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MKTG 409, FOM 9ED, CH. 12 PRICING CONCEPTS AND MANAGEMENT,TEST BANK QUESTIONS, FALL 22.docx
CHAPTER 12: PRICING CONCEPTS AND MANAGEMENT
1. When establishing prices, a marketer's first step is to
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2. Marketers must take steps to make sure that the pricing objectives they set are consistent with the organization's ____ objectives and ____ objectives.
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3. Which of the following is a requirement for setting pricing objectives?
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4. The Cubicles is an office supplies company that has just adjusted its price levels so that it can increase its sales volume to match its expenses. The Cubicles is most likely employing a ____ objective.
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5. Running a big sale in order to generate enough cash flow to pay creditors is typical in a situation in which a firm's primary pricing objective is
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6. Le Meridien, Inc. has an objective of achieving a 25% return from its overall sales. This is an example of a ____ pricing objective.
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7. Most pricing objectives based on ____ are achieved by trial and error because not all cost and revenue data are available when prices are set.
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8. Maintaining or increasing market share
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9. A market share objective
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10. Under Armour is establishing a ______ pricing objective to maintain or increase its product’s sales in relation to total industry sales.
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11. Which of the following pricing objectives sets prices to recover cash as quickly as possible?
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12. A marketer is most likely to set prices according to a cash-flow objective when a
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13. Iota 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
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14. Maintaining a certain market share, meeting competitors' prices, maintaining a favorable image, and achieving price stability are all associated with a ____ pricing objective.
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15. Which pricing objective de-emphasizes price and can lead to a climate of nonprice competition in an industry?
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16. What type of pricing objective would an organization use if it were in a favorable position and desired nothing more?
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17. Which type of pricing objective can reduce a firm's risk by helping to stabilize demand for its products?
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18. 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.
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19. The pricing of Origins makeup, which is priced considerably higher than brands such as Cover Girl, Revlon, and Maybelline, is used to communicate ____, which is the company's primary pricing objective.
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20. Olivia has been doing research for a smartphone manufacturing company. She has just been reviewing the results of several focus groups and has found that for customers, value is a function of the product’s
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21. For most firms in the United States, demand curves are
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22. If Wilson Sporting Goods faces a standard demand curve that exists for most products, as it raises the price of its tennis rackets, the
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23. For most products, a(n) ____ relationship exists between the price of a particular product and the quantity demanded.
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24. A graph of the quantity of products marketers expect to sell at various prices if other factors remain constant is a
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25. Food King grocery stores offer candy bars in the checkout lanes for $0.99 rather than $1.00. This use of _____ pricing should help increase sales of the candy bars.
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26. Which of the following is an advantage of utilizing penetration pricing?
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27. Which of the following products is most likely to have an inverted C-shaped demand curve?
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28. A measure of sensitivity of demand in relation to changes in price is
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29. If Princess Cruise Lines increased the price of its seven-day cruise package by 10% and, as a result, experienced a 20% decline in customer bookings, Princess's demand would be
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30. Which of the following is most likely to have an inelastic demand curve?
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31. If a product has an inelastic demand and the manufacturer raises its price,
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32. Which of the following statements about price elasticity is false?
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33. If Pacific Power and Light increased its rates by 10% and experienced a 2% reduction in the demand for power, the demand would be
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34. If a company increased its price from $100 to $120 and the quantity demanded fell by 40%, the price elasticity of demand for this product is
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35. Dividing the percentage change in quantity demanded by the percentage change in price gives the
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36. Marginal analysis involves examining
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37. Nate is an operations unit manager for Morningstar Foods. So far in developing his monthly budget, he has identified the following costs: overhead at $120,000; packaging at $70,000; advertising at $60,000; salaries at $400,000; food production at $90,000; and distribution at $22,000. The fixed costs in this situation would be
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38. The owner of Mega Motor Bikes is opening a new retail location. Which of the following is most likely to be a fixed cost for Mega Motor Bikes?
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39. The Palace Confectionary Co is a small business located in the northeastern United States. The owner of Palace Confectionary is calculating the projected costs for the coming year. There is rent for the building; salaries for the retail employees; raw materials of sugar, chocolate, and other ingredients; wrappers for packaging of individual pieces of candy; boxes; and radio advertising. Palace’s ______ are most likely to be the raw materials of sugar, chocolate, and other ingredients, as well as the wrappers.
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40. If a firm currently produces 2,500 products per month and decides to produce 2,501, it will incur
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41. Firestone notices that when the number of tires it sells increases from 1,000,000 to 1,000,001, total revenue rises $35. The $35 represents the firm's
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42. At what point does a firm maximize profit?
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43. When marginal cost is equal to marginal revenue, the firm should
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44. If Colgate-Palmolive wants to maximize profit on its toothpaste, it should operate at the point where
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45. At the breakeven point,
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46. Timothy is developing a business plan for a new type of bicycle helmet. He is interested in finding the point at which the costs of producing the helmet will equal the revenue earned from selling the product. Timothy is interested in finding the
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47. Suppose managers at Mahindra have determined the costs associated with producing hay balers are equal to the price that they charge for the hay balers. This indicates that Mahindra is producing at the ____ point.
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48. To determine the breakeven point in units, divide the fixed costs by
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49. If the product price is $100, average variable cost $40 per unit, and the total fixed costs are $120,000, what is the breakeven point?
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50. Gallants Industries determines that for its air compressors the following results are achieved at a price of $250: total costs = $250,000; variable costs per unit = $100; fixed costs = $175,000. Given these figures, Gallant would break even at ____ units.
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51. A certain location of O’Bannon’s restaurant has annual fixed costs of $200,000. If an average tab at the restaurant is $60 and the variable costs per tab is $20, how many groups of customers must O’Bannon’s serve per year in order to break even?
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52. The Venue Racquet Club found that with annual fixed costs of $60,000, its breakeven point is 2,000 members when the membership charge is $60 per person per year. What is the variable cost per person for Venue?
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53. Saffie is a marketing consultant who specializes in small businesses. Her current client is very interested in estimating the costs for the coming year in order to find the breakeven point. Saffie knows this is an important financial statistic because below the breakeven point, the firm is operating
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54. What assumption does breakeven analysis make that limits its overall usefulness?
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55. Some grocery stores collect data on competitive prices
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56. Marketers at organizations engaged in nonprice competition
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57. The three primary bases for developing prices are
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58. 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.
