. status quo

 

23. Most pricing objectives based on ___________ are achieved by trial and error because not all cost and revenue data are available when prices are set. A. market shareB. cash flowC. return on investmentD. survivalE. profit

 

24. Maintaining or increasing market share A. can be achieved even if industry sales are flat or decreasing.B. is an infrequently used pricing objective in most industries.C. depends upon the overall growth of the total industry.D. is a profit-related objective based on price.E. is directly tied to leading an industry in product quality.

 

25. If Nabisco had established a pricing objective of selling one out of every three crackers consumed in the world, it would have established an objective based on A. cash flow.B. market share.C. survival.D. return on investment.E. dollar sales volume.

 

26. A market share objective A. is not recommended when sales for the total industry are declining.B. is not especially useful when sales for the total industry are increasing.C. is not especially useful when sales for the total industry are flat.D. is useful primarily in an industry where total sales are increasing.E. can be used effectively whether total industry sales are rising or falling.

 

27. A firm establishes which of the following pricing objectives to maintain or increase its product's sales in relation to total industry sales? A. Cash flowB. Sales potentialC. Product qualityD. Market shareE. Status quo

 

28. Which of the following pricing objectives sets prices to recover cash as quickly as possible? A. Market shareB. ProfitC. Cash flowD. Return on investmentE. Product quality

 

29. A marketer is most likely to set prices according to a cash-flow objective when a A. trial-and-error approach to the market is acceptable.B. certain market share must be maintained.C. quick return on investment is desired.D. higher price is acceptable to the firm.E. product is expected to have a long life cycle.

 

30. Gambrell Designs thinks its new product, the Automatic Dog Walker, will have a short product life cycle; therefore, its marketing department sets its primary pricing objective as A. market share.B. cash flow.C. profit.D. product quality.E. status quo.

 

31. Maintaining a certain market share, meeting competitors' prices, maintaining a favorable image, and achieving price stability are all associated with a _____ pricing objective. A. product qualityB. market shareC. survivalD. profitE. status quo

 

32. Which pricing objective de-emphasizes price and can lead to a climate of nonprice competition in an industry? A. Status quoB. Return on investmentC. Market shareD. SurvivalE. Cash flow

 

33. What type of pricing objective would an organization use if it were in a favorable position and desired nothing more? A. Return on investmentB. Cash flowC. ProfitD. Status quoE. Survival

 

34. Which type of pricing objective can reduce a firm's risk by helping to stabilize demand for its products? A. Status quoB. Market shareC. SurvivalD. Cash flowE. Return on investment

 

35. If an organization sets prices to recover research and development expenses and establish a premium quality image for its product, it would be using a _________ pricing objective. A. survivalB. return on investmentC. market shareD. product qualityE. cash flow

 

36. The pricing of Clinique makeup considerably higher than brands such as Cover Girl, Revlon, and Maybelline is used to communicate ______, which is the company's primary pricing objective. A. market shareB. product qualityC. status quoD. profitabilityE. cash flow

 

37. Research indicates that both market share and ___________ are good indicators of profitability. A. low pricingB. product qualityC. limited competitionD. sales growthE. ROI pricing

 

38. When consumers are making do with less expensive products and shopping more selectively, manufacturers and retailers must focus on the ___________ of their products. A. priceB. qualityC. availabilityD. valueE. image

 

39. For customers, value is a function of the product's A. quality attributes.B. price.C. price and durability.D. quality and functional attributes.E. quality relative to the quality of competing brands.

 

40. Marketers improve their ability to establish prices appropriately when A. there is nonprice competition.B. they know prices charged for competing brands.C. their products are of better quality than the competition's.D. the main objective is image building.E. using psychological pricing.

 

41. Some grocery stores collect data on competitive prices A. by calling their competitors.B. on a quarterly basis.C. through stores' purchase data.D. from their resellers.E. by using full-time comparison shoppers.

 

42. Marketers at organizations engaged in nonprice competition A. are more concerned about knowing competitors' prices than are marketers in organizations that are engaged in price competition.B. are not concerned about the prices of competing brands.C. need competitive price information to make sure that their products are priced at approximately the same level as the prices of competing brands.D. rely on customers to help them gather information regarding the prices of competing brands.E. experience high levels of price instability.

 

43. Competitors' prices, along with the marketing variables they emphasize, are determining factors in A. the instability of prices in a particular industry.B. using markup pricing for consumer goods.C. how much marketing research a firm needs to collect.D. using differential pricing to demonstrate quality differences.E. how important price will be to customers.

 

44. Companies that focus on particular product categories and rely on everyday low pricing to acquire a large market share through aggressive and competitive pricing strategies are often referred to as A. pioneers.B. category killers.C. comparison discounters.D. price leaders.E. category leaders.

 

45. The three primary bases for developing prices are A. profit, demand, and competition.B. supply, demand, and marketing objectives.C. demand, competition, and cost.D. markup, cost, and cost-plus.E. negotiation, periodicity, and randomness.

 

46. When a seller's costs are usually determined during or after a product is made and then a specified percentage or dollar amount is added to the cost to establish a price, an organization is using _____ pricing. A. markupB. demand-basedC. differentialD. cost-plusE. expensed-based

 

47. For custom-made equipment or commercial construction projects, which pricing method is most likely used? A. PrestigeB. PremiumC. DifferentialD. Return-on-investmentE. Cost-plus

 

48. Steinway produces concert grand pianos, often using the custom materials and designs desired by a specific customer. The average price of these pianos runs about $50,000 depending on the exact piano. What type of pricing does Steinway most likely use for these pianos? A. MarkupB. Competition-basedC. Cost-plusD. Demand-basedE. Secondary-market

 

49. The federal government often uses _____ pricing when it grants defense contracts. A. markupB. differentialC. breakevenD. cost-plusE. competition-based

 

50. A cost-based pricing method commonly used in retail is called A. value pricing.B. cost-plus pricing.C. cost discounting.D. differential pricing.E. markup pricing.

 

51. Which of the following pricing approaches is used most often by retailers? A. Markup pricingB. Price discriminationC. Multiple-unit pricingD. Return on investmentE. Price skimming

 

52. Markup is measured either as a percentage of _____ or a percentage of _____. A. selling price; costB. cost; profitC. revenue; contribution marginD. resources used; costE. demand; competition

 

53. When determining markup as a percentage of cost, divide the markup amount by A. price.B. cost.C. quantity.D. revenue.E. 100.

 

54. A retailer of Real Dry deodorant prices it at $2.00; it costs the retailer $1.40. What is the markup as a percentage of selling price? A. 3 percentB. 14.3 percentC. 30 percentD. 70 percentE. 20 percent

 

55. J.C. Penney's pays $16.50 for a six-ounce bottle of cologne and sells it for $25.95. Its markup as a percentage of cost is approximately ___________ percent for this product. A. 64B. 36C. 18D. 57E. 45

 

56. If a product is priced based on how many or how few people want it at a particular time and place, ______ pricing is being used. A. markupB. demand-basedC. competitiveD. peakE. differential

 

57. Amtrak prices its tickets so that it is less expensive to travel on weekends than during the week when there is heavy business travel. This illustrates ___________ pricing. A. cost-plusB. demand-basedC. competitiveD. secondary markupE. seasonal

 

58. During July and August, Lakewood Links Golf Course, located in South Carolina, offers weekday rates of $13 for a round of golf with a cart. During the rest of the year, the weekday rates are between $25 and $35. This is an example of the use of A. differential pricing.B. incentives.C. competition-based pricing.D. demand-based pricing.E. random discounting.

 

59. If General Motors determines that it wants to sell 200,000 Chevrolet Acadias and sets the price at $29,500 because it knows that at that price it will reach that goal, the firm would be using a ___________ pricing method. A. cost-plusB. competition-basedC. psychologicalD. comparisonE. demand-based

 

60. Competition-based pricing is A. used when costs and revenues are secondary to competitors' prices.B. not useful as a method of increasing market share.C. not useful if the competing products are homogeneous.D. not able to increase sales.E. used when competing products are heterogeneous.

