Marketing Management, 3e (Marshall)
Chapter 11 Manage Pricing Decisions
1) Regardless of whether the setting is B2C or B2B, most costs are associated with the purchase
price.
2) For the marketing manager, pricing is merely an economic break-even point or a cost-plus
accounting calculation.
3) Since a product’s price tends to be invisible, customers rarely have trouble moving past price
to consider other critical benefits the product affords.
4) Price objectives are the desired or expected result associated with a pricing strategy and must
be consistent with other marketing-related objectives, such as positioning or branding.
5) A competitor’s price is one of the most visible elements of its marketing strategy; analyzing
historical and current pricing patterns may allow firms to determine the competitor’s pricing
objective.
6) Effectively communicating a product’s differential advantages is at the heart of positioning
strategy, and exposure to these elements spurs the customer to develop perceptions of value and
a subsequent understanding of the value proposition.
7) Firms that have an objective of utilizing pricing to communicate positioning use a stability
pricing strategy.
8) Firms and brands that continually attempt to operate in the high-price/low-benefits
environment do not survive over the long run as customer trust is damaged.
9) Firms frequently rely on combinations of pricing tactics in the marketplace rather than putting
all their eggs in one basket.
10) In product line pricing, the escalation of product prices up the product line does not depend
on prices competitors are charging for similar products.
11) Captive pricing entails gaining a commitment from a customer to a basic product or system
that requires continual purchase of peripherals to operate.
12) With prestige pricing, some of the traditional price/demand curves cannot properly predict
sales or market response because it violates the common assumption that increasing price
decreases volume.
13) Odd pricing can backfire if misapplied, especially with respect to service industries.
14) A variable pricing strategy makes planning and forecasting much easier than a one-price
strategy.
15) Due to its use of an everyday low pricing tactic, Walmart has historically needed to make
heavy investment in promotional activities.
16) To set an exact price for goods or service, marketing managers should consider more than
one method of calculation to arrive at the optimal price.
17) Average-cost pricing is a method for determining the price of an offering by adding a
standardized markup on top of the costs for the offering.
18) A promotional allowance offers retailers the opportunity to receive some compensation from
product marketers for the costs of successful product promotions.
19) Zone, uniform delivered, and free on board are examples of geographically-driven pricing
options that can be implemented within a distribution channel.
20) Among the marketing mix variables, price is the easiest and quickest to alter, so sometimes
firms overuse price changes to stimulate additional sales or gain market share.
21) The just noticeable difference in a price is the amount of price increase that can be taken
without affecting customer demand.
22) When formulating a response to a competitor’s price reduction, firms should consider their
offering from the perspective of its overall value proposition to customers.
23) Deceptive pricing refers to the collusion among companies to set mutually beneficial high
prices and limit competition.
24) The Robinson-Patman Act addressed price discrimination by prohibiting a seller’s ability to
offer different prices to different customers without a substantive basis.
25) The internal processes at Southwest Airlines are highly efficient, giving it a competitive
advantage over other airlines. Southwest has a very efficient maintenance process and also has a
very simple process of booking passengers. Because of these efficiencies, the company is able to
offer customers an appealing mileage-driven pricing structure while also increasing the airline’s
profit margin. In this scenario, Southwest’s competitive advantage is based on ________.
A) price perception
B) cost leadership
C) value ratio
D) service
E) quality
26) Michael Porter has consistently advocated that firms that are able to compete based on some
extraordinary efficiency in one or more internal processes bring to the market a competitive
advantage based on ________.
A) price perception
B) cost leadership
C) value ratio
D) service
E) quality
27) A company’s core cost advantages translate directly to an edge over its competitors based on
much more flexibility in its ________ as well as its ability to translate some of the cost savings
to the bottom line.
A) pricing strategies
B) cost leadership
C) value ratio
D) service
E) quality
28) ________ is a critical component that plays into a customer’s assessment of the value
afforded by a firm and its offerings.
A) Price
B) Cost
C) ROI
D) Markup
E) Skimming
29) In markets where customers are sensitive to price and where internal efficiencies lead to cost
advantages allowing for acceptable margins even with aggressive pricing, a ________ strategy
can create a powerful barrier to market entry for other firms.
A) penetration pricing
B) target ROI
C) price skimming
D) competitor-based pricing
E) value pricing
30) When a firm’s objective is to gain as much market share as possible, a likely pricing strategy
is ________, sometimes also referred to as pricing for maximum marketing share.
A) penetration pricing
B) price skimming
C) target ROI
D) competitor-based pricing
E) value pricing
31) Firms should be careful with a ________ strategy, as price is a cue for developing customer
perceptions of product quality. The value proposition may be reduced if a low price belies the
product’s actual quality attributes.