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59. For custom-made equipment or commercial construction projects, which pricing method is most likely used?
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60. The federal government often uses ____ pricing when it grants defense contracts.
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61. Everything But Water, a retailer of swimwear, employs a commonly used cost-based pricing method called
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62. Markup is measured either as a percentage of ____ or a percentage of ____.
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63. When determining markup as a percentage of cost, divide the markup amount by
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64. A retailer of Dry Day deodorant prices it at $2.00; it costs the retailer $1.40. What is the approximate markup as a percentage of selling price?
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65. Kohl'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 ____ % for this product.
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66. 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.
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67. Amtrak is considering two pricing strategies for its service. One is to price its train tickets so that it is less expensive to travel on weekends than during the week when there is heavy business travel, which illustrates ____ pricing. The second is to price its train tickets so that the further away the travel date, the greater the discount, which is best described as ___.
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68. During July and August, Crystal Cove 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
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69. Competition-based pricing is
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70. When products in an industry are relatively homogeneous and price is a key purchase consideration,
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71. If local Shell gasoline stations look at BP stations’ prices as the primary method of determining its own prices, Shell is using ________
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72. If Coca-Cola sets its twelve-pack price to match the price charged by PepsiCo, Coca-Cola is using which of the following pricing methods?
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73. The fact that senior citizens are charged a lower price at movie theaters than younger adults is an example of ____ pricing.
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74. 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
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75. Georgina 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
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76. A problem associated with ____ is that consumers can predict when prices will be lowered and delay purchases until that time.
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77. The "White Sale" that many department stores have every year a few weeks after Christmas is an example of
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78. A manager at Kohl's discovers that Macy’s 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?
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79. If a business decides to reduce its prices once in a while on an unsystematic basis, it is using
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80. The newest version of a product like Bose headphones is likely to use _____, while the new version of Red Bull is likely to use _____ .
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81. If Dell uses _____ pricing for its newest version of laptops, it is probably most interested in obtaining market share; and it is assuming
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82. 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
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83. Samsung 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
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84. 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
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85. If Nabisco wants to quickly gain a large market share with its new line of reduced-fat snack crackers, it should use
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86. Which of the following would be used in setting the price of a new product if considerable competition is expected?
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87. Pricing the basic product in a product line low while pricing related items at a higher level is called
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88. HP sells some of its color printers for about $100, but the refill cartridges cost over $30 each. HP’s pricing strategy would be best labeled as
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89. 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?
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90. Blue Bunny 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. Blue Bunny is using ____ to price its ice cream.
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91. When an organization sets a number of prices for selected groups of merchandise, this is commonly referred to as
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92. When a satellite dish company uses bundling to combine phone, dish, and broadband Internet access prices, it is attempting to influence a consumer's perception of price to make a product's price more attractive and reduce "sticker shock." This is an example of using a ____ pricing strategy.
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93. All of the following are psychological techniques except
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94. Reference pricing is
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95. 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?
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96. Bundle pricing may be perceived to be of value by customers because
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97. When Jamie and Cayden 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
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98. Products such as light bulbs, canned soft drinks, and ice cream sandwiches are usually priced using ______, which usually results in a ____.
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99. The decision of Lowes to use odd prices such as $59.99 for a Craftsman drill is an application of ____, where prices are often used to _____.
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100. Odd-number pricing is
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101. If REVO offers 20% off on Black Friday every year for its sunglasses, it is using _____.
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102. Price leaders, comparison discounting, and special-event pricing are applications of
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103. If Safeway Foods 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
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104. A product is a price leader when
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105. 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
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106. Which of the following pricing strategies often results in a retailer losing money on the product?
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107. Len is planning three sales during the third quarter of the year at Toys “R” Us. The first is at the beginning of the school year, the second is the week before Halloween, and the third is Black Friday. These sales would be considered to be
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108. 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
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109. The manager at Target puts a sign up next to a Samsung audio system that reads, "Only $299.99! $60 less than at Best Buy." This is an example of what type of pricing strategy?
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110. Pricing strategies and methods
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111. Which of the following is not a discount provided to business customers?
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112. What type of discount is given to a business purchaser for performing activities such as transporting, storing, and selling?
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113. The Panama Jack Company utilizes a special strategy to sell its ECO-shirt line. Its basic promotional tool is the discount. These discounts offered to middlemen for performing certain channel activities are referred to as ____ discounts.
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114. Elise Stanton, of North Central Novelties, reduces the price of games sold to Pride’s Entertainment by 10% to allow for expenses associated with Pride’s promoting the games to consumers. This is an example of a ____ discount.
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115. If Ralph Lauren offers to reduce the price of its women's blazers when retailers buy more than 100 pieces, the designer is offering a ____ discount.
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116. If the terms of a business exchange are 2/10 net 30, this means that the transaction
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117. A concession in price in business markets to achieve a desired goal is called a(n)
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118. Reductions for transportation and other costs related to the physical distance between buyer and seller are known as
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119. If a retailer orders a quantity of merchandise to be delivered to his store in San Francisco and is quoted a price that does not include shipping charges, the retailer is paying a(n) ____ price.
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120. Brandon orders 16 dozen fishing lures from Strike Right for $375. When he gets the invoice, he is furious that $25 in freight charges has been tacked onto his bill because he thought the price included freight costs. Brandon should have been certain that the order terms were
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121. Suppose that the frozen foods division of Amy’s purchases food trays and boxes from the packaging division. The form of pricing used to charge the frozen foods division is called
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122. When Cadillac buys headlights from Delco (both of which are divisions of General Motors), ____ pricing occurs.
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Scenario 12.1 Use the following to answer the questions. Concession Supply sells hotdogs, buns, and nacho ingredients to several major league ballparks across the country. Currently, Concession Supply has the following pricing information for one case of hotdogs sold at Wrigley Field: Total fixed costs = $1,200, Selling price = $16, and Variable costs = $6. |
123. Refer to Scenario 12.1. To break even, Concession Supply should sell ____ cases of hot dogs per day at Wrigley Field.
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124. Refer to Scenario 12.1. What is the breakeven point in dollar sales volume?