 

61. When products in an industry are relatively homogeneous and price is a key purchase consideration, A. competition-based pricing becomes more important.B. demand-based pricing dominates pricing decisions.C. firms tend to use secondary-market pricing.D. cost-based methods like markup pricing are dominant.E. customary pricing is often used.

 

62. If General Mills looks at Kellogg's cereal prices as the primary method of determining its own prices, General Mills is using A. price fixing.B. price discrimination.C. demand-based pricing.D. market share pricing.E. competition-based pricing.

 

63. If PepsiCo sets its twelve-pack price at $3.99 to match the price charged by Coca-Cola, Pepsi is using which of the following pricing methods? A. Demand-basedB. Cost-basedC. Reference pricingD. Competition-basedE. Price leader

 

64. Many firms decide to charge various prices to individual customers for the same quality and quantity of product, a pricing strategy known as A. periodic discounting.B. differential pricing.C. prejudicial pricing.D. psychological pricing.E. promotional pricing.

 

65. Executives in Japan decided to price Lexus luxury cars in the United States at $55,000 while pricing them at $66,000 in their own country. This is an example of A. secondary-market pricing.B. price skimming.C. bait pricing.D. prestige pricing.E. random discounting.

 

66. Maria recently put her house on the market at an asking price of $260,000. She realizes, however, that in order to sell the house, she may have to use A. secondary-market pricing.B. reference pricing.C. negotiated pricing.D. price lining.E. professional pricing.

 

67. A problem associated with _____ is that consumers can predict when prices will be lowered and delay purchases until that time. A. random discountingB. penetration pricingC. reference pricingD. everyday low pricingE. periodic discounting

 

68. The "White Sale" that many department stores have every year a few weeks after Christmas is an example of A. secondary pricing.B. off-peak pricing.C. periodic discounting.D. random discounting.E. captive pricing.

 

69. A manager at JC Penney discovers that Sears has reduced the price of its children's Levi's from $31.99 to $24.99, according to an advertisement in the Sunday newspaper. She immediately phones her store and instructs the salesperson on duty to put a sign up next to their children's Levi's that reads, "SALE: $24.99." This is an example of what pricing strategy? A. Secondary-market pricingB. Bait-pricingC. Reference pricingD. Random discountingE. Comparison discounting

 

70. If a business decides to reduce its prices once in a while on an unsystematic basis, it is using A. price reduction planning.B. random discounting.C. bait pricing.D. periodic discounting.E. penetration pricing.

 

71. A sale that advertised prices "up to 65 percent off" the original price uses A. tensile pricing.B. random discounting.C. periodic discounting.D. bait pricing.E. psychological pricing.

 

72. Price skimming and penetration pricing are both strategies used for A. product-line pricing.B. business products only.C. psychological pricing.D. new-product pricing.E. promotional pricing.

 

73. When businesses charge the highest possible price that customers who really want the new product will pay, they are using A. premium pricing.B. prestige lining.C. captive pricing.D. price skimming.E. penetration pricing.

 

74. If Norelco introduced a new electric razor that sonically removes hair and priced it first at $175 and then at $150 before reducing the price to $100, the firm's initial pricing strategy is known as A. penetration pricing.B. psychological pricing.C. price lining.D. price skimming.E. odd-even pricing.

 

75. Sony management decided to use skimming as a pricing strategy for its newest line of high-definition television (HDTV) sets. It should be aware that this strategy does not A. generate capital to cover research and development costs.B. discourage competitors from entering the market.C. provide flexibility in the introductory base price.D. protect the firm from covering costs if prices are set too low.E. reduce the stress that may be placed on the firm's production capabilities.

 

76. When Sharp first introduced its line of graphing calculators, it set the price quite high; it has lowered the price as competitors have entered the market. The pricing strategy initially used by Sharp is called A. customary pricing.B. odd-even pricing.C. penetration pricing.D. price skimming.E. prestige pricing.

 

77. A price-skimming strategy assumes that A. the initial demand is highly elastic.B. the product is efficient.C. it will be difficult to recoup development costs.D. all consumers have homogeneous tastes.E. the initial demand is highly inelastic.

 

78. A penetration pricing strategy is particularly appropriate when demand is A. increasing.B. highly elastic.C. highly inelastic.D. decreasing.E. inefficient.

 

79. If Nabisco wants to quickly gain a large market share with its new line of reduced-fat snack crackers, it should use A. penetration pricing.B. random discounting.C. captive pricing.D. price skimming.E. everyday low prices.

 

80. The management at Allied Electronics is having difficulty in raising the introductory price on system components to cover the increased costs of producing the sensing devices for home security systems. Apparently, Allied used a(n) ___________ strategy in pricing these components. A. odd-evenB. skimmingC. liningD. penetrationE. psychological

 

81. Which of the following would be used in setting the price of a new product if considerable competition is expected? A. Psychological pricingB. Penetration pricingC. Odd-even pricingD. Price skimmingE. Prestige pricing

 

82. All of the following are pricing strategies used by companies establishing prices of multiple products within a product line except A. premium pricing.B. price lining.C. captive pricing.D. bait pricing.E. penetration pricing.

 

83. Pricing the basic product in a product line low while pricing related items at a higher level is called A. premium pricing.B. bait pricing.C. captive pricing.D. price skimming.E. price lining.

 

84. Lexmark sells some of its color printers for about $100, but the refill cartridges cost over $30 each. Lexmark's pricing strategy would be best labeled as A. bait pricing.B. captive pricing.C. customary pricing.D. price lining.E. complementary pricing.

 

85. A product that has more features than those of its competition, or that is perceived to be of higher quality, warrants using which type of pricing strategy? A. Custom pricingB. Special-event pricingC. Premium pricingD. Price liningE. Bait pricing

 

86. Breyer's produces a variety of ice cream flavors and lines of varying qualities. The higher quality ice cream varieties are priced higher than the basic ones. Breyer's is using _____ to price its ice cream. A. captive pricingB. price baitingC. premium pricingD. bait pricingE. differential pricing

 

87. When a company prices one item in a line low with the intention of selling a higher-priced item in the same line, it is using A. bait pricing.B. a price leader.C. penetration pricing.D. price lining.E. captive pricing.

 

88. When Gabriella logs on to Dell's website, she sees a notebook model priced well below $1,000. As she continues through the site to view the other options, she realizes the first one she saw was the cheapest model available, but she of course wants more features. Dell is utilizing A. bait and switch.B. price lining.C. captive pricing.D. penetration pricing.E. bait pricing.

 

89. When an organization sets a number of prices for selected groups of merchandise, this is commonly referred to as A. prestige pricing.B. price lining.C. customary pricing.D. odd-even pricing.E. ethical pricing.

 

90. The pricing strategy that assumes that demand is relatively inelastic over certain price ranges is called A. price lining.B. odd-even pricing.C. price skimming.D. prestige pricing.E. customary pricing.

 

91. When a company attempts to influence a consumer's perception of price to make a product's price more attractive and reduce "sticker shock," it is using a ______ pricing strategy. A. competition-basedB. professionalC. promotionalD. comparisonE. psychological

 

92. All of the following are psychological techniques except A. customary pricing.B. prestige pricing.C. reference pricing.D. odd-even pricing.E. price skimming.

 

93. Reference pricing is A. listing the manufacturer's suggested retail price on the price tag along with the store's lower price.B. mentioning the price that other retailers charge for the same product on the display for the product.C. using a consumer's internal perceptions of what the appropriate price should be to help price a firm's products.D. pricing a product at a moderate level and positioning it next to a more expensive model or brand.E. using prices in advertising so that customers will have a point of reference when they come to the retail facility.

 

94. A Macy's manager designs the casual clothing department such that one of Macy's private label pairs of jeans, priced at $24.99, is positioned next to a national brand of jeans, such as Levis, priced at $39.99. What is the manager attempting to accomplish? A. Everyday low prices strategyB. Odd-even pricing strategyC. Prestige pricing strategyD. Special-event pricing strategyE. Reference pricing strategy

 

95. Bundle pricing may be perceived to be of value by customers because A. they always pay a lower price per item than they would have if they bought each item separately.B. they prefer buying a combination of bundled products in a single transaction, which saves time, effort, and perhaps money.C. the companies selling the products can sell them at a lower price because their costs of packaging are lower.D. they are purchasing complementary products, which is convenient for them.E. they can purchase items that are consumed frequently in larger quantities.

