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Principles of Marketing, 17e, Global Edition (Kotler/Armstrong)
Chapter 11 Pricing Strategies: Additional Considerations
1) Companies set not a single price, but a pricing ________ that 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 ________ pricing.
A) comparative
B) competitive
C) market-skimming
D) market-segmentation
E) cost-plus
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 completes more, though less profitable, sales.
7) Companies that 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 that has several competitors, Barrymore's
Bakery slashed the prices of all its products by 50 percent. 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) For a market penetration-price strategy to succeed, which of the following is LEAST likely
to be true?
A) Production costs decrease as sales volume increases.
B) A low price triggers market growth.
C) Distribution costs decrease as sales volume increases.
D) Low prices must inhibit competition from entering the market.
E) The strategy can be changed quickly, to a higher-priced position, with no negative impact.
Refer to the scenario below to answer the following question(s).
Champion, Inc. is a manufacturer of lunch boxes, school bags, and school stationery. Charles
Payton, the CEO of Champion, hopes to sell the products at a low price to penetrate the market
quickly.
14) Which of the following best supports a market-penetration strategy for Champion?
A) Production costs increase as sales volume increases.
B) It is very difficult for competitors to enter the market.
C) The cost of producing a smaller volume is negligible.
D) The quality of the products supports high initial prices.
E) The market for the products is highly price sensitive.
15) Pricing strategies tend to change and evolve as the average product passes through its life
cycle.
16) For market skimming to be successful, the costs of producing a smaller volume cannot be
so high that they cancel the advantage of charging more.
17) When The Candy Store sets a low initial price in order to get its "foot in the door" and to
quickly attract a large number of buyers, the company is using market-skimming pricing.
18) After entering a market by using market-penetration pricing, a company can easily raise its
price and maintain its market share.
19) Differentiate between market-skimming and market-penetration pricing strategies. Explain
the conditions within which they are effective.
20) For what types of products might marketers use market-skimming pricing?
21) Why might marketers use market-penetration pricing?
22) 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
23) Go Zone plans to introduce four tablet models over the next year. These models range from
basic readers at $99 per unit, to more sophisticated tablets 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
tablets?
A) product line pricing
B) product bundle pricing
C) captive product pricing
D) by-product pricing
E) optional product pricing
24) 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 used 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.
25) 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-percent 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
26) Which of the following product mix pricing strategies involves pricing additional or
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
27) Which of the following is true of optional-product pricing?
A) It involves capitalizing on low value by-products.
B) It involves pricing products that can be added to the base 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.
28) Which of the following product mix pricing strategies involves pricing products that 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
29) 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 models share the
same specifications. What type of pricing does Multiprint use?
A) product line pricing
B) captive product pricing
C) optional product pricing
D) by-product pricing
E) product bundle pricing
30) 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
31) In the case of services, captive product pricing is called ________ pricing.
A) by-product
B) optional product
C) two-part
D) bundle
E) segmented
32) 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) Go Zone, which launched a range of tablet models, each priced according to its features
C) Penguin's Parlor, which offers customers a 20-percent 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
33) 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) penetration
D) skimming
E) two-part
34) Beach Heaven uses two-part pricing for its holiday resort charges. Because this is a service,
the price is broken into a fixed fee for the room plus a(n) ________ usage rate for activities,
including kite-sailing and child care.
A) fixed
B) variable
C) standard
D) market
E) optional
35) 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
36) A lumber mill takes in logs, turns them into 2 x 4's and other sizes needed for building
construction. Wood chips created in the milling process are a(n) ________ that can be sold.
A) bundled product
B) captive product
C) by-product
D) optional product
E) primary product
37) 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
38) 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.
39) 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) Go Zone, which launched a range of tablet models, each priced according to its features
C) Penguin's Parlor, which offers customers a 20 percent 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
Refer to the scenario below to answer the following question(s).
Champion, Inc. is a manufacturer of lunch boxes, school bags, and school stationery. Charles
Payton, the CEO of Champion, hopes to sell the products at a low price to penetrate the market
quickly.
40) Noticing that themed envelopes aren't selling well, Charles Payton decides to offer
customers a special "letter writing" kit. He prices the kit—which comprises letter paper,
matching envelopes, and pens—at $5, even though the combined prices of the individual items
is $8. Which of the following pricing strategies is he using?
A) optional product pricing
B) product bundle pricing
C) by-product pricing
D) dynamic pricing
E) captive product pricing
41) Pricing across a product mix is difficult because various products have related demand and
costs, and products face different degrees of competition.
42) In product line pricing, price steps should account for differences in customer perceptions
of the value of different features.
43) Thinking Cap Corp. prices its various cap designs at different price levels, ranging from
$2.05 to $5.95. This is an example of optional product pricing.
44) Print-Fast Printers prices its printer cartridges at a premium, since customers must buy
Print-Fast cartridges to work with their Print-Fast printer. Print-Fast uses optional-product
pricing.
45) In addition to its customary services, On the Spot, a moving company, also sells the boxes
and padding that are used when moving household furniture. This is an example of customer-
segmented pricing.
46) When a manufacturer seeks a market for by-products and accepts a price that covers more
than the cost of storing and delivering those by-products, the manufacturer is able to reduce the
main product's price to make it more competitive.
47) Some industries commonly use two-part pricing, breaking the price down into a fixed fee
and a fixed usage rate.
48) When using product bundle pricing, sellers combine several of their products and offer the
bundle at an increased price for increased profit.
49) Sensenig Propeller manufactures replica antique wooden airplane propellers. In the process
of production, the company generates a great deal of scrap hardwood. How can using by-
product pricing benefit the company?
50) Explain product line pricing.
51) What should the price steps of product line pricing take into account?
52) Give two examples of products for which marketers might use optional-product pricing.
53) Give two examples of products for which captive product pricing might be used.
54) Give two examples of by-product pricing.
55) Give two examples of product bundle pricing.
56) 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
57) Which of the following price adjustment strategies involves reducing prices to reward
customer responses such as volume purchases, paying early, or participating in sales-support
programs?
A) product bundle pricing
B) captive product pricing
C) product line pricing
D) dynamic pricing
E) discount and allowance pricing
58) 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) quota
59) Solar Tanning Salon prices tanning sessions at $25 per visit. It also offers seasonal passes
for $175 that allow the customer to visit the salon multiple times in a year. This is an example
of a ________.
A) sample
B) promotional allowance
C) product bundle
D) discount
E) product line
60) 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
61) 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
62) 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
63) 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
64) The discount offered by Glamor Gifts to customers who bought Valentine-themed
merchandise the week following Valentine's Day is an example of a ________.
A) functional discount
B) seasonal discount
C) trade discount
D) cash discount
E) time-based discount
65) 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
66) ________ 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
67) Trade-in allowances are most commonly used in the ________ industry.
A) real estate
B) automobile
C) dairy products
D) financial services
E) health care
