MKTG 409, FOM 9ED, CH. 12 PRICING CONCEPTS AND MANAGEMENT,TEST BANK QUESTIONS, FALL 22.docx

Pricing Objectives

The goals set by marketers to guide pricing decisions and strategies.

Market Share Objective

A pricing objective focused on maintaining or increasing a product's sales in relation to total industry sales.

Cash Flow Objective

A pricing objective aimed at recovering cash as quickly as possible.

Status Quo Objective

A pricing objective that de-emphasizes price and can lead to nonprice competition in an industry.

Demand Curve

The relationship between the price of a product and the quantity demanded.

Penetration Pricing

A pricing strategy that helps a company build market share quickly by setting low prices.

Inelastic Demand

A situation where changes in price have a relatively small impact on the quantity demanded.

Price Elasticity of Demand

A measure of sensitivity of demand in relation to changes in price.

Marginal Analysis

Examining the impact on costs and revenues when production is changed by one unit.

Fixed Costs

Costs that do not vary with the level of production or sales.

Breakeven Point

The point at which total revenue equals total costs, resulting in neither profit nor loss.

Variable Costs

Costs that vary with the level of production or sales.

Marginal Cost

The cost of producing one more unit of a product.

Marginal Revenue

The additional revenue generated from selling one more unit of a product.

Profit Maximization

The point at which marginal cost equals marginal revenue.

Sunk Costs

Costs that have already been incurred and cannot be recovered.

Markup Pricing

Setting a price by adding a percentage to the cost of the product.

Cost-Plus Pricing

Setting a price by adding a markup to the cost of the product.

Demand-Based Pricing

Setting prices based on customer demand and willingness to pay.

Demand-based pricing

Setting prices based on the level of demand for a product or service.

Competition-based pricing

Determining prices by considering competitors' prices as a primary factor.

Homogeneous products

Products in an industry that are similar, making price a key factor in purchase decisions.

Price fixing

Setting prices based on competitors' prices rather than costs.

Differential pricing

Charging different prices to different customer segments based on various factors.

Secondary-market pricing

Pricing strategy where products are sold at different prices in different markets.

Negotiated pricing

Setting prices through bargaining or negotiation with customers.

Random discounting

Occasional price reductions without a set pattern.

Price skimming

Setting high initial prices then lowering them over time.

Penetration pricing

Setting low prices to quickly gain market share.

Cost-based strategy

A pricing strategy that determines the price of a product based on the costs involved in producing and distributing it.

Psychological pricing strategy

A pricing technique that focuses on the psychological aspects of consumer behavior, such as perception and emotions, to set prices.

Price leader pricing

A strategy where a product is sold at a lower price than its cost in the hope that sales of other products will increase.

Special-event pricing

A pricing strategy where prices are reduced for a limited time or special occasion to attract customers.

Comparison discounting

Showing a product's price along with its previous price, the price of a competing brand, or the price at another retail outlet to influence consumer decisions.

Periodic discounting

Offering a special package if a prevention plan is purchased within the first 30 days of each year for vaccinations.

Penetration pricing

Pricing strategy where Glenwood would most likely be employing if it priced its basic office visit lower than its competitor.

Markup pricing

Adding a 33.3% markup to the cost of an office visit plus vaccines to determine the price.

The firm’s survival

Factor considered when establishing pricing objectives by the head of sales and marketing.

A status quo pricing objective can reduce a firm’s risks by helping stabilize demand for its products

Best explanation for leaving existing pricing objectives unchanged.

The demand for the company’s products is elastic, so total revenue declines when prices are raised

Explanation for why total revenue declines when prices are raised.

Demand-based pricing

Intending to use the sales volume trends to set prices based on this data.

Periodic discounting

Pricing strategy used to facilitate a model year change for a fleet of autos.

Transfer pricing

Selling products to internal divisions at a price equivalent to a market-based cost.

The importance of price depends on the type of product

True statement about the target market’s evaluation of price.

Total cost is the sum of average fixed costs and average variable costs times the quantity produced

True statement about marginal analysis.

At the breakeven point, the firm’s sales revenue equals the sum of its fixed and variable costs

True statement about breakeven analysis.

This is done in stage three of the price-setting process

True statement about the evaluation of competitors’ prices.

Markup pricing

Most commonly used pricing base by retailers.

Penetration pricing

Setting the price lower than competing brands to quickly gain market share.

Reference pricing

Pricing a product at a moderate level and positioning it next to a more expensive model or brand.

Trade discounts

Reductions off the list price given by a producer to an intermediary for performing certain functions.

Survival

Pricing objective likely utilized by Wendy’s when pricing items below cost to attract more customers.

Market share

Pricing objective utilized by Aldi’s and Dollar General to capture a large proportion of consumer spending.

Value

Perceived attribute established by Target through partnerships with suppliers to offer high-quality products at reasonable prices.

Price elasticity

Testing the sensitivity of demand by adjusting prices to maximize profitability, as done by LaTonya Horton.

Demand for gasoline

Inelastic for Mariposa Sanchez, as she consumes a significant amount regardless of the price.

Inelastic

Describes a situation where the quantity demanded does not change significantly with a change in price.

Elastic

Describes a situation where the quantity demanded changes significantly with a change in price.

Unitary

Describes a situation where the percentage change in quantity demanded is equal to the percentage change in price.

Variable

Costs that change with the level of production or sales.

Marginal costs equal marginal revenue

Situation where profits are maximized.

Demand-based pricing

Pricing strategy based on the perceived value to the customer.

Competition-based pricing

Setting prices based on competitors' pricing strategies.

Bundle pricing

Offering several products for sale as one combined product.

Comparison discounting

Pricing strategy that involves comparing prices to show a discount.

Dynamic pricing

Adjusting prices based on real-time market conditions.

Yield management

Pricing strategy to maximize resources by adapting to changes in demand.

Markup pricing

Adding a percentage to the cost to set the selling price.

Return on investment

Pricing strategy aiming for a specific return on the resources invested.

Product quality

Pricing strategy based on emphasizing the quality of the product.

Everyday low price strategy

Setting prices consistently low to attract customers.

Assessment of competitor's prices

Step in the pricing process involving analyzing competitors' pricing strategies.

Psychological pricing

Setting prices to influence consumer perception and behavior.

Flexibility

Unique characteristic of pricing in the marketing mix, allowing for adjustments based on various factors.

Terms

2/10 net 30

Payment in the next week

$588

Payment after three weeks

$600