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125. Refer to Scenario 12.1. If Concession Supply increased its price by 10% and experienced only a 2% decrease in the demand for hotdogs, the demand would be
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Scenario 12.2 Use the following to answer the questions. Suppose that Ray-Ban 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 Ray-Ban lines that are sold through more selective stores. In determining the price for this sunglass line, Ray-Ban wants to gather information about all brands sold in department stores and about customers' perceptions of those brands. |
126. Refer to Scenario 12.2. Ray-Ban'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.
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127. Refer to Scenario 12.2. Given Ray-Ban's plan for positioning the new sunglass line, they should use a ____ strategy when introducing their new product.
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128. Refer to Scenario 12.2. Ray-Ban 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 Ray-Ban use to price its product line?
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129. Refer to Scenario 12.2. If Ray-Ban selected the prices for its new sunglasses to be $59.99 or $79.99, this would most likely be an example of using ____ pricing in order to increase sales of the new line.
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Scenario 12.3 Use the following to answer the questions. 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. |
130. Refer to Scenario 12.3. Glenwood's new pricing strategy is an example of ____ pricing.
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131. Refer to Scenario 12.3. 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
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132. Refer to Scenario 12.3. 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?
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133. Refer to Scenario 12.3. 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% of the costs, its price would be
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134. You are head of sales and marketing for your firm, and you are meeting with the CEO to establish pricing objectives for the upcoming product year.
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135. You are a brand manager for a large chain of grocery stores. You have been working overtime for the last two weeks to prepare for your pricing objectives meeting with the head of sales and marketing. You walk into the meeting with a high degree of confidence in the strategy that you have for setting the pricing objectives for your brand category for the upcoming year. You are speechless when the marketing head tells you that no changes in the pricing objectives will be made for your brand category. He says he believes it is most prudent to leave the existing pricing objectives as they are for the upcoming year.
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136. You are a senior sales and marketing analyst for a major retailing firm in Wisconsin. The marketing manager just stopped by your office with a very frustrated look on her face. She tells you that she is confused as to why, every time the company raises the sales price of its products, total revenue for the company declines.
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137. You are reading the quarterly financial report of one of your competitors. You expected to see their total sales revenue decline because they had a large price increase during the quarter. You were certain that the price increase would lead to an equivalently large decrease in their total sales revenue. To your surprise, their total sales revenue actually increased in the quarter.
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138. You are the head of pricing strategy for your firm, and you are very excited about a new point-of-sale system that has just been installed in all your firm’s retail outlets. The system is a state-of-the-art, real-time information system that captures the details of every sale made in your retail outlets. Now you will have up-to-the-minute data on sales volume trends and performances for your entire product line. You plan to use this data to set prices based on these volume trends. Which of the following bases for pricing are you intending to use?
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139. You are the marketing manager for a multistate auto dealership in the southeast United States. It is that time of year when your fleet of autos goes through a major model year change. You are putting the final touches on your pricing strategy to facilitate this change in your inventory of autos. Which of the following pricing strategies will you use to facilitate this model year change?
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140. You are the general manager of the machining products division of a diversified manufacturing company in Des Moines, Iowa. You primarily produce machining products for sale to wholesalers around the world. However, you periodically get requests from other divisions in your company to purchase your products. You treat these purchase requests the same as a purchase request from a non-affiliated entity. You sell your machining products to other internal divisions at a price that is equivalent to a market-based cost.
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141. Which of the following is true about the target market’s evaluation of price?
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142. Which of the following statements is true about marginal analysis?
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143. Which of the following statements is true about breakeven analysis?
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144. Which of the following is true about the evaluation of competitors’ prices?
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145. Which of the following bases for pricing is most commonly used by retailers?
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146. ____________ is setting the price lower than competing brands in order to enter a market and quickly gain a significant share of the market.
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147. _____________ is pricing a product at a moderate level and positioning it next to a more expensive model or brand.
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150. ____________ are reductions off the list price given by a producer to an intermediary for performing certain functions.
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151. Wendy’s restaurants have experienced declining sales recently due to consumers' increased interest in healthier eating and their preference for fast-casual restaurants such as Chipotle and Modern Market. In order to attract more customers to Wendy’s, the chain expanded the number of items they are offering on the $1 menu, and many of these items are priced below cost. Wendy’s is most likely utilizing a _____ pricing objective.
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152. Aldi’s and Dollar General stores have been expanding their footprint across the United States, opening new locations and competing against traditional discount and grocery store chains, such as Walmart, Target, Kmart, Kroger, Jewel Osco, and Schnucks. Both Aldi’s and Dollar General hope to capture a large proportion of the dollars consumers spend on grocery and general merchandise items and have responded to consumer desires for value and convenience of a smaller store. What type of pricing objective are these stores utilizing?
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153. Target has worked closely with suppliers such as Calphalon to offer customers a high-quality, branded product that is only available in Target stores. Due to these partnerships, Target has established a high level of perceived _______ among their customers since they provide a large range of brand-name merchandise at reasonable or below-competition prices.
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154. LaTonya Horton works for the Stars organization and is responsible for managing ticket sales. She knows that ticket price and season ticket packages are related to consumers’ interest in purchasing tickets and she tries to price individual tickets and packages at the level where ticket sales and profitability are maximized for the Spurs home games. LaTonya typically tests the _______ of demand by creating special events or special sales where she adjusts the price of tickets so she can determine the best price that maximizes profitability for the organization.
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155. Mariposa Sanchez is a sales representative for Sherwin Williams and her territory includes an approximately 120-mile radius of her “home” retail store. Her customers are painting contractors and facility managers of office complexes, apartment buildings, hospitals, and other businesses that might have commercial painting needs. Mariposa uses her company vehicle and spends about five hours each day in her car visiting her customers and prospecting for new business. Since her territory is so large, Mariposa puts about 200 miles on her car each day, which consumes a lot of gasoline. She tries to be economical when choosing gas stations, but it doesn’t really matter how much the gas costs, she pays the price. In this case, demand for gasoline is
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156. Priya Singh recently opened a clothing boutique catering to women aged 20 to 60 who are seeking on-trend fashions at an economical price point. Priya focuses on customer service and offers her customers personal styling advice, closet audits, and a generous return policy. She’s developing quite a following and has found that social media is a great way to market her business and showcase new arrivals. Since she orders limited numbers of items in a size range, customers know they must call or stop by the shop if they see something posted on Instagram or Facebook that they’d like to own. Priya sells most of her clothing at full price and only offers a “sale” twice each year. Priya was recently asked to speak with a marketing class about pricing and how to run a profitable business. She was reviewing some information to prepare for the class and wanted to emphasize to the students the importance of identifying fixed costs, variable costs, marginal costs, and marginal revenue as well as their relationship to profitability. Priya planned to demonstrate that profits will be at their highest when
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157. Liam Rutherford is the owner of a company that manufactures metal doors that are utilized by retail outlets in shopping malls or higher crime areas where the retailer wants to provide additional security to prevent break-ins. Liam is developing a new model that provides greater metal strength, is lighter, and is more attractive when in a closed position. He’s interested in determining the breakeven point in order to establish minimum goals for the first month of production. Liam estimates that his fixed costs to produce the new model will be $60,000. He plans to sell the doors to retailers at a list price of $249. Variable costs are estimated to be $95. How many units will his business need to sell in order to reach the breakeven point?
