Chapter 11 – Pricing Strategy
Chapter 11
Pricing Strategy
1. Price strategy is always related to competition whether firms use a higher, lower, or equal
price.
2. Both revenues and costs need to be taken into account in selecting pricing strategies.
3. Lowering prices generally eliminates potential price wars.
4. The second step in selecting a pricing strategy is analyzing the pricing situation.
5. The core issue in pricing is finding out what value requirements (benefits-costs) the buyer
places on the product or brand.
6. The underlying logic of economic value modeling (EVM) is that using the price/benefit
ratio is a more realistic view of value than “dollar worth of benefits minus price.”
7. Customer value mapping estimates are based on the differentiated benefits that a customer
receives from a product.
8. Competitive bidding is an example of demand-oriented approach of pricing.
Chapter 11 – Pricing Strategy
9. Reverse auction pricing involves sellers bidding for organizational buyers’ purchases.
10. The competitor is the frame of reference for demand-oriented pricing methods.
11. Which of the following distribution approaches is most likely to call for more competitive
pricing?
A. Exclusive
B. Selective
C. Intensive
D. Narrow
12. Price cuts in economic downturns are primarily aimed at:
A. increasing short-term profits.
B. defending a firm’s position vigorously.
C. compensating for low quality products.
D. capturing market share.
13. Which of the following is the first step in selecting a pricing strategy?
A. Setting pricing objectives
B. Analyzing the pricing situation
C. Selecting pricing strategy
D. Determining specific prices and policies
14. Which of the following is the final step in selecting a pricing strategy?
A. Setting pricing objectives
B. Determining specific prices and policies
C. Selecting pricing strategy
D. Analyzing the pricing situation
15. _____ is the percentage change in the quantity sold of a brand when the price changes,
divided by the percentage change in price.
A. Price distribution
B. Price band
C. Price point
D. Price elasticity
16. _____ estimates value as the perceived quality buyers obtain per unit of price.
A. Customer value mapping
B. Customer equity
C. User lifetime value
D. Customer value proposition
17. Value using _____ consists of the financial savings and gains provided to customers due
to purchase of the firm’s brand instead of competitors’ brands.
A. customer value mapping
B. economic value modeling
C. user lifetime value
D. customer value proposition
18. Which of the following is the first step in cost analysis for pricing decisions?
A. Estimating how cost varies with the volume of sales
B. Analyzing the cost competitive advantage of the product
C. Determining the components of the cost of the product
D. Estimating how much control management has over costs
19. _____ indicates whether costs and prices for various products decline by a given amount
each time the number of units produced doubles.
A. Economic value modeling
B. Activity-based costing
Chapter 11 – Pricing Strategy
C. Customer value mapping
D. Learning-curve analysis
20. A high-active pricing strategy:
A. values superiority.
B. emphasizes nonprice competitive factors.
C. offers discounts.
D. avoids price comparisons.
21. Which of the following is true of high-passive strategy pricing?
A. It is used when competition for the market target is very high.
B. It emphasizes nonprice competitive factors.
C. It is primarily used by discount retailers.
D. It is used by producers whose brands are not familiar to the market.
22. A low-active pricing strategy:
A. emphasizes nonprice competitive factors.
B. is mainly used to gain margins in small market targets.
C. is most effective for discount retailers.
D. is an attractive strategy when competition for market target is high.
23. A low-passive pricing strategy:
A. emphasizes superior value of the product.
B. emphasizes nonprice competitive factors.
C. offers discounts.
D. avoids price comparisons.
24. When two or more competitors collude to explicitly or implicitly set prices, this practice is
referred to as _____.
A. horizontal price fixing
B. price discrimination
Chapter 11 – Pricing Strategy
C. deceptive pricing
D. predatory pricing
25. _____ is the practice of charging different prices to different buyers for goods of similar
grade and quality.
A. Price fixing
B. Price discrimination
C. Deceptive pricing
D. Predatory pricing
26. Charging a very low price for a product with the intent of driving competitors out of
business is referred to as _____.
A. cannibalization
B. price fixing
C. predatory pricing
D. deceptive pricing
27. Which of the following types of price determination methods uses the price of producing
and marketing the product as the basis for determining price?
A. Cost-oriented
B. Supply-oriented
C. Competition-oriented
D. Demand-oriented
Chapter 11 – Pricing Strategy
28. _____ pricing methods consider estimated market response to alternative prices.
A. Cost-oriented
B. Supply-oriented
C. Competition-oriented
D. Demand-oriented
29. Which of the following types of pricing is considered a cost-oriented approach of pricing?
A. Break-even pricing
B. Reverse auction pricing
C. Demand-oriented pricing
D. Internet auction pricing
30. When using markup pricing, which of the following formulas determines the selling
price?
A. Price = Average unit cost divided by Markup percentage
B. Price = Average unit cost divided by 1 minus Markup percentage
C. Price = Unit cost minus Markup price
D. Price = Total fixed costs divided by Unit price minus Unit variable cost
31. Explain the role of price in the distribution strategy.
Chapter 11 – Pricing Strategy
32. Explain the various roles of price in the marketing program.
33. What are the steps in selecting a pricing strategy?
34. Give an account of predatory pricing. What are its ethical implications?
Chapter 11 – Pricing Strategy
35. Give an account of the impact of emerging markets on pricing.