 

96. When Mia and Shane are planning their honeymoon, their travel agent tells them that if they buy a special package, their trip to Paris will include meals, tickets to the theater, and a rental car in addition to airfare and a hotel. This is an example of the use of A. multiple-unit pricing.B. bundle pricing.C. prestige pricing.D. price lining.E. price packaging.

 

97. Products such as light bulbs, canned soft drinks, and ice cream sandwiches are usually priced using A. multiple-unit pricing.B. reference pricing.C. price lining.D. bundle pricing.E. odd-even pricing.

 

98. Some companies attempt to reduce or eliminate the use of frequent short-term price reductions by using A. odd-even pricing.B. customary pricing.C. everyday low prices.D. price leaders.E. reference pricing.

 

99. Odd-even pricing is A. a cost-based strategy.B. competition-based.C. a rarely used technique.D. a psychological pricing strategy.E. a form of unethical pricing.

 

100. If REVO sets the price for its sunglasses at $240, it is using psychological pricing to convey A. thrift.B. cost cutting.C. value.D. prestige.E. availability.

 

101. Goods that are priced primarily based on the way they have always been priced are examples of A. traditional pricing.B. professional pricing.C. everyday low prices.D. price lining.E. customary pricing.

 

102. What type of pricing strategy is used in a situation where demand for a product is price inelastic and the seller has an ethical responsibility not to overcharge the client? A. Price liningB. Prestige pricingC. Professional pricingD. Customary pricingE. Price skimming

 

103. Price leaders, comparison discounting, and special-event pricing are applications of A. psychological pricing.B. professional pricing.C. product-line pricing.D. bait-and-switch.E. promotional pricing.

 

104. If Kroger Food Stores advertises 2-liter bottles of Pepsi for 89 cents to generate store traffic that will purchase other items at regular prices, the grocer is using A. reference pricing.B. a price leader.C. special-event pricing.D. comparison discounting.E. professional pricing.

 

105. A product is a price leader when A. it is sold at the highest price.B. its price maximizes profits.C. an increase or decrease in price leads to increased revenue or lower costs.D. it is sold at less than cost in the hope that sales of other products will increase.E. its price leads the industry in sales.

 

106. To attract customers into a store, Safeway advertises its milk at less than cost, hoping that customers will purchase other groceries as well. This pricing strategy is called A. price lining.B. special-event pricing.C. differential pricing.D. comparison discounting.E. price leader pricing.

 

107. Which of the following pricing strategies often results in a retailer losing money on the product? A. Price leaderB. Psychological discountingC. Penetration pricingD. Special-event pricingE. Ethical pricing

 

108. A sale at The Bon Marche the day after Thanksgiving to kick off the Christmas season would be considered A. psychological pricing.B. comparison discounting.C. customary pricing.D. special-event pricing.E. captive pricing.

 

109. Showing a product's price along with its previous price, the price of a competing brand, or the price at another retail outlet is called A. competition-based pricing.B. reference pricing.C. comparison discounting.D. captive pricing.E. psychological pricing.

 

110. The manager at Best Buy puts a sign up next to a Pioneer audio system that reads, "Only $199.99! $60 less than Circuit City." This is an example of what type of pricing strategy? A. Random discountingB. Periodic discountingC. Comparison discountingD. Penetration pricingE. Everyday low prices

 

111. Pricing strategies and methods A. help direct and structure the selection of a final price.B. are the last decisions made for a new product.C. are the same for all of a company's products.D. are the most important decisions made for a product.E. require limited planning on the part of management.

 

112. Suppose that Rayban is considering a new line of sunglasses that would be sold in major department stores. The new line would be positioned as a more distinctive brand than the typical glasses sold through department stores, and would be priced higher than other brands in the store, but a lower price line than the current Rayban lines that are sold through more selective stores. In determining the price for this sunglass line, Rayban wants to gather information about all brands sold in department stores and about customers' perceptions of those brands.   Reference: Ref 20-1 Rayban's plan of gathering information about the other brands sold in department stores, including their prices, would most likely be used in a __________ basis for pricing. A. CostB. CompetitionC. DemandD. CustomerE. Market

 

113. Suppose that Rayban is considering a new line of sunglasses that would be sold in major department stores. The new line would be positioned as a more distinctive brand than the typical glasses sold through department stores, and would be priced higher than other brands in the store, but a lower price line than the current Rayban lines that are sold through more selective stores. In determining the price for this sunglass line, Rayban wants to gather information about all brands sold in department stores and about customers' perceptions of those brands.   Reference: Ref 20-1 Given Rayban's plan for positioning the new sunglass line, they should use a __________ strategy when introducing their new product. A. promotionalB. penetrationC. price-skimmingD. referenceE. secondary-market

 

114. Suppose that Rayban is considering a new line of sunglasses that would be sold in major department stores. The new line would be positioned as a more distinctive brand than the typical glasses sold through department stores, and would be priced higher than other brands in the store, but a lower price line than the current Rayban lines that are sold through more selective stores. In determining the price for this sunglass line, Rayban wants to gather information about all brands sold in department stores and about customers' perceptions of those brands.   Reference: Ref 20-1 Rayban has decided to promote the new sunglass line as an "affordable luxury" and plans significant promotional expenditures. With these objectives, which of the following should Rayban use to price its product line? A. competition-based pricingB. cost-plus pricingC. markup pricingD. demand-based pricingE. differential pricing

 

115. Suppose that Rayban is considering a new line of sunglasses that would be sold in major department stores. The new line would be positioned as a more distinctive brand than the typical glasses sold through department stores, and would be priced higher than other brands in the store, but a lower price line than the current Rayban lines that are sold through more selective stores. In determining the price for this sunglass line, Rayban wants to gather information about all brands sold in department stores and about customers' perceptions of those brands.   Reference: Ref 20-1 If Rayban selected the prices for its new sunglasses to be $60, $70, or $80, this would most likely be an example of using __________ pricing to enhance its distinctive positioning strategy. A. product-lineB. odd-evenC. professionalD. promotionalE. penetration

 

116. Glenwood Pet Hospital is considering implementing a new pricing strategy for its veterinarian services. After reviewing the previous three years' revenue, Glenwood finds that most of its customers bring their pets in for the required annual vaccinations and then only if the animal is ill. Glenwood's objective is to generate more income per customer on an annual basis. The hospital has previously priced its services by charging a flat fee for the office visit, a fee for each vaccine, and a fee for each type of examination beyond the basic office visit. Most customers pay the flat office fee and a fee for a rabies vaccine. Glenwood is now considering a new plan where the pet owner would pay one fee that would cover an office visit, the required rabies vaccine, and additional vaccines that prevent heartworm, kennel-cough, and fleas. Glenwood hopes to encourage the pet owners to view their pet's health as part of a prevention program, rather than a one-time annual visit.   Reference: Ref 20-2 Glenwood's previous pricing strategy is an example of __________ pricing, while the new strategy is an example of __________ pricing. A. percentage; cost-basedB. cost-based; psychologicalC. sales-based; customaryD. a la carte; bundleE. demand-based; bundling

 

117. Glenwood Pet Hospital is considering implementing a new pricing strategy for its veterinarian services. After reviewing the previous three years' revenue, Glenwood finds that most of its customers bring their pets in for the required annual vaccinations and then only if the animal is ill. Glenwood's objective is to generate more income per customer on an annual basis. The hospital has previously priced its services by charging a flat fee for the office visit, a fee for each vaccine, and a fee for each type of examination beyond the basic office visit. Most customers pay the flat office fee and a fee for a rabies vaccine. Glenwood is now considering a new plan where the pet owner would pay one fee that would cover an office visit, the required rabies vaccine, and additional vaccines that prevent heartworm, kennel-cough, and fleas. Glenwood hopes to encourage the pet owners to view their pet's health as part of a prevention program, rather than a one-time annual visit.   Reference: Ref 20-2 Glenwood has decided that it is going to offer a special package offer if the prevention plan is purchased within the first 30 days of each year's time for vaccinations. This type of pricing strategy would be an example of A. customary pricing.B. secondary-market pricing.C. introductory pricing.D. periodic discounting.E. random discounting.

