Principles of Marketing, 15e (Kotler/Armstrong)
Chapter 11 Pricing Strategies: Additional Considerations
1) Companies set not a single price, but a pricing ________ which covers different items in its
line and changes over time as products move through their life cycles.
A) by-product
B) structure
C) loop
D) cycle
E) bundle
2) Companies facing the challenge of setting prices for the first time can choose between two
broad strategies: market-penetration pricing and ________.
A) comparative pricing
B) competitive pricing
C) market-skimming pricing
D) market-segmentation pricing
E) cost-plus pricing
3) A market-skimming pricing strategy should NOT be used for a new product when ________.
A) the product’s quality and image support its higher price
B) enough buyers want the products at that price
C) competitors are unable to enter the market
D) competitors can undercut prices easily
E) producing a smaller number of goods is feasible
4) When a company sets a high price for a new product with the intention of reducing the price
in the future, it is using the ________ pricing strategy.
A) market-skimming
B) cost-plus
C) market-segmentation
D) market-penetration
E) competitive
5) Midnight Magic, a perfume manufacturing company, plans to release a new fragrance during
the holiday season at $99 per bottle. The company intends to bring the price down to $49 within
six months of its release to attract buyers who couldn’t afford the initial price. Which of the
following pricing strategies is Midnight Magic using?
A) market-penetration pricing
B) market-skimming pricing
C) competitive pricing
D) cost-plus pricing
E) product-line pricing
6) Which of the following is true of price skimming?
A) It is effective in situations in which competitors are able to undercut prices easily.
B) It can be profitably used when the product’s quality and image support its price.
C) It involves underpricing products so that companies make larger sales.
D) It is ineffective in situations in which competitors are unable to enter the market easily.
E) It leads to a situation in which the company makes more, though less profitable, sales.
7) Companies which set a low price for a new product in order to attract a large number of
buyers and a large market share are using the ________ strategy.
A) market-skimming pricing
B) market-penetration pricing
C) cost-plus pricing
D) inclusive pricing
E) exclusive pricing
8) A market-penetration pricing policy should LEAST likely be used for a new product when
________.
A) the market is highly price sensitive
B) production and distribution costs fall as sales volume increases
C) the product’s quality and image support a high price
D) a high price helps keep out the competition
E) there are few or no competitors in the market
9) Which of the following is true of market-penetration pricing?
A) It should be used when the product’s quality and image support a high price.
B) It involves setting a high price for a new product to appeal to the elite in society.
C) It results in drawing in large numbers of buyers quickly, winning a large market share.
D) It is best used in conjunction with a market-skimming pricing strategy.
E) It results in the company making fewer and less profitable sales.
10) In a bid to attract more customers in a market which has several competitors, Barrymore’s
Bakery slashed the prices of all its products by 50%. Managers at the firm reasoned that lower
prices would draw in even more customers, making up for the reduction in price several times
over. Which of the following pricing strategies are they using?
A) market-skimming pricing
B) market-penetration pricing
C) captive-product pricing
D) cash discount pricing
E) by-product pricing
11) Whizz Corp. wishes to introduce a new hybrid car into mature markets in developed
countries with the goal of gaining mass-market share quickly. Which of the following pricing
strategies would help the firm meet its goal?
A) market-skimming pricing
B) market-penetration pricing
C) market-segmentation pricing
D) cost-plus pricing
E) captive-product pricing
12) Electrowhip, a company that manufacturers blenders and electric whisks, has decided to use
a market-penetration pricing strategy. Which of the following, if true, proves their decision to be
a wise one?
A) Electrowhip’s competitors utilize social media for marketing their products.
B) Electrowhip sells products whose image and quality support high prices.
C) Electrowhip operates in a market with many competitors.
D) Electrowhip does not operate in a price sensitive market.
E) Electrowhip’s products are intended to appeal to the elite in society.
13) Which of the following product mix pricing strategies involves setting prices across an entire
product range based on cost differences between the products, customer evaluations of different
features, and competitors’ prices?