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158. Department stores such as Kohl’s and Macy’s are interested in learning how much their competitors are charging for similar merchandise. Which of the following practices might these retailers utilize to identify competitors’ prices?
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159. All for Fun is a retail store that offers a variety of board games, magic cards, and other collectible items and caters to teens and adults who enjoy strategy-based games. The store has over 12,000 magic cards and utilizes a sophisticated computer system to identify the value of each card. All for Fun determines the rarity of a given card and adjusts prices according to how much money customers are likely to pay for a particular card. Cards that are in limited production or considered “rare” are more expensive than cards that are widely available. Thus, the price for a single magic card might vary between $25 and $50 or more per card depending on the market. What type of pricing is All for Fun utilizing?
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160. Theatergoers in the Midwest were pleasantly surprised when they arrived at the cinema to see the latest release and learned that a price reduction had just gone into effect. The Wehrenberg Theater chain, which is the oldest theater company and operates in 15 Midwest locations, decided to drop matinee prices from $7.75 to $4.50 per person and reduce evening prices from $9.75 to $7.50 per person. The price decrease is a result of decreased traffic at the theater and a trend for consumers to use Netflix or Hulu to watch movies. The Starplex Cinemas operating in the same communities as Wehrenberg followed suit and reduced their prices to attract consumers as well. The two movie theater chains are utilizing the ______ pricing basis.
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161. Phoebe and Daniel recently purchased a 25-year-old home and are currently immersed in a kitchen remodel, which includes replacing countertops, cabinets, and kitchen appliances. They are shopping for appliances and visited several retailers to compare prices and determine which brands best met their requirements. One retailer is offering the GE brand refrigerator, cook top, built-in oven, dishwasher, and warming drawer for $3,999, while another retailer has a set of LG appliances that includes a larger refrigerator, range/oven combination, dishwasher, and wine cooler for $3,450. Phoebe and Daniel are meeting with their kitchen designer to finalize their plans for the kitchen and think that either one of these packages will fit their requirements. The appliance retailers are utilizing a ______ pricing strategy.
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162. Bentley is shopping for a new coat at Stein Mart and finds a North Face down jacket that he really likes. He knows that the North Face brand is considered to be high quality and that it’s usually very expensive. He’s pleasantly surprised to see the price—the “suggested retail price” is $199 and Stein Mart’s price is $99. Bentley decides to purchase the coat even though it’s a little more expensive than he originally thought he’d spend on the jacket. What type of pricing strategy is Stein Mart using to price the North Face jacket and other merchandise?
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163. Uber uses a pricing strategy based on real-time market conditions. It charges less in periods of low demand and more during periods of high demand. Sometimes these prices double or triple during periods of high demand. Uber argues that these higher prices motivate more drivers to pick up passengers, thus increasing the supply of drivers needed to handle the additional demand. This demand-based pricing strategy is an example of
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164. Hotels try to price rooms to maximize resources by quickly adapting to changes in demand. Part of this involves anticipating consumer behavior and calculating a number of different factors, including demand for rooms at a particular time period, likely length of stay, types of rooms likely to be requested, etc. It wants to be able to sell rooms at the right price to the right people. This pricing strategy is an example of
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165. Zoey is setting a price for her store's newest item. She purchased the item for $45 and decides to sell it for $54 using markup pricing. If she wanted to calculate the markup as percentage of cost, it would be ______________. If she wanted to calculate the markup as the percentage of the selling price, it would be ______________.
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166. Pfizer wants to price its newest medication product so that it earns a 35% return on investment. It chose this pricing objective because of the significant amount of resources it spent on research and development. What is one challenge of using return on investment as a pricing strategy?
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167. In its advertisement, Timberland gives a close-up of one of its boots to show its fine craftsmanship. At the bottom of the advertisement is "Est. 1973," followed by the phrase "Best Then. Better Now." What type of pricing strategy is Timberland most likely to use with this ad?
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168. Caroline is selling soda and lemonade at the local university's baseball game. She prices the soda at $4.00 a bottle and lemonade at $7 each. These are generally much higher prices than people would normally pay. What is likely to happen to demand?
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169. Blake is trying to come up with a pricing strategy for his store. He greatly admires Walmart and is considering adopting an everyday low price strategy. However, he is concerned because he believes that consumers might then view his products as being of low quality. At what stage of the process is Blake currently at as he is trying to establish prices?
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170. Tammy works at ITZ, a new makeup brand. Her company has decided that they want to lead the makeup industry in product quality. They have assessed the market and determined that women will associate higher-priced makeup with being higher in quality. What is the next step that Tammy’s company must do?
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171. Chris is excited because he has obtained the price list of his company's major competitor. His supervisor, Homer, is also optimistic. However, he has much more experience in the industry than Chris and cautions him that just because they have access to their competitor's price list
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172. Frito-Lay introduced its Stax brand of potato chips to compete directly against Pringles. The intent was to gain market share quickly. During the first few months they were on the market, Stax retailed for 69 cents. What type of pricing strategy was Frito-Lay likely using?
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173. Target released a promotional campaign with the tagline, "Expect more. Pay less." Which of the following pricing strategies is Target most likely using?
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174. After selecting a pricing strategy, what is the next step in the establishment of prices?
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175. Which of the following characteristics is unique to pricing more so than other variables of the marketing mix?
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176. Myra's company just purchased $600 worth of supplies from Office Depot. The terms for payment are 2/10 net 30. If Myra's firm pays in the next week, it will pay ___________. If Myra's company waits three weeks to pay Office Depot, it will pay _____________.