 

118. Glenwood Pet Hospital is considering implementing a new pricing strategy for its veterinarian services. After reviewing the previous three years' revenue, Glenwood finds that most of its customers bring their pets in for the required annual vaccinations and then only if the animal is ill. Glenwood's objective is to generate more income per customer on an annual basis. The hospital has previously priced its services by charging a flat fee for the office visit, a fee for each vaccine, and a fee for each type of examination beyond the basic office visit. Most customers pay the flat office fee and a fee for a rabies vaccine. Glenwood is now considering a new plan where the pet owner would pay one fee that would cover an office visit, the required rabies vaccine, and additional vaccines that prevent heartworm, kennel-cough, and fleas. Glenwood hopes to encourage the pet owners to view their pet's health as part of a prevention program, rather than a one-time annual visit.   Reference: Ref 20-2 Glenwood's closest competitor, The Hearthstone Pet Hospital, currently charges $60 for each basic office visit. If Glenwood were to price its basic office visit at $45, it would most likely be employing which of the following? A. customary pricing.B. penetration pricing.C. prestige pricing.D. price skimming.E. cost-based pricing.

 

119. Glenwood Pet Hospital is considering implementing a new pricing strategy for its veterinarian services. After reviewing the previous three years' revenue, Glenwood finds that most of its customers bring their pets in for the required annual vaccinations and then only if the animal is ill. Glenwood's objective is to generate more income per customer on an annual basis. The hospital has previously priced its services by charging a flat fee for the office visit, a fee for each vaccine, and a fee for each type of examination beyond the basic office visit. Most customers pay the flat office fee and a fee for a rabies vaccine. Glenwood is now considering a new plan where the pet owner would pay one fee that would cover an office visit, the required rabies vaccine, and additional vaccines that prevent heartworm, kennel-cough, and fleas. Glenwood hopes to encourage the pet owners to view their pet's health as part of a prevention program, rather than a one-time annual visit.   Reference: Ref 20-2 Glenwood is considering a markup pricing basis, with the cost for office visit plus vaccines at $45. If Glenwood were to add a markup of 33.3 percent of the costs, its price would be _____.  A. $79B. $65C. $55D. $78E. $60

 

120. The six stages of setting prices should always be followed if prices are to be set correctly. True    False

 

121. A marketer uses only one pricing objective to avoid organizational confusion. True    False

 

122. Pricing objectives should be considered overall goals to aid the organization in its long-range plans. True    False

 

123. The objective of profit maximization is rarely operational because its achievement is difficult to measure. True    False

 

124. The objective of maintaining or increasing market share depends on growth in industry sales. True    False

 

125. The use of market share as a pricing objective oversimplifies the value of price in contributing to profits. True    False

 

126. The role played by attitudes toward price in the overall evaluation of the marketing mix is a minor concern in identifying the target market. True    False

 

127. Knowing the target market's evaluation of price allows the marketer to know how much emphasis to place on price and how to price a product relative to competition. True    False

 

128. The price of a hotel room is more important to a business traveler than to a tourist. True    False

 

129. The importance of price depends on the type of product, the type of target market, and the purchase situation. True    False

 

130. A marketer is usually in a better position to establish prices when it knows the prices charged for competing brands. True    False

 

131. Some stores employ comparison shoppers to learn what prices their competitors are charging. True    False

 

132. It is usually easy to obtain an accurate price list for a competitor's products. True    False

 

133. Marketers that evaluate competitors' prices do so to set their own prices slightly below those of competitors. True    False

 

134. Cost-based pricing strategies result in a percentage being added to the cost of the product. True    False

 

135. Cost-based pricing results in a high price when demand is high and a low price when demand is low. True    False

 

136. One pitfall of cost-plus pricing for the buyer is that the seller may increase costs to establish a larger profit base. True    False

 

137. Cost-plus pricing is popular in periods of rapid inflation. True    False

 

138. Markup pricing is not used often by marketers because establishing a percentage markup greatly increases the complexity of the decision-making process. True    False

 

139. Markup can be stated as a percentage of the cost or as a percentage of the selling price. True    False

 

140. A major reason why retailers use markup pricing is that it is convenient. True    False

 

141. The effectiveness of demand-based pricing often depends on a marketer's ability to determine all the costs associated with the product. True    False

 

142. Demand-based pricing strategies are easy to use. True    False

 

143. A firm that considers costs and revenue secondary to competitors' prices when setting its own prices is using a competition-based pricing strategy. True    False

 

144. The government frequently uses competition-based pricing in granting defense contracts. True    False

 

145. Competition-based pricing is important if competing products are almost homogeneous or if price is the key variable in the marketing strategy. True    False

 

146. A pricing strategy is a course of action designed to achieve pricing and marketing objectives. True    False

 

147. Differential pricing means different buyers pay different prices for the same quality and quantity of product. True    False

 

148. Differential pricing is effective mainly when focusing on only one market segment. True    False

 

149. Grocery stores use negotiated pricing strategies. True    False

 

150. An early-bird special offered by a restaurant during off-peak hours is an example of the secondary-market pricing strategy. True    False

 

151. Periodic discounting is often predictable so consumers wait to make purchases until they can benefit from the price reductions. True    False

 

152. Random discounting means discounting various products on a systematic basis. True    False

 

153. Two types of new-product pricing are price skimming and product-line pricing. True    False

 

154. Penetration pricing and price skimming of the market are two types of new-product pricing. True    False

 

155. Price skimming is designed to yield maximum unit sales volume. True    False

 

156. The use of price skimming discourages competitors from entering a market. True    False

 

157. Penetration pricing is one new-product pricing approach that provides the most flexible introductory price. True    False

 

158. A company wanting to maximize profits from its new product would use product-line pricing. True    False

 

159. Captive pricing, premium pricing, bait pricing, and price lining are all strategies aimed at maximizing the profits of an entire product line rather than an individual product. True    False

 

160. Grocery stores that position their less expensive, private brands next to more expensive, well-known manufacturer brands on the shelf are using the concept of reference pricing. True    False

 

161. A psychological price is designed to encourage purchases on the basis of rational response rather than on the basis of emotional reactions. True    False

 

162. In some cases, prices are assigned to goods on the basis of nothing more than custom. True    False

 

163. Prestige pricing is used when a higher price is consistent with buyers' attitudes toward the quality or image of a product. True    False

 

164. A price-leader approach is a pricing approach most often used in supermarkets to attract consumers by giving them special low prices on a few items. True    False

 

165. The local florist advertises a discount on arrangements during the month of April because the anniversary of the store's opening is in April. This is an example of special-event pricing. True    False

 

166. The way that pricing is used in the marketing mix will influence the determination of the final price. True    False

 

Chapter 20: Setting Prices Key 

1. Describe the six steps of the process that marketers can use to establish prices. 

 

 

2. What are some of the objectives a firm might hope to achieve when setting prices? 

 

 

3. How are pricing objectives similar to a corporation's overall goals? How are they different? 

 

 

4. How can a marketer use product quality as a pricing objective to influence purchasing decisions? 

 

 

5. How might a marketer find information about a competitor's prices? Why is this information important? 

 

 

6. Explain the difference between cost-plus and markup pricing. 

 

 

7. Describe, compare, and contrast the three major bases for setting prices. 

 

 

8. Explain differential pricing and then describe the four major types. 

 

 

9. Compare and contrast price skimming and penetration pricing. 

 

 

10. Identify and describe the four types of product-line pricing. 

 

 

11. Identify and describe six types of psychological pricing. 

 

 

12. What is bundle pricing? Give three examples, each one from a different industry. 

 

 

13. Explain the ethical implications of professional pricing. 

 

 

14. Under what conditions would a marketer most likely use a price leader strategy? 

 

 

15. What are some issues to consider when determining a specific price? 

 

 

16. When establishing prices, a marketer's first step is to A. determine demand.B. develop pricing objectives.C. select a pricing policy.D. evaluate competitors' prices.E. determine a pricing method.