A) by-product pricing
B) product bundle pricing
C) optional product pricing
D) captive product pricing
E) product line pricing
14) Tone Zone plans to introduce four mp3 player models over the next year. These models
range from basic players at $99 per unit, to more sophisticated players at $399 per unit. The
more features a model has, the more expensive it is. What pricing strategy is Tone Zone using
for its range of mp3 players?
A) product line pricing
B) product bundle pricing
C) captive product pricing
D) by-product pricing
E) optional product pricing
15) Which of the following is true of product line pricing?
A) The price steps take cost differences between products in the line into account.
B) The pricing strategy cannot be availed of by companies in developed countries.
C) The price steps do not account for the prices of similar products from competitors.
D) The pricing strategy involves overpricing products so that they appeal to the elite.
E) The customer’s perception of the value of different features is considered irrelevant.
16) Which of the following companies uses product line pricing?
A) Photo Genie, which sells inexpensive cameras that run only on their own expensive batteries
B) Mobile Point, which launched a range of cell phone models, each priced according to its
features
C) Penguin’s Parlor, which offers customers a 20% discount on their birthdays and certain
holidays
D) Green Thumb, which gives away free watering cans with the purchase of certain potted plants
E) Panizza, whose combo meals are priced lower than the individual components sold together
17) Which of the following product mix pricing strategies involves pricing additional/accessory
products sold along with the main product?
A) inclusive product pricing
B) exclusive product pricing
C) by-product pricing
D) product bundle pricing
E) optional product pricing
18) Which of the following is true of optional product pricing?
A) It involves capitalizing on low value by-products.
B) It involves pricing accessory products sold with the main product
C) It is used to price a company’s main product.
D) It involves setting geographically-specific prices.
E) It is used to price products that must be used with the company’s main product.
19) Which of the following product mix pricing strategies involves pricing products that must or
can only be used with the main product?
A) by-product pricing
B) product bundle pricing
C) captive product pricing
D) product line pricing
E) optional product pricing
20) Multiprint, a printer manufacturing firm, sells ink cartridges for each of its specific models.
Only Multiprint cartridges are compatible with Multiprint printers, and no two of the firm’s
models share the same specifications. What type of pricing does Multiprint use?
A) product line pricing
B) optional product pricing
C) captive product pricing
D) by-product pricing
E) product bundle pricing
21) Which of the following product mix pricing strategies did Polaroid use when it set the
general price range of its cameras low and the markup on its film high?
A) product-segmented pricing
B) by-product pricing
C) customer-segmented pricing
D) captive product pricing
E) product bundling pricing
22) In the case of services, captive product pricing is called ________ pricing.
A) by-product
B) optional product
C) two-part
D) bundle
E) segmented
23) Which of the following companies uses captive product pricing?
A) Photo Genie, which sells inexpensive cameras that run only on their own expensive batteries
B) Tune Zone, which launched a range of mp3 player models, each priced according to its
features
C) Penguin’s Parlor, which offers customers a 20% discount on their birthdays
D) Sportsprint, which prices sports equipment according to customer evaluations
E) Burger Den, whose combo meals are priced lower than its individual components sold
together
24) When amusement parks charge customers for admission and later for food and beverages,
they are following a ________ pricing strategy.
A) by-product
B) product line
C) two-part
D) skimming
E) penetration
25) Cellpoint uses two-part pricing for its long-distance call charges. Because this is a service,
the price is broken into a fixed fee plus a(n) ________ rate.
A) fixed usage
B) variable usage
C) standard usage
D) market usage
E) optional usage
26) Using ________ pricing, companies are able to turn their trash into cash, allowing them to
make the price of their main product more competitive.
A) product bundle
B) optional product
C) captive product
D) by-product
E) product line
27) Which of the following product mix pricing strategies involves pricing multiple products to
be sold together?
A) product line pricing
B) product bundle pricing
C) optional product pricing
D) by-product pricing
E) captive product pricing
28) Which of the following is true of product bundle pricing?
A) It promotes the sale of products that consumers might not otherwise buy.
B) It is used to set prices across an entire product range based on customer evaluations.
C) It forces customers to buy product parts that are only compatible with the main product.