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MKTG 409, FOM 9ED, CH. 12 PRICING CONCEPTS AND MANAGEMENT,TEST BANK QUESTIONS, FALL 22.docx
CHAPTER 12: PRICING CONCEPTS AND MANAGEMENT
1. When establishing prices, a marketer's first step is to
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2. Marketers must take steps to make sure that the pricing objectives they set are consistent with the organization's ____ objectives and ____ objectives.
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3. Which of the following is a requirement for setting pricing objectives?
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4. The Cubicles is an office supplies company that has just adjusted its price levels so that it can increase its sales volume to match its expenses. The Cubicles is most likely employing a ____ objective.
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5. Running a big sale in order to generate enough cash flow to pay creditors is typical in a situation in which a firm's primary pricing objective is
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6. Le Meridien, Inc. has an objective of achieving a 25% return from its overall sales. This is an example of a ____ pricing objective.
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7. Most pricing objectives based on ____ are achieved by trial and error because not all cost and revenue data are available when prices are set.
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8. Maintaining or increasing market share
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9. A market share objective
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10. Under Armour is establishing a ______ pricing objective to maintain or increase its product’s sales in relation to total industry sales.
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11. Which of the following pricing objectives sets prices to recover cash as quickly as possible?
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12. A marketer is most likely to set prices according to a cash-flow objective when a
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13. Iota 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
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14. Maintaining a certain market share, meeting competitors' prices, maintaining a favorable image, and achieving price stability are all associated with a ____ pricing objective.
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15. Which pricing objective de-emphasizes price and can lead to a climate of nonprice competition in an industry?
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16. What type of pricing objective would an organization use if it were in a favorable position and desired nothing more?
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17. Which type of pricing objective can reduce a firm's risk by helping to stabilize demand for its products?
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18. 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.
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19. The pricing of Origins makeup, which is priced considerably higher than brands such as Cover Girl, Revlon, and Maybelline, is used to communicate ____, which is the company's primary pricing objective.
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20. Olivia has been doing research for a smartphone manufacturing company. She has just been reviewing the results of several focus groups and has found that for customers, value is a function of the product’s
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21. For most firms in the United States, demand curves are
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22. If Wilson Sporting Goods faces a standard demand curve that exists for most products, as it raises the price of its tennis rackets, the
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23. For most products, a(n) ____ relationship exists between the price of a particular product and the quantity demanded.
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24. A graph of the quantity of products marketers expect to sell at various prices if other factors remain constant is a
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25. Food King grocery stores offer candy bars in the checkout lanes for $0.99 rather than $1.00. This use of _____ pricing should help increase sales of the candy bars.
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26. Which of the following is an advantage of utilizing penetration pricing?
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27. Which of the following products is most likely to have an inverted C-shaped demand curve?
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28. A measure of sensitivity of demand in relation to changes in price is
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29. If Princess Cruise Lines increased the price of its seven-day cruise package by 10% and, as a result, experienced a 20% decline in customer bookings, Princess's demand would be
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30. Which of the following is most likely to have an inelastic demand curve?
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31. If a product has an inelastic demand and the manufacturer raises its price,
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32. Which of the following statements about price elasticity is false?
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33. If Pacific Power and Light increased its rates by 10% and experienced a 2% reduction in the demand for power, the demand would be
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34. If a company increased its price from $100 to $120 and the quantity demanded fell by 40%, the price elasticity of demand for this product is
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35. Dividing the percentage change in quantity demanded by the percentage change in price gives the
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36. Marginal analysis involves examining
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37. Nate is an operations unit manager for Morningstar Foods. So far in developing his monthly budget, he has identified the following costs: overhead at $120,000; packaging at $70,000; advertising at $60,000; salaries at $400,000; food production at $90,000; and distribution at $22,000. The fixed costs in this situation would be
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38. The owner of Mega Motor Bikes is opening a new retail location. Which of the following is most likely to be a fixed cost for Mega Motor Bikes?
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39. The Palace Confectionary Co is a small business located in the northeastern United States. The owner of Palace Confectionary is calculating the projected costs for the coming year. There is rent for the building; salaries for the retail employees; raw materials of sugar, chocolate, and other ingredients; wrappers for packaging of individual pieces of candy; boxes; and radio advertising. Palace’s ______ are most likely to be the raw materials of sugar, chocolate, and other ingredients, as well as the wrappers.
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40. If a firm currently produces 2,500 products per month and decides to produce 2,501, it will incur
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41. Firestone notices that when the number of tires it sells increases from 1,000,000 to 1,000,001, total revenue rises $35. The $35 represents the firm's
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42. At what point does a firm maximize profit?
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43. When marginal cost is equal to marginal revenue, the firm should
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44. If Colgate-Palmolive wants to maximize profit on its toothpaste, it should operate at the point where
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45. At the breakeven point,
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46. Timothy is developing a business plan for a new type of bicycle helmet. He is interested in finding the point at which the costs of producing the helmet will equal the revenue earned from selling the product. Timothy is interested in finding the
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47. Suppose managers at Mahindra have determined the costs associated with producing hay balers are equal to the price that they charge for the hay balers. This indicates that Mahindra is producing at the ____ point.
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48. To determine the breakeven point in units, divide the fixed costs by
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49. If the product price is $100, average variable cost $40 per unit, and the total fixed costs are $120,000, what is the breakeven point?
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50. Gallants Industries determines that for its air compressors the following results are achieved at a price of $250: total costs = $250,000; variable costs per unit = $100; fixed costs = $175,000. Given these figures, Gallant would break even at ____ units.
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51. A certain location of O’Bannon’s restaurant has annual fixed costs of $200,000. If an average tab at the restaurant is $60 and the variable costs per tab is $20, how many groups of customers must O’Bannon’s serve per year in order to break even?
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52. The Venue Racquet Club found that with annual fixed costs of $60,000, its breakeven point is 2,000 members when the membership charge is $60 per person per year. What is the variable cost per person for Venue?
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53. Saffie is a marketing consultant who specializes in small businesses. Her current client is very interested in estimating the costs for the coming year in order to find the breakeven point. Saffie knows this is an important financial statistic because below the breakeven point, the firm is operating
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54. What assumption does breakeven analysis make that limits its overall usefulness?
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55. Some grocery stores collect data on competitive prices
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56. Marketers at organizations engaged in nonprice competition
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57. The three primary bases for developing prices are
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58. 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.