A) penetration pricing
B) price skimming
C) target ROI
D) competitor-based pricing
E) value pricing
32) Amelia is the marketing manager at a cafe in Charleston, and is responsible for deciding the
price of dishes included on the cafe’s menu. The chef of the cafe introduced a new dish, which
was initially priced at $20 by Amelia, but she increased its price slowly over a period of 6
months. In this scenario, Amelia utilized a ________ strategy.
A) penetration pricing
B) price skimming
C) target ROI
D) competitor-based pricing
E) value pricing
33) A strategy of ________ addresses the objective of entering a market at a relatively high price
point.
A) penetration pricing
B) price skimming
C) target ROI
D) competitor-based pricing
E) value pricing
34) In proposing a ________ strategy, the marketing manager usually is convinced that a strong
price-quality relationship exists for the product.
A) penetration pricing
B) price skimming
C) target ROI
D) competitor-based pricing
E) value pricing
35) Jean Claude has just completed a new line of designer handbags. He wants the price to
communicate to the customer that the handbags are high quality and exclusive, so he sets the
price high. He knows that after this season, the price may need to decrease as the market evolves.
Jean Claude is using a ________ strategy.
A) penetration pricing
B) price skimming
C) target ROI
D) competitor-based pricing
E) value pricing
36) Pricing objectives very frequently are designed to maximize profit, which necessitates a
________ pricing strategy.
A) penetration
B) price skimming
C) target return on investment (ROI)
D) price war
E) value
37) Hector is opening an appliance store. He has estimated a monthly profit goal based on his
anticipated expenses and earning goals and uses it to set product prices. Hector is implementing a
________ pricing strategy.
A) penetration
B) price skimming
C) target return on investment (ROI)
D) competitor-based
E) value
38) ________ could lead the marketing manager to decide to price at some market average price,
or perhaps above or below it in the context of penetration or skimming objectives.
A) Penetration pricing
B) Price skimming
C) Target ROI
D) Competitor-based pricing
E) Value pricing
39) Mark owns a driving range in New York City. He has taken notice of the three competitors
who are located very close to his business. Mark decides to look at his competitors’ pricing and
then determine his best pricing strategy based on all of the information. In this scenario, Mark is
utilizing ________.
A) penetration pricing
B) price skimming
C) target ROI
D) competitor-based pricing
E) value pricing
40) ________ can occur when a company purposefully makes pricing decisions to undercut one
or more competitors and gain sales and net market share.
A) Cost leadership
B) A price war
C) Price skimming
D) Price discrimination
E) Price elasticity of demand
41) A firm attempts to find a neutral set point for price that is neither low enough to raise the ire
of competition nor high enough to put the value proposition at risk with customers. The firm is
adopting a(n) ________ pricing strategy.
A) stability
B) target ROI
C) value
D) average-cost
E) product line
42) Firms that have an objective of utilizing pricing to communicate positioning use a ________
strategy.
A) penetration pricing
B) price skimming
C) target ROI
D) competitor-based pricing
E) value pricing
43) Marco wants to buy a new car that is of good quality and available at an affordable price.
After exploring the available options, Marco decides to purchase a car made by a popular car
manufacturer, which has a high retail price but offers very low operating and maintenance costs.
In this scenario, the pricing strategy employed by the car manufacturer is ________.
A) penetration pricing
B) price skimming
C) target ROI
D) competitor-based pricing
E) value pricing
44) In markets where customers typically witness rapidly changing prices, ________ can provide
a source of competitive advantage.
A) price elasticity of demand
B) stability pricing
C) price bundling
D) auction pricing
E) variable pricing
45) For most products, as long as the customer perceives the ratio of price and benefit to be at
least equal, perceptions of ________ will likely be favorable.
A) market share
B) quality
C) value
D) cost
E) brand image
46) Firms and brands that continually attempt to operate in the ________ quadrant do not survive
over the long run as customer trust is damaged. Some firms use price skimming strategies,
especially on product introductions, even when all the bugs have yet to be worked out of the
product.
A) high price, high benefits
B) high price, low benefits
C) low price, high benefits
D) low price, low benefits
E) low price, no benefits
47) ________ affords the marketing manager an opportunity to develop a rational pricing
strategy across a complete line of related items.
A) Product line pricing
B) Captive pricing
C) Price bundling
D) Reference pricing
E) Prestige pricing
48) Yoko is trying to explain to one of her ticket counter associates the differences in price
associated with concert tickets. She explains that the lowest-priced tickets are for the least
desirable seats and the highest-priced tickets are for the most desirable seats, with the rest of the
ticket prices falling somewhere in between. Yoko is describing ________ pricing.
A) product line
B) captive
C) odd/even
D) reference
E) prestige