D) It results in companies making fewer—though more profitable—sales.
E) It involves pricing the main product low and setting high markups on the supplies.
29) Which of the following companies uses product bundle pricing?
A) Photo Genie, which sells inexpensive cameras that run only on their own, expensive, batteries
B) Tune Zone, which launched a range of mp3 player models, each priced according to its
features
C) Penguin’s Parlor, which offers customers a 20% discount on their birthdays
D) Green Thumb, which gives away free watering cans with the purchase of certain potted plants
E) Panizza, whose combo meals are priced lower than its individual components sold together
30) Which of the following is a price adjustment strategy?
A) product bundle pricing
B) by-product pricing
C) product line pricing
D) optional product pricing
E) discount and allowance pricing
31) Which of the following price adjustment strategies involves reducing prices to reward
customer responses such as volume purchases, paying early, or promoting the product promptly?
A) product bundle pricing
B) captive product pricing
C) product line pricing
D) dynamic pricing
E) discount and allowance pricing
32) A(n) ________ is a straight reduction in price on purchases during a stated period of time or
of larger quantities.
A) allowance
B) free sample
C) discount
D) tax credit
E) intromit
33) Solar Tanning Salon prices tanning sessions at $25 per visit. It also offers seasonal passes for
$175 which permit the customer to visit the salon multiple times in a year. This is an example of
a(n) ________.
A) sample
B) promotional allowance
C) product bundle
D) discount
E) product line
34) Which of the following price adjustment strategies offers a price reduction to buyers who
pay their bills promptly?
A) cash discount
B) season discount
C) quantity discount
D) trade discount
E) functional discount
35) Leicestershire Renovations has a history of problems with customers who do not pay their
bills on time. Leicestershire Renovations wants to improve its cash situation, reduce bad debts,
and reduce credit-collection costs. Which of the following forms of pricing would most likely
help the firm achieve its goal?
A) by-product pricing
B) zone pricing
C) cash discounts
D) product bundling
E) quantity discounts
36) A quantity discount is a price reduction for buyers who ________.
A) buy merchandise out of season
B) buy merchandise in bulk
C) pay their bills on time
D) buy discontinued products
E) return old items while buying new ones
37) A seller offers a ________ to trade-channel members who perform certain functions, such as
selling, storing, and record keeping.
A) functional discount
B) storage allowance
C) cash discount
D) promotional allowance
E) quantity discount
38) The discount offered by Glamor Gifts to customers who bought Valentine-themed
merchandise the week following Valentines Day is an example of a ________.
A) functional discount
B) seasonal discount
C) trade discount
D) cash discount
E) time-based discount
39) A(n) ________ refers to promotional money paid by manufacturers to retailers in return for
an agreement to feature the manufacturer’s products in some way.
A) allowance
B) sample
C) discount
D) tax credit
E) tax exemption
40) ________ allowances are price reductions given for turning in an old item when buying a
new one.
A) Promotional
B) Trade-in
C) Depreciation
D) Segmented
E) Functional
41) Trade-in allowances are most commonly used in the ________ industry.
A) real estate
B) automobile
C) dairy products
D) financial services
E) health care
42) Shoe Trends, a company that manufactures formal shoes for men and women, offers to give
its customers $10 for an old pair of shoes when they buy a new pair. In essence, they’re reducing
the price of the new shoes by $10. What is this type of price adjustment called?
A) functional discount
B) captive product pricing
C) seasonal discount
D) trade-in allowance
E) by-product pricing
43) ________ allowances are payments or price reductions that reward dealers for participating
in advertising and sales support programs.
A) Promotional
B) Trade-in
C) Segmented
D) Functional
E) Dynamic
44) In return for participating in Honda advertising and sales support programs, Honda
dealerships are rewarded with payments or price reductions, which are known as ________.
A) seasonal discounts
B) functional allowances
C) cash discounts
D) promotional allowances
E) trade-in allowances
45) By definition, ________ is used when a firm sells a product or service at two or more prices,
even though the difference in price is not based on differences in cost.