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59. For custom-made equipment or commercial construction projects, which pricing method is most likely used?
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60. The federal government often uses ____ pricing when it grants defense contracts.
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61. Everything But Water, a retailer of swimwear, employs a commonly used cost-based pricing method called
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62. Markup is measured either as a percentage of ____ or a percentage of ____.
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63. When determining markup as a percentage of cost, divide the markup amount by
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64. A retailer of Dry Day deodorant prices it at $2.00; it costs the retailer $1.40. What is the approximate markup as a percentage of selling price?
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65. Kohl'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 ____ % for this product.
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66. 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.
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67. Amtrak is considering two pricing strategies for its service. One is to price its train tickets so that it is less expensive to travel on weekends than during the week when there is heavy business travel, which illustrates ____ pricing. The second is to price its train tickets so that the further away the travel date, the greater the discount, which is best described as ___.
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68. During July and August, Crystal Cove 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
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69. Competition-based pricing is
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70. When products in an industry are relatively homogeneous and price is a key purchase consideration,
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71. If local Shell gasoline stations look at BP stations’ prices as the primary method of determining its own prices, Shell is using ________
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72. If Coca-Cola sets its twelve-pack price to match the price charged by PepsiCo, Coca-Cola is using which of the following pricing methods?
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73. The fact that senior citizens are charged a lower price at movie theaters than younger adults is an example of ____ pricing.
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74. 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
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75. Georgina 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
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76. A problem associated with ____ is that consumers can predict when prices will be lowered and delay purchases until that time.
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77. The "White Sale" that many department stores have every year a few weeks after Christmas is an example of
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78. A manager at Kohl's discovers that Macy’s 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?
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79. If a business decides to reduce its prices once in a while on an unsystematic basis, it is using
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80. The newest version of a product like Bose headphones is likely to use _____, while the new version of Red Bull is likely to use _____ .
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81. If Dell uses _____ pricing for its newest version of laptops, it is probably most interested in obtaining market share; and it is assuming
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82. 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
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83. Samsung 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
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84. 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
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85. If Nabisco wants to quickly gain a large market share with its new line of reduced-fat snack crackers, it should use
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86. Which of the following would be used in setting the price of a new product if considerable competition is expected?
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87. Pricing the basic product in a product line low while pricing related items at a higher level is called
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88. HP sells some of its color printers for about $100, but the refill cartridges cost over $30 each. HP’s pricing strategy would be best labeled as
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89. 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?
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90. Blue Bunny 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. Blue Bunny is using ____ to price its ice cream.
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91. When an organization sets a number of prices for selected groups of merchandise, this is commonly referred to as
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92. When a satellite dish company uses bundling to combine phone, dish, and broadband Internet access prices, it is attempting to influence a consumer's perception of price to make a product's price more attractive and reduce "sticker shock." This is an example of using a ____ pricing strategy.
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93. All of the following are psychological techniques except
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94. Reference pricing is
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95. 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?
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96. Bundle pricing may be perceived to be of value by customers because
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97. When Jamie and Cayden 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
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98. Products such as light bulbs, canned soft drinks, and ice cream sandwiches are usually priced using ______, which usually results in a ____.
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99. The decision of Lowes to use odd prices such as $59.99 for a Craftsman drill is an application of ____, where prices are often used to _____.
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100. Odd-number pricing is
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101. If REVO offers 20% off on Black Friday every year for its sunglasses, it is using _____.
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102. Price leaders, comparison discounting, and special-event pricing are applications of
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103. If Safeway Foods 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
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104. A product is a price leader when
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105. 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
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106. Which of the following pricing strategies often results in a retailer losing money on the product?
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107. Len is planning three sales during the third quarter of the year at Toys “R” Us. The first is at the beginning of the school year, the second is the week before Halloween, and the third is Black Friday. These sales would be considered to be
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108. 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
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109. The manager at Target puts a sign up next to a Samsung audio system that reads, "Only $299.99! $60 less than at Best Buy." This is an example of what type of pricing strategy?
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110. Pricing strategies and methods
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111. Which of the following is not a discount provided to business customers?
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112. What type of discount is given to a business purchaser for performing activities such as transporting, storing, and selling?
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113. The Panama Jack Company utilizes a special strategy to sell its ECO-shirt line. Its basic promotional tool is the discount. These discounts offered to middlemen for performing certain channel activities are referred to as ____ discounts.
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114. Elise Stanton, of North Central Novelties, reduces the price of games sold to Pride’s Entertainment by 10% to allow for expenses associated with Pride’s promoting the games to consumers. This is an example of a ____ discount.
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115. If Ralph Lauren offers to reduce the price of its women's blazers when retailers buy more than 100 pieces, the designer is offering a ____ discount.
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116. If the terms of a business exchange are 2/10 net 30, this means that the transaction
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117. A concession in price in business markets to achieve a desired goal is called a(n)
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118. Reductions for transportation and other costs related to the physical distance between buyer and seller are known as
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119. If a retailer orders a quantity of merchandise to be delivered to his store in San Francisco and is quoted a price that does not include shipping charges, the retailer is paying a(n) ____ price.
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120. Brandon orders 16 dozen fishing lures from Strike Right for $375. When he gets the invoice, he is furious that $25 in freight charges has been tacked onto his bill because he thought the price included freight costs. Brandon should have been certain that the order terms were
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121. Suppose that the frozen foods division of Amy’s purchases food trays and boxes from the packaging division. The form of pricing used to charge the frozen foods division is called
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122. When Cadillac buys headlights from Delco (both of which are divisions of General Motors), ____ pricing occurs.
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Scenario 12.1 Use the following to answer the questions. Concession Supply sells hotdogs, buns, and nacho ingredients to several major league ballparks across the country. Currently, Concession Supply has the following pricing information for one case of hotdogs sold at Wrigley Field: Total fixed costs = $1,200, Selling price = $16, and Variable costs = $6. |
123. Refer to Scenario 12.1. To break even, Concession Supply should sell ____ cases of hot dogs per day at Wrigley Field.
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124. Refer to Scenario 12.1. What is the breakeven point in dollar sales volume?