 

17. Marketers must take steps to make sure that the pricing objectives they set are consistent with the organization's ___________ objectives and ___________ objectives. A. advertising; marketingB. overall; marketingC. marketing; promotionalD. overall; promotionalE. overall; revenue

 

18. If Wrigley set its pricing objective as attaining 38 percent of the chewing gum market, what else would be needed to make this a true pricing objective? A. Statement of demand elasticitiesB. Identification of cost structureC. Breakeven analysisD. Identification of a time period for accomplishmentE. Establishment of a subsequent pricing policy

 

19. Which of the following is a requirement for setting pricing objectives? A. The objectives should be short-term oriented.B. There should be only one pricing objective.C. An evaluation of competitors' prices should be made.D. The cost structure should be identified.E. The objectives should be explicitly stated.

 

20. When a company adjusts price levels so that it can increase sales volume to levels that match the organization's expenses, it is said to employ a _________ objective. A. market shareB. cash flowC. return on investmentD. survivalE. profit

 

21. Which of the following pricing objectives is rarely operational because its achievement is difficult to measure? A. Return on investmentB. Cash flowC. Profit maximizationD. Market shareE. Survival

 

22. Westin Inc. has an objective of achieving a 25 percent return from its overall sales. This is an example of a ______ pricing objective. A. market shareB. cash flowC. return on investmentD. profitE. status quo

 

23. Most pricing objectives based on ___________ are achieved by trial and error because not all cost and revenue data are available when prices are set. A. market shareB. cash flowC. return on investmentD. survivalE. profit

 

24. Maintaining or increasing market share A. can be achieved even if industry sales are flat or decreasing.B. is an infrequently used pricing objective in most industries.C. depends upon the overall growth of the total industry.D. is a profit-related objective based on price.E. is directly tied to leading an industry in product quality.

 

25. If Nabisco had established a pricing objective of selling one out of every three crackers consumed in the world, it would have established an objective based on A. cash flow.B. market share.C. survival.D. return on investment.E. dollar sales volume.

 

26. A market share objective A. is not recommended when sales for the total industry are declining.B. is not especially useful when sales for the total industry are increasing.C. is not especially useful when sales for the total industry are flat.D. is useful primarily in an industry where total sales are increasing.E. can be used effectively whether total industry sales are rising or falling.

 

27. A firm establishes which of the following pricing objectives to maintain or increase its product's sales in relation to total industry sales? A. Cash flowB. Sales potentialC. Product qualityD. Market shareE. Status quo

 

28. Which of the following pricing objectives sets prices to recover cash as quickly as possible? A. Market shareB. ProfitC. Cash flowD. Return on investmentE. Product quality

 

29. A marketer is most likely to set prices according to a cash-flow objective when a A. trial-and-error approach to the market is acceptable.B. certain market share must be maintained.C. quick return on investment is desired.D. higher price is acceptable to the firm.E. product is expected to have a long life cycle.

 

30. Gambrell Designs thinks its new product, the Automatic Dog Walker, will have a short product life cycle; therefore, its marketing department sets its primary pricing objective as A. market share.B. cash flow.C. profit.D. product quality.E. status quo.

 

31. Maintaining a certain market share, meeting competitors' prices, maintaining a favorable image, and achieving price stability are all associated with a _____ pricing objective. A. product qualityB. market shareC. survivalD. profitE. status quo

 

32. Which pricing objective de-emphasizes price and can lead to a climate of nonprice competition in an industry? A. Status quoB. Return on investmentC. Market shareD. SurvivalE. Cash flow

 

33. What type of pricing objective would an organization use if it were in a favorable position and desired nothing more? A. Return on investmentB. Cash flowC. ProfitD. Status quoE. Survival

 

34. Which type of pricing objective can reduce a firm's risk by helping to stabilize demand for its products? A. Status quoB. Market shareC. SurvivalD. Cash flowE. Return on investment

 

35. If an organization sets prices to recover research and development expenses and establish a premium quality image for its product, it would be using a _________ pricing objective. A. survivalB. return on investmentC. market shareD. product qualityE. cash flow

 

36. The pricing of Clinique makeup considerably higher than brands such as Cover Girl, Revlon, and Maybelline is used to communicate ______, which is the company's primary pricing objective. A. market shareB. product qualityC. status quoD. profitabilityE. cash flow

 

37. Research indicates that both market share and ___________ are good indicators of profitability. A. low pricingB. product qualityC. limited competitionD. sales growthE. ROI pricing

 

38. When consumers are making do with less expensive products and shopping more selectively, manufacturers and retailers must focus on the ___________ of their products. A. priceB. qualityC. availabilityD. valueE. image

 

39. For customers, value is a function of the product's A. quality attributes.B. price.C. price and durability.D. quality and functional attributes.E. quality relative to the quality of competing brands.

 

40. Marketers improve their ability to establish prices appropriately when A. there is nonprice competition.B. they know prices charged for competing brands.C. their products are of better quality than the competition's.D. the main objective is image building.E. using psychological pricing.

 

41. Some grocery stores collect data on competitive prices A. by calling their competitors.B. on a quarterly basis.C. through stores' purchase data.D. from their resellers.E. by using full-time comparison shoppers.

 

42. Marketers at organizations engaged in nonprice competition A. are more concerned about knowing competitors' prices than are marketers in organizations that are engaged in price competition.B. are not concerned about the prices of competing brands.C. need competitive price information to make sure that their products are priced at approximately the same level as the prices of competing brands.D. rely on customers to help them gather information regarding the prices of competing brands.E. experience high levels of price instability.

 

43. Competitors' prices, along with the marketing variables they emphasize, are determining factors in A. the instability of prices in a particular industry.B. using markup pricing for consumer goods.C. how much marketing research a firm needs to collect.D. using differential pricing to demonstrate quality differences.E. how important price will be to customers.

 

44. Companies that focus on particular product categories and rely on everyday low pricing to acquire a large market share through aggressive and competitive pricing strategies are often referred to as A. pioneers.B. category killers.C. comparison discounters.D. price leaders.E. category leaders.

 

45. The three primary bases for developing prices are A. profit, demand, and competition.B. supply, demand, and marketing objectives.C. demand, competition, and cost.D. markup, cost, and cost-plus.E. negotiation, periodicity, and randomness.

 

46. When a seller's costs are usually determined during or after a product is made and then a specified percentage or dollar amount is added to the cost to establish a price, an organization is using _____ pricing. A. markupB. demand-basedC. differentialD. cost-plusE. expensed-based

 

47. For custom-made equipment or commercial construction projects, which pricing method is most likely used? A. PrestigeB. PremiumC. DifferentialD. Return-on-investmentE. Cost-plus

 

48. Steinway produces concert grand pianos, often using the custom materials and designs desired by a specific customer. The average price of these pianos runs about $50,000 depending on the exact piano. What type of pricing does Steinway most likely use for these pianos? A. MarkupB. Competition-basedC. Cost-plusD. Demand-basedE. Secondary-market

 

49. The federal government often uses _____ pricing when it grants defense contracts. A. markupB. differentialC. breakevenD. cost-plusE. competition-based

 

50. A cost-based pricing method commonly used in retail is called A. value pricing.B. cost-plus pricing.C. cost discounting.D. differential pricing.E. markup pricing.

 

51. Which of the following pricing approaches is used most often by retailers? A. Markup pricingB. Price discriminationC. Multiple-unit pricingD. Return on investmentE. Price skimming

 

52. Markup is measured either as a percentage of _____ or a percentage of _____. A. selling price; costB. cost; profitC. revenue; contribution marginD. resources used; costE. demand; competition

 

53. When determining markup as a percentage of cost, divide the markup amount by A. price.B. cost.C. quantity.D. revenue.E. 100.