A) segmented pricing
B) variable pricing
C) flexible pricing
D) cost-plus pricing
E) reference pricing
46) The New Age Gallery has three admission prices for students, adults, and seniors, even
though all three groups are entitled to the same services. This form of pricing is called ________.
A) psychological pricing
B) product-form pricing
C) customer-segmented pricing
D) captive product pricing
E) by-product pricing
47) Under ________, different versions of the product are priced differently but not according to
differences in their costs.
A) product-form pricing
B) optional product pricing
C) captive product pricing
D) by-product pricing
E) seasonal pricing
48) Sparkling Valley, a luxury resort, prices cottages facing the lake higher than cottages that do
not, even though the cottages and services offered are identical in every other aspect. This form
of pricing is called ________.
A) location-based pricing
B) time-based pricing
C) by-product pricing
D) seasonal pricing
E) captive product pricing
49) When theaters vary their seat prices because of audience preferences for seats in coveted
rows, they use ________.
A) customer-segment pricing
B) location-based pricing
C) time-based pricing
D) product line pricing
E) captive product pricing
50) When a firm varies its price by the season, it is using ________.
A) product-form pricing
B) customer-segment pricing
C) location-based pricing
D) time-based pricing
E) value-added pricing
51) Segmented pricing is only effective when ________.
A) the segments show similar degrees of demand
B) the cost of segmenting does not exceed the revenue obtained from the price difference
C) the segmented prices do not reflect real differences in customers’ perceived value
D) the customers of different socio-economic classes are treated according to their rank
E) companies make their services and products accessible exclusively to wealthy patrons
52) Which of the following is a price adjustment strategy that considers how a customer’s
perception of a product is influenced by its price?
A) captive product pricing
B) psychological pricing
C) by-product pricing
D) promotional pricing
E) international pricing
53) Consumers are less likely to use price to judge the quality of a product when they ________.
A) have never tried the product before
B) have little knowledge of the brand
C) have experience with the product
D) are shopping for luxury items
E) cannot physically examine the product
54) Which term refers to prices that buyers carry in their minds and check with when they look at
a given product?
A) product line prices
B) reference prices
C) location-based prices
D) product-form prices
E) time-based prices
55) ________ are formed by noting current prices, remembering past prices, or assessing the
buying situation.
A) Product line prices
B) Seasonal prices
C) Reference prices
D) Time-based prices
E) Product bundle prices
56) La Belle released a a cut glass bottle of perfume at $299 per item, even though its major
competitor prices its signature scent at $99 per item. La Belle reasons that customers in search of
luxury goods will prefer its product because they are likelier to believe that high price indicates
superior quality. What price adjustment strategy is evident in its reasoning?
A) seasonal pricing
B) time-based pricing
C) captive product pricing
D) psychological pricing
E) location-based pricing
57) A supermarket places its store brand of blackberry jam priced at $5 per jar in the fruit
preserves aisle, alongside the jam jars of a better known brand—whose products are priced at $8
apiece. Store managers reason that customers are more likely to choose the store brand instead of
the better known brand when they realize the price difference. What price adjustment strategy is
evident in the supermarket’s reasoning?
A) by-product pricing
B) product bundle pricing
C) captive product pricing
D) psychological pricing
E) seasonal pricing
58) What type of pricing is being used when a company temporarily prices its product below the
list price or even below cost to create buying excitement and urgency?
A) segmented pricing
B) international pricing
C) reference pricing
D) promotional pricing
E) basing-point pricing
59) Hearth & Home, a store which sells household products, has announced a one-week sale on
its new carpet line. This is an example of ________.
A) promotional pricing
B) seasonal pricing
C) by-product pricing
D) product bundle pricing
E) time-based pricing
60) Which of the following is true of promotional pricing?
A) It leads to ‘deal-prone’ customers who buy products only during sales.
B) It fortifies the brand’s image in the eyes of customers if relied upon extensively.
C) It simplifies shopping for customers if used simultaneously by multiple stores.
D) It makes balancing short-term sales incentives against long-term brand building unnecessary.
E) It is extremely beneficial for the brand’s profitability if practiced repeatedly.