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125. Refer to Scenario 12.1. If Concession Supply increased its price by 10% and experienced only a 2% decrease in the demand for hotdogs, the demand would be
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Scenario 12.2 Use the following to answer the questions. Suppose that Ray-Ban 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 Ray-Ban lines that are sold through more selective stores. In determining the price for this sunglass line, Ray-Ban wants to gather information about all brands sold in department stores and about customers' perceptions of those brands. |
126. Refer to Scenario 12.2. Ray-Ban'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.
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127. Refer to Scenario 12.2. Given Ray-Ban's plan for positioning the new sunglass line, they should use a ____ strategy when introducing their new product.
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128. Refer to Scenario 12.2. Ray-Ban 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 Ray-Ban use to price its product line?
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129. Refer to Scenario 12.2. If Ray-Ban selected the prices for its new sunglasses to be $59.99 or $79.99, this would most likely be an example of using ____ pricing in order to increase sales of the new line.
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Scenario 12.3 Use the following to answer the questions. 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. |
130. Refer to Scenario 12.3. Glenwood's new pricing strategy is an example of ____ pricing.
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131. Refer to Scenario 12.3. 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
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132. Refer to Scenario 12.3. 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?
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133. Refer to Scenario 12.3. 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% of the costs, its price would be
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134. You are head of sales and marketing for your firm, and you are meeting with the CEO to establish pricing objectives for the upcoming product year.
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135. You are a brand manager for a large chain of grocery stores. You have been working overtime for the last two weeks to prepare for your pricing objectives meeting with the head of sales and marketing. You walk into the meeting with a high degree of confidence in the strategy that you have for setting the pricing objectives for your brand category for the upcoming year. You are speechless when the marketing head tells you that no changes in the pricing objectives will be made for your brand category. He says he believes it is most prudent to leave the existing pricing objectives as they are for the upcoming year.
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136. You are a senior sales and marketing analyst for a major retailing firm in Wisconsin. The marketing manager just stopped by your office with a very frustrated look on her face. She tells you that she is confused as to why, every time the company raises the sales price of its products, total revenue for the company declines.
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137. You are reading the quarterly financial report of one of your competitors. You expected to see their total sales revenue decline because they had a large price increase during the quarter. You were certain that the price increase would lead to an equivalently large decrease in their total sales revenue. To your surprise, their total sales revenue actually increased in the quarter.
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138. You are the head of pricing strategy for your firm, and you are very excited about a new point-of-sale system that has just been installed in all your firm’s retail outlets. The system is a state-of-the-art, real-time information system that captures the details of every sale made in your retail outlets. Now you will have up-to-the-minute data on sales volume trends and performances for your entire product line. You plan to use this data to set prices based on these volume trends. Which of the following bases for pricing are you intending to use?
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139. You are the marketing manager for a multistate auto dealership in the southeast United States. It is that time of year when your fleet of autos goes through a major model year change. You are putting the final touches on your pricing strategy to facilitate this change in your inventory of autos. Which of the following pricing strategies will you use to facilitate this model year change?
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140. You are the general manager of the machining products division of a diversified manufacturing company in Des Moines, Iowa. You primarily produce machining products for sale to wholesalers around the world. However, you periodically get requests from other divisions in your company to purchase your products. You treat these purchase requests the same as a purchase request from a non-affiliated entity. You sell your machining products to other internal divisions at a price that is equivalent to a market-based cost.
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141. Which of the following is true about the target market’s evaluation of price?
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142. Which of the following statements is true about marginal analysis?
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143. Which of the following statements is true about breakeven analysis?
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144. Which of the following is true about the evaluation of competitors’ prices?
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145. Which of the following bases for pricing is most commonly used by retailers?
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146. ____________ is setting the price lower than competing brands in order to enter a market and quickly gain a significant share of the market.
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147. _____________ is pricing a product at a moderate level and positioning it next to a more expensive model or brand.
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150. ____________ are reductions off the list price given by a producer to an intermediary for performing certain functions.
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151. Wendy’s restaurants have experienced declining sales recently due to consumers' increased interest in healthier eating and their preference for fast-casual restaurants such as Chipotle and Modern Market. In order to attract more customers to Wendy’s, the chain expanded the number of items they are offering on the $1 menu, and many of these items are priced below cost. Wendy’s is most likely utilizing a _____ pricing objective.
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152. Aldi’s and Dollar General stores have been expanding their footprint across the United States, opening new locations and competing against traditional discount and grocery store chains, such as Walmart, Target, Kmart, Kroger, Jewel Osco, and Schnucks. Both Aldi’s and Dollar General hope to capture a large proportion of the dollars consumers spend on grocery and general merchandise items and have responded to consumer desires for value and convenience of a smaller store. What type of pricing objective are these stores utilizing?
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153. Target has worked closely with suppliers such as Calphalon to offer customers a high-quality, branded product that is only available in Target stores. Due to these partnerships, Target has established a high level of perceived _______ among their customers since they provide a large range of brand-name merchandise at reasonable or below-competition prices.
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154. LaTonya Horton works for the Stars organization and is responsible for managing ticket sales. She knows that ticket price and season ticket packages are related to consumers’ interest in purchasing tickets and she tries to price individual tickets and packages at the level where ticket sales and profitability are maximized for the Spurs home games. LaTonya typically tests the _______ of demand by creating special events or special sales where she adjusts the price of tickets so she can determine the best price that maximizes profitability for the organization.
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155. Mariposa Sanchez is a sales representative for Sherwin Williams and her territory includes an approximately 120-mile radius of her “home” retail store. Her customers are painting contractors and facility managers of office complexes, apartment buildings, hospitals, and other businesses that might have commercial painting needs. Mariposa uses her company vehicle and spends about five hours each day in her car visiting her customers and prospecting for new business. Since her territory is so large, Mariposa puts about 200 miles on her car each day, which consumes a lot of gasoline. She tries to be economical when choosing gas stations, but it doesn’t really matter how much the gas costs, she pays the price. In this case, demand for gasoline is
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156. Priya Singh recently opened a clothing boutique catering to women aged 20 to 60 who are seeking on-trend fashions at an economical price point. Priya focuses on customer service and offers her customers personal styling advice, closet audits, and a generous return policy. She’s developing quite a following and has found that social media is a great way to market her business and showcase new arrivals. Since she orders limited numbers of items in a size range, customers know they must call or stop by the shop if they see something posted on Instagram or Facebook that they’d like to own. Priya sells most of her clothing at full price and only offers a “sale” twice each year. Priya was recently asked to speak with a marketing class about pricing and how to run a profitable business. She was reviewing some information to prepare for the class and wanted to emphasize to the students the importance of identifying fixed costs, variable costs, marginal costs, and marginal revenue as well as their relationship to profitability. Priya planned to demonstrate that profits will be at their highest when
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157. Liam Rutherford is the owner of a company that manufactures metal doors that are utilized by retail outlets in shopping malls or higher crime areas where the retailer wants to provide additional security to prevent break-ins. Liam is developing a new model that provides greater metal strength, is lighter, and is more attractive when in a closed position. He’s interested in determining the breakeven point in order to establish minimum goals for the first month of production. Liam estimates that his fixed costs to produce the new model will be $60,000. He plans to sell the doors to retailers at a list price of $249. Variable costs are estimated to be $95. How many units will his business need to sell in order to reach the breakeven point?