 

54. A retailer of Real Dry deodorant prices it at $2.00; it costs the retailer $1.40. What is the markup as a percentage of selling price? A. 3 percentB. 14.3 percentC. 30 percentD. 70 percentE. 20 percent

 

55. J.C. Penney's pays $16.50 for a six-ounce bottle of cologne and sells it for $25.95. Its markup as a percentage of cost is approximately ___________ percent for this product. A. 64B. 36C. 18D. 57E. 45

 

56. If a product is priced based on how many or how few people want it at a particular time and place, ______ pricing is being used. A. markupB. demand-basedC. competitiveD. peakE. differential

 

57. Amtrak prices its tickets so that it is less expensive to travel on weekends than during the week when there is heavy business travel. This illustrates ___________ pricing. A. cost-plusB. demand-basedC. competitiveD. secondary markupE. seasonal

 

58. During July and August, Lakewood Links Golf Course, located in South Carolina, offers weekday rates of $13 for a round of golf with a cart. During the rest of the year, the weekday rates are between $25 and $35. This is an example of the use of A. differential pricing.B. incentives.C. competition-based pricing.D. demand-based pricing.E. random discounting.

 

59. If General Motors determines that it wants to sell 200,000 Chevrolet Acadias and sets the price at $29,500 because it knows that at that price it will reach that goal, the firm would be using a ___________ pricing method. A. cost-plusB. competition-basedC. psychologicalD. comparisonE. demand-based

 

60. Competition-based pricing is A. used when costs and revenues are secondary to competitors' prices.B. not useful as a method of increasing market share.C. not useful if the competing products are homogeneous.D. not able to increase sales.E. used when competing products are heterogeneous.

 

61. When products in an industry are relatively homogeneous and price is a key purchase consideration, A. competition-based pricing becomes more important.B. demand-based pricing dominates pricing decisions.C. firms tend to use secondary-market pricing.D. cost-based methods like markup pricing are dominant.E. customary pricing is often used.

 

62. If General Mills looks at Kellogg's cereal prices as the primary method of determining its own prices, General Mills is using A. price fixing.B. price discrimination.C. demand-based pricing.D. market share pricing.E. competition-based pricing.

 

63. If PepsiCo sets its twelve-pack price at $3.99 to match the price charged by Coca-Cola, Pepsi is using which of the following pricing methods? A. Demand-basedB. Cost-basedC. Reference pricingD. Competition-basedE. Price leader

 

64. Many firms decide to charge various prices to individual customers for the same quality and quantity of product, a pricing strategy known as A. periodic discounting.B. differential pricing.C. prejudicial pricing.D. psychological pricing.E. promotional pricing.

 

65. Executives in Japan decided to price Lexus luxury cars in the United States at $55,000 while pricing them at $66,000 in their own country. This is an example of A. secondary-market pricing.B. price skimming.C. bait pricing.D. prestige pricing.E. random discounting.

 

66. Maria recently put her house on the market at an asking price of $260,000. She realizes, however, that in order to sell the house, she may have to use A. secondary-market pricing.B. reference pricing.C. negotiated pricing.D. price lining.E. professional pricing.

 

67. A problem associated with _____ is that consumers can predict when prices will be lowered and delay purchases until that time. A. random discountingB. penetration pricingC. reference pricingD. everyday low pricingE. periodic discounting

 

68. The "White Sale" that many department stores have every year a few weeks after Christmas is an example of A. secondary pricing.B. off-peak pricing.C. periodic discounting.D. random discounting.E. captive pricing.

 

69. A manager at JC Penney discovers that Sears has reduced the price of its children's Levi's from $31.99 to $24.99, according to an advertisement in the Sunday newspaper. She immediately phones her store and instructs the salesperson on duty to put a sign up next to their children's Levi's that reads, "SALE: $24.99." This is an example of what pricing strategy? A. Secondary-market pricingB. Bait-pricingC. Reference pricingD. Random discountingE. Comparison discounting

 

70. If a business decides to reduce its prices once in a while on an unsystematic basis, it is using A. price reduction planning.B. random discounting.C. bait pricing.D. periodic discounting.E. penetration pricing.

 

71. A sale that advertised prices "up to 65 percent off" the original price uses A. tensile pricing.B. random discounting.C. periodic discounting.D. bait pricing.E. psychological pricing.

 

72. Price skimming and penetration pricing are both strategies used for A. product-line pricing.B. business products only.C. psychological pricing.D. new-product pricing.E. promotional pricing.

 

73. When businesses charge the highest possible price that customers who really want the new product will pay, they are using A. premium pricing.B. prestige lining.C. captive pricing.D. price skimming.E. penetration pricing.

 

74. If Norelco introduced a new electric razor that sonically removes hair and priced it first at $175 and then at $150 before reducing the price to $100, the firm's initial pricing strategy is known as A. penetration pricing.B. psychological pricing.C. price lining.D. price skimming.E. odd-even pricing.

 

75. Sony management decided to use skimming as a pricing strategy for its newest line of high-definition television (HDTV) sets. It should be aware that this strategy does not A. generate capital to cover research and development costs.B. discourage competitors from entering the market.C. provide flexibility in the introductory base price.D. protect the firm from covering costs if prices are set too low.E. reduce the stress that may be placed on the firm's production capabilities.

 

76. When Sharp first introduced its line of graphing calculators, it set the price quite high; it has lowered the price as competitors have entered the market. The pricing strategy initially used by Sharp is called A. customary pricing.B. odd-even pricing.C. penetration pricing.D. price skimming.E. prestige pricing.

 

77. A price-skimming strategy assumes that A. the initial demand is highly elastic.B. the product is efficient.C. it will be difficult to recoup development costs.D. all consumers have homogeneous tastes.E. the initial demand is highly inelastic.

 

78. A penetration pricing strategy is particularly appropriate when demand is A. increasing.B. highly elastic.C. highly inelastic.D. decreasing.E. inefficient.

 

79. If Nabisco wants to quickly gain a large market share with its new line of reduced-fat snack crackers, it should use A. penetration pricing.B. random discounting.C. captive pricing.D. price skimming.E. everyday low prices.

 

80. The management at Allied Electronics is having difficulty in raising the introductory price on system components to cover the increased costs of producing the sensing devices for home security systems. Apparently, Allied used a(n) ___________ strategy in pricing these components. A. odd-evenB. skimmingC. liningD. penetrationE. psychological

 

81. Which of the following would be used in setting the price of a new product if considerable competition is expected? A. Psychological pricingB. Penetration pricingC. Odd-even pricingD. Price skimmingE. Prestige pricing

 

82. All of the following are pricing strategies used by companies establishing prices of multiple products within a product line except A. premium pricing.B. price lining.C. captive pricing.D. bait pricing.E. penetration pricing.

 

83. Pricing the basic product in a product line low while pricing related items at a higher level is called A. premium pricing.B. bait pricing.C. captive pricing.D. price skimming.E. price lining.

 

84. Lexmark sells some of its color printers for about $100, but the refill cartridges cost over $30 each. Lexmark's pricing strategy would be best labeled as A. bait pricing.B. captive pricing.C. customary pricing.D. price lining.E. complementary pricing.

 

85. A product that has more features than those of its competition, or that is perceived to be of higher quality, warrants using which type of pricing strategy? A. Custom pricingB. Special-event pricingC. Premium pricingD. Price liningE. Bait pricing

 

86. Breyer's produces a variety of ice cream flavors and lines of varying qualities. The higher quality ice cream varieties are priced higher than the basic ones. Breyer's is using _____ to price its ice cream. A. captive pricingB. price baitingC. premium pricingD. bait pricingE. differential pricing

 

87. When a company prices one item in a line low with the intention of selling a higher-priced item in the same line, it is using A. bait pricing.B. a price leader.C. penetration pricing.D. price lining.E. captive pricing.

 

88. When Gabriella logs on to Dell's website, she sees a notebook model priced well below $1,000. As she continues through the site to view the other options, she realizes the first one she saw was the cheapest model available, but she of course wants more features. Dell is utilizing A. bait and switch.B. price lining.C. captive pricing.D. penetration pricing.E. bait pricing.

 

89. When an organization sets a number of prices for selected groups of merchandise, this is commonly referred to as A. prestige pricing.B. price lining.C. customary pricing.D. odd-even pricing.E. ethical pricing.

 

90. The pricing strategy that assumes that demand is relatively inelastic over certain price ranges is called A. price lining.B. odd-even pricing.C. price skimming.D. prestige pricing.E. customary pricing.