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158. Department stores such as Kohl’s and Macy’s are interested in learning how much their competitors are charging for similar merchandise. Which of the following practices might these retailers utilize to identify competitors’ prices?
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159. All for Fun is a retail store that offers a variety of board games, magic cards, and other collectible items and caters to teens and adults who enjoy strategy-based games. The store has over 12,000 magic cards and utilizes a sophisticated computer system to identify the value of each card. All for Fun determines the rarity of a given card and adjusts prices according to how much money customers are likely to pay for a particular card. Cards that are in limited production or considered “rare” are more expensive than cards that are widely available. Thus, the price for a single magic card might vary between $25 and $50 or more per card depending on the market. What type of pricing is All for Fun utilizing?
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160. Theatergoers in the Midwest were pleasantly surprised when they arrived at the cinema to see the latest release and learned that a price reduction had just gone into effect. The Wehrenberg Theater chain, which is the oldest theater company and operates in 15 Midwest locations, decided to drop matinee prices from $7.75 to $4.50 per person and reduce evening prices from $9.75 to $7.50 per person. The price decrease is a result of decreased traffic at the theater and a trend for consumers to use Netflix or Hulu to watch movies. The Starplex Cinemas operating in the same communities as Wehrenberg followed suit and reduced their prices to attract consumers as well. The two movie theater chains are utilizing the ______ pricing basis.
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161. Phoebe and Daniel recently purchased a 25-year-old home and are currently immersed in a kitchen remodel, which includes replacing countertops, cabinets, and kitchen appliances. They are shopping for appliances and visited several retailers to compare prices and determine which brands best met their requirements. One retailer is offering the GE brand refrigerator, cook top, built-in oven, dishwasher, and warming drawer for $3,999, while another retailer has a set of LG appliances that includes a larger refrigerator, range/oven combination, dishwasher, and wine cooler for $3,450. Phoebe and Daniel are meeting with their kitchen designer to finalize their plans for the kitchen and think that either one of these packages will fit their requirements. The appliance retailers are utilizing a ______ pricing strategy.
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162. Bentley is shopping for a new coat at Stein Mart and finds a North Face down jacket that he really likes. He knows that the North Face brand is considered to be high quality and that it’s usually very expensive. He’s pleasantly surprised to see the price—the “suggested retail price” is $199 and Stein Mart’s price is $99. Bentley decides to purchase the coat even though it’s a little more expensive than he originally thought he’d spend on the jacket. What type of pricing strategy is Stein Mart using to price the North Face jacket and other merchandise?
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163. Uber uses a pricing strategy based on real-time market conditions. It charges less in periods of low demand and more during periods of high demand. Sometimes these prices double or triple during periods of high demand. Uber argues that these higher prices motivate more drivers to pick up passengers, thus increasing the supply of drivers needed to handle the additional demand. This demand-based pricing strategy is an example of
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164. Hotels try to price rooms to maximize resources by quickly adapting to changes in demand. Part of this involves anticipating consumer behavior and calculating a number of different factors, including demand for rooms at a particular time period, likely length of stay, types of rooms likely to be requested, etc. It wants to be able to sell rooms at the right price to the right people. This pricing strategy is an example of
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165. Zoey is setting a price for her store's newest item. She purchased the item for $45 and decides to sell it for $54 using markup pricing. If she wanted to calculate the markup as percentage of cost, it would be ______________. If she wanted to calculate the markup as the percentage of the selling price, it would be ______________.
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166. Pfizer wants to price its newest medication product so that it earns a 35% return on investment. It chose this pricing objective because of the significant amount of resources it spent on research and development. What is one challenge of using return on investment as a pricing strategy?
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167. In its advertisement, Timberland gives a close-up of one of its boots to show its fine craftsmanship. At the bottom of the advertisement is "Est. 1973," followed by the phrase "Best Then. Better Now." What type of pricing strategy is Timberland most likely to use with this ad?
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168. Caroline is selling soda and lemonade at the local university's baseball game. She prices the soda at $4.00 a bottle and lemonade at $7 each. These are generally much higher prices than people would normally pay. What is likely to happen to demand?
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169. Blake is trying to come up with a pricing strategy for his store. He greatly admires Walmart and is considering adopting an everyday low price strategy. However, he is concerned because he believes that consumers might then view his products as being of low quality. At what stage of the process is Blake currently at as he is trying to establish prices?
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170. Tammy works at ITZ, a new makeup brand. Her company has decided that they want to lead the makeup industry in product quality. They have assessed the market and determined that women will associate higher-priced makeup with being higher in quality. What is the next step that Tammy’s company must do?
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171. Chris is excited because he has obtained the price list of his company's major competitor. His supervisor, Homer, is also optimistic. However, he has much more experience in the industry than Chris and cautions him that just because they have access to their competitor's price list
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172. Frito-Lay introduced its Stax brand of potato chips to compete directly against Pringles. The intent was to gain market share quickly. During the first few months they were on the market, Stax retailed for 69 cents. What type of pricing strategy was Frito-Lay likely using?
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173. Target released a promotional campaign with the tagline, "Expect more. Pay less." Which of the following pricing strategies is Target most likely using?
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174. After selecting a pricing strategy, what is the next step in the establishment of prices?
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175. Which of the following characteristics is unique to pricing more so than other variables of the marketing mix?
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176. Myra's company just purchased $600 worth of supplies from Office Depot. The terms for payment are 2/10 net 30. If Myra's firm pays in the next week, it will pay ___________. If Myra's company waits three weeks to pay Office Depot, it will pay _____________.
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