 

91. When a company attempts to influence a consumer's perception of price to make a product's price more attractive and reduce "sticker shock," it is using a ______ pricing strategy. A. competition-basedB. professionalC. promotionalD. comparisonE. psychological

 

92. All of the following are psychological techniques except A. customary pricing.B. prestige pricing.C. reference pricing.D. odd-even pricing.E. price skimming.

 

93. Reference pricing is A. listing the manufacturer's suggested retail price on the price tag along with the store's lower price.B. mentioning the price that other retailers charge for the same product on the display for the product.C. using a consumer's internal perceptions of what the appropriate price should be to help price a firm's products.D. pricing a product at a moderate level and positioning it next to a more expensive model or brand.E. using prices in advertising so that customers will have a point of reference when they come to the retail facility.

 

94. A Macy's manager designs the casual clothing department such that one of Macy's private label pairs of jeans, priced at $24.99, is positioned next to a national brand of jeans, such as Levis, priced at $39.99. What is the manager attempting to accomplish? A. Everyday low prices strategyB. Odd-even pricing strategyC. Prestige pricing strategyD. Special-event pricing strategyE. Reference pricing strategy

 

95. Bundle pricing may be perceived to be of value by customers because A. they always pay a lower price per item than they would have if they bought each item separately.B. they prefer buying a combination of bundled products in a single transaction, which saves time, effort, and perhaps money.C. the companies selling the products can sell them at a lower price because their costs of packaging are lower.D. they are purchasing complementary products, which is convenient for them.E. they can purchase items that are consumed frequently in larger quantities.

 

96. When Mia and Shane are planning their honeymoon, their travel agent tells them that if they buy a special package, their trip to Paris will include meals, tickets to the theater, and a rental car in addition to airfare and a hotel. This is an example of the use of A. multiple-unit pricing.B. bundle pricing.C. prestige pricing.D. price lining.E. price packaging.

 

97. Products such as light bulbs, canned soft drinks, and ice cream sandwiches are usually priced using A. multiple-unit pricing.B. reference pricing.C. price lining.D. bundle pricing.E. odd-even pricing.

 

98. Some companies attempt to reduce or eliminate the use of frequent short-term price reductions by using A. odd-even pricing.B. customary pricing.C. everyday low prices.D. price leaders.E. reference pricing.

 

99. Odd-even pricing is A. a cost-based strategy.B. competition-based.C. a rarely used technique.D. a psychological pricing strategy.E. a form of unethical pricing.

 

100. If REVO sets the price for its sunglasses at $240, it is using psychological pricing to convey A. thrift.B. cost cutting.C. value.D. prestige.E. availability.

 

101. Goods that are priced primarily based on the way they have always been priced are examples of A. traditional pricing.B. professional pricing.C. everyday low prices.D. price lining.E. customary pricing.

 

102. What type of pricing strategy is used in a situation where demand for a product is price inelastic and the seller has an ethical responsibility not to overcharge the client? A. Price liningB. Prestige pricingC. Professional pricingD. Customary pricingE. Price skimming

 

103. Price leaders, comparison discounting, and special-event pricing are applications of A. psychological pricing.B. professional pricing.C. product-line pricing.D. bait-and-switch.E. promotional pricing.

 

104. If Kroger Food Stores advertises 2-liter bottles of Pepsi for 89 cents to generate store traffic that will purchase other items at regular prices, the grocer is using A. reference pricing.B. a price leader.C. special-event pricing.D. comparison discounting.E. professional pricing.

 

105. A product is a price leader when A. it is sold at the highest price.B. its price maximizes profits.C. an increase or decrease in price leads to increased revenue or lower costs.D. it is sold at less than cost in the hope that sales of other products will increase.E. its price leads the industry in sales.

 

106. To attract customers into a store, Safeway advertises its milk at less than cost, hoping that customers will purchase other groceries as well. This pricing strategy is called A. price lining.B. special-event pricing.C. differential pricing.D. comparison discounting.E. price leader pricing.

 

107. Which of the following pricing strategies often results in a retailer losing money on the product? A. Price leaderB. Psychological discountingC. Penetration pricingD. Special-event pricingE. Ethical pricing

 

108. A sale at The Bon Marche the day after Thanksgiving to kick off the Christmas season would be considered A. psychological pricing.B. comparison discounting.C. customary pricing.D. special-event pricing.E. captive pricing.

 

109. Showing a product's price along with its previous price, the price of a competing brand, or the price at another retail outlet is called A. competition-based pricing.B. reference pricing.C. comparison discounting.D. captive pricing.E. psychological pricing.

 

110. The manager at Best Buy puts a sign up next to a Pioneer audio system that reads, "Only $199.99! $60 less than Circuit City." This is an example of what type of pricing strategy? A. Random discountingB. Periodic discountingC. Comparison discountingD. Penetration pricingE. Everyday low prices

 

111. Pricing strategies and methods A. help direct and structure the selection of a final price.B. are the last decisions made for a new product.C. are the same for all of a company's products.D. are the most important decisions made for a product.E. require limited planning on the part of management.

 

112. Suppose that Rayban is considering a new line of sunglasses that would be sold in major department stores. The new line would be positioned as a more distinctive brand than the typical glasses sold through department stores, and would be priced higher than other brands in the store, but a lower price line than the current Rayban lines that are sold through more selective stores. In determining the price for this sunglass line, Rayban wants to gather information about all brands sold in department stores and about customers' perceptions of those brands.   Reference: Ref 20-1 Rayban's plan of gathering information about the other brands sold in department stores, including their prices, would most likely be used in a __________ basis for pricing. A. CostB. CompetitionC. DemandD. CustomerE. Market

 

113. Suppose that Rayban is considering a new line of sunglasses that would be sold in major department stores. The new line would be positioned as a more distinctive brand than the typical glasses sold through department stores, and would be priced higher than other brands in the store, but a lower price line than the current Rayban lines that are sold through more selective stores. In determining the price for this sunglass line, Rayban wants to gather information about all brands sold in department stores and about customers' perceptions of those brands.   Reference: Ref 20-1 Given Rayban's plan for positioning the new sunglass line, they should use a __________ strategy when introducing their new product. A. promotionalB. penetrationC. price-skimmingD. referenceE. secondary-market

 

114. Suppose that Rayban is considering a new line of sunglasses that would be sold in major department stores. The new line would be positioned as a more distinctive brand than the typical glasses sold through department stores, and would be priced higher than other brands in the store, but a lower price line than the current Rayban lines that are sold through more selective stores. In determining the price for this sunglass line, Rayban wants to gather information about all brands sold in department stores and about customers' perceptions of those brands.   Reference: Ref 20-1 Rayban has decided to promote the new sunglass line as an "affordable luxury" and plans significant promotional expenditures. With these objectives, which of the following should Rayban use to price its product line? A. competition-based pricingB. cost-plus pricingC. markup pricingD. demand-based pricingE. differential pricing

 

115. Suppose that Rayban is considering a new line of sunglasses that would be sold in major department stores. The new line would be positioned as a more distinctive brand than the typical glasses sold through department stores, and would be priced higher than other brands in the store, but a lower price line than the current Rayban lines that are sold through more selective stores. In determining the price for this sunglass line, Rayban wants to gather information about all brands sold in department stores and about customers' perceptions of those brands.   Reference: Ref 20-1 If Rayban selected the prices for its new sunglasses to be $60, $70, or $80, this would most likely be an example of using __________ pricing to enhance its distinctive positioning strategy. A. product-lineB. odd-evenC. professionalD. promotionalE. penetration

 

116. Glenwood Pet Hospital is considering implementing a new pricing strategy for its veterinarian services. After reviewing the previous three years' revenue, Glenwood finds that most of its customers bring their pets in for the required annual vaccinations and then only if the animal is ill. Glenwood's objective is to generate more income per customer on an annual basis. The hospital has previously priced its services by charging a flat fee for the office visit, a fee for each vaccine, and a fee for each type of examination beyond the basic office visit. Most customers pay the flat office fee and a fee for a rabies vaccine. Glenwood is now considering a new plan where the pet owner would pay one fee that would cover an office visit, the required rabies vaccine, and additional vaccines that prevent heartworm, kennel-cough, and fleas. Glenwood hopes to encourage the pet owners to view their pet's health as part of a prevention program, rather than a one-time annual visit.   Reference: Ref 20-2 Glenwood's previous pricing strategy is an example of __________ pricing, while the new strategy is an example of __________ pricing. A. percentage; cost-basedB. cost-based; psychologicalC. sales-based; customaryD. a la carte; bundleE. demand-based; bundling

 

117. Glenwood Pet Hospital is considering implementing a new pricing strategy for its veterinarian services. After reviewing the previous three years' revenue, Glenwood finds that most of its customers bring their pets in for the required annual vaccinations and then only if the animal is ill. Glenwood's objective is to generate more income per customer on an annual basis. The hospital has previously priced its services by charging a flat fee for the office visit, a fee for each vaccine, and a fee for each type of examination beyond the basic office visit. Most customers pay the flat office fee and a fee for a rabies vaccine. Glenwood is now considering a new plan where the pet owner would pay one fee that would cover an office visit, the required rabies vaccine, and additional vaccines that prevent heartworm, kennel-cough, and fleas. Glenwood hopes to encourage the pet owners to view their pet's health as part of a prevention program, rather than a one-time annual visit.   Reference: Ref 20-2 Glenwood has decided that it is going to offer a special package offer if the prevention plan is purchased within the first 30 days of each year's time for vaccinations. This type of pricing strategy would be an example of A. customary pricing.B. secondary-market pricing.C. introductory pricing.D. periodic discounting.E. random discounting.

 

118. Glenwood Pet Hospital is considering implementing a new pricing strategy for its veterinarian services. After reviewing the previous three years' revenue, Glenwood finds that most of its customers bring their pets in for the required annual vaccinations and then only if the animal is ill. Glenwood's objective is to generate more income per customer on an annual basis. The hospital has previously priced its services by charging a flat fee for the office visit, a fee for each vaccine, and a fee for each type of examination beyond the basic office visit. Most customers pay the flat office fee and a fee for a rabies vaccine. Glenwood is now considering a new plan where the pet owner would pay one fee that would cover an office visit, the required rabies vaccine, and additional vaccines that prevent heartworm, kennel-cough, and fleas. Glenwood hopes to encourage the pet owners to view their pet's health as part of a prevention program, rather than a one-time annual visit.   Reference: Ref 20-2 Glenwood's closest competitor, The Hearthstone Pet Hospital, currently charges $60 for each basic office visit. If Glenwood were to price its basic office visit at $45, it would most likely be employing which of the following? A. customary pricing.B. penetration pricing.C. prestige pricing.D. price skimming.E. cost-based pricing.

 

119. Glenwood Pet Hospital is considering implementing a new pricing strategy for its veterinarian services. After reviewing the previous three years' revenue, Glenwood finds that most of its customers bring their pets in for the required annual vaccinations and then only if the animal is ill. Glenwood's objective is to generate more income per customer on an annual basis. The hospital has previously priced its services by charging a flat fee for the office visit, a fee for each vaccine, and a fee for each type of examination beyond the basic office visit. Most customers pay the flat office fee and a fee for a rabies vaccine. Glenwood is now considering a new plan where the pet owner would pay one fee that would cover an office visit, the required rabies vaccine, and additional vaccines that prevent heartworm, kennel-cough, and fleas. Glenwood hopes to encourage the pet owners to view their pet's health as part of a prevention program, rather than a one-time annual visit.   Reference: Ref 20-2 Glenwood is considering a markup pricing basis, with the cost for office visit plus vaccines at $45. If Glenwood were to add a markup of 33.3 percent of the costs, its price would be _____.  A. $79B. $65C. $55D. $78E. $60

 

120. The six stages of setting prices should always be followed if prices are to be set correctly. FALSE

 

121. A marketer uses only one pricing objective to avoid organizational confusion. FALSE

 

122. Pricing objectives should be considered overall goals to aid the organization in its long-range plans. TRUE

 

123. The objective of profit maximization is rarely operational because its achievement is difficult to measure. TRUE

 

124. The objective of maintaining or increasing market share depends on growth in industry sales. FALSE

 

125. The use of market share as a pricing objective oversimplifies the value of price in contributing to profits. FALSE

 

126. The role played by attitudes toward price in the overall evaluation of the marketing mix is a minor concern in identifying the target market. FALSE

 

127. Knowing the target market's evaluation of price allows the marketer to know how much emphasis to place on price and how to price a product relative to competition. TRUE

 

128. The price of a hotel room is more important to a business traveler than to a tourist. FALSE

 

129. The importance of price depends on the type of product, the type of target market, and the purchase situation. TRUE

 

130. A marketer is usually in a better position to establish prices when it knows the prices charged for competing brands. TRUE

 

131. Some stores employ comparison shoppers to learn what prices their competitors are charging. TRUE

 

132. It is usually easy to obtain an accurate price list for a competitor's products. FALSE

 

133. Marketers that evaluate competitors' prices do so to set their own prices slightly below those of competitors. FALSE

 

134. Cost-based pricing strategies result in a percentage being added to the cost of the product. TRUE

 

135. Cost-based pricing results in a high price when demand is high and a low price when demand is low. FALSE

 

136. One pitfall of cost-plus pricing for the buyer is that the seller may increase costs to establish a larger profit base. TRUE

 

137. Cost-plus pricing is popular in periods of rapid inflation. TRUE

 

138. Markup pricing is not used often by marketers because establishing a percentage markup greatly increases the complexity of the decision-making process. FALSE

 

139. Markup can be stated as a percentage of the cost or as a percentage of the selling price. TRUE

 

140. A major reason why retailers use markup pricing is that it is convenient. TRUE

 

141. The effectiveness of demand-based pricing often depends on a marketer's ability to determine all the costs associated with the product. FALSE

 

142. Demand-based pricing strategies are easy to use. FALSE

 

143. A firm that considers costs and revenue secondary to competitors' prices when setting its own prices is using a competition-based pricing strategy. TRUE

 

144. The government frequently uses competition-based pricing in granting defense contracts. FALSE

 

145. Competition-based pricing is important if competing products are almost homogeneous or if price is the key variable in the marketing strategy. TRUE

 

146. A pricing strategy is a course of action designed to achieve pricing and marketing objectives. TRUE

 

147. Differential pricing means different buyers pay different prices for the same quality and quantity of product. TRUE

 

148. Differential pricing is effective mainly when focusing on only one market segment. FALSE

 

149. Grocery stores use negotiated pricing strategies. FALSE

 

150. An early-bird special offered by a restaurant during off-peak hours is an example of the secondary-market pricing strategy. TRUE

 

151. Periodic discounting is often predictable so consumers wait to make purchases until they can benefit from the price reductions. TRUE

 

152. Random discounting means discounting various products on a systematic basis. FALSE

 

153. Two types of new-product pricing are price skimming and product-line pricing. FALSE

 

154. Penetration pricing and price skimming of the market are two types of new-product pricing. TRUE

 

155. Price skimming is designed to yield maximum unit sales volume. FALSE

 

156. The use of price skimming discourages competitors from entering a market. FALSE

 

157. Penetration pricing is one new-product pricing approach that provides the most flexible introductory price. FALSE

 

158. A company wanting to maximize profits from its new product would use product-line pricing. FALSE

 

159. Captive pricing, premium pricing, bait pricing, and price lining are all strategies aimed at maximizing the profits of an entire product line rather than an individual product. TRUE

 

160. Grocery stores that position their less expensive, private brands next to more expensive, well-known manufacturer brands on the shelf are using the concept of reference pricing. TRUE

 

161. A psychological price is designed to encourage purchases on the basis of rational response rather than on the basis of emotional reactions. FALSE

 

162. In some cases, prices are assigned to goods on the basis of nothing more than custom. TRUE

 

163. Prestige pricing is used when a higher price is consistent with buyers' attitudes toward the quality or image of a product. TRUE

 

164. A price-leader approach is a pricing approach most often used in supermarkets to attract consumers by giving them special low prices on a few items. TRUE

 

165. The local florist advertises a discount on arrangements during the month of April because the anniversary of the store's opening is in April. This is an example of special-event pricing. TRUE

 

166. The way that pricing is used in the marketing mix will influence the determination of the final price. TRUE