Chapter 15
Test Bank
1. It is best if firms choose one pricing strategy to use for all its products rather than use different methods for pricing.
2. The three different methods that can help develop pricing strategies are cost based, competitor based, and profit based.
3. Cost-based methods do not recognize the role that consumers’ or competitors’ prices play in the marketplace.
4. The improvement value method and the cost of ownership method are both cost-based pricing methods.
5. When a retail store rarely sells deeply discounted or sale products, it is known as “everyday low pricing.”
6. Sellers using an EDLP pricing strategy often communicate their strategy through the creative use of a reference price.
7. A high/low pricing strategy relies on the promotion of sales, during which prices are temporarily reduced to encourage purchases.
8. When Sony released its PlayStation 4 game console, it charged a high price, attracting the most avid game players. This was a market penetration
pricing strategy.
9. Cheryl wants to quickly establish a dominant market share for her new line of ergonomic pens. To do this, she will likely use a market penetration
pricing strategy.
10. For market penetration pricing to work, the product or service must be perceived as breaking new ground in some way.
11. A pricing strategy and a pricing tactic are essentially the same thing.
12. Coupons may annoy, alienate, and confuse consumers and therefore do little to increase store loyalty.
13. Kristina sells sports equipment and wants to get customers into her store. She knows from past experience that sales generate customer traffic,
particularly when she puts children’s baseball equipment on sale. Kristina may consider a leader pricing strategy.
14. Price lining is setting a price floor and a price ceiling for a line of products and then setting price points in between to represent differences in
quality.
15. Slotting allowances are used to get retailers to feature a manufacturer’s product in their advertising and promotional efforts.
16. The expression “3/10, n/30” means that a business must pay 3 percent of the total invoice amount in 10 days, with the remainder due in 30 days.
17. A noncumulative quantity discount usually involves several transactions.
18. Firm A has set very low prices for its products in an attempt to drive its competitor, Firm B, out of business. This is known as monopolistic pricing.
19. Proving that a company has engaged in the deceptive bait-and-switch practice is easy.
20. The Robinson-Patman Act does not apply to end consumers, at which point many forms of price discrimination occur.
Multiple Choice Questions
21. Because market and operating conditions are different in each target market
22. A weakness associated with cost-based pricing methods is that they
23. Compared with other methods used to set prices, _______ pricing is relatively simple.
24. Cost-based pricing assumes that costs
25. Yvonne estimates the average cost of her floral arrangements is $14 regardless of whether she is making 5 or 20 arrangements that day. She adds a
standard markup to the $14 estimate to determine her price. Yvonne is using a(n) _______ pricing method.
26. Firms using a(n) _______ pricing method set their prices relative to what other firms are charging.
27. In determining the price for his company’s new photo printer, Raymond is assessing the total cost of owning his printer as compared to alternative
products available in the market. Raymond is using _______ pricing.
28. When Greenbelt Construction Company began building houses in a large subdivision with many other builders, the company priced its homes
slightly higher than its competitors and promoted the added quality features found in Greenbelt’s homes. Greenbelt was using a(n) _______ pricing
strategy.
29. Value-based pricing methods include approaches to setting prices that focus on the overall value of the product offering
30. The improvement value method and the cost of ownership method are two approaches for setting prices that are _______ methods.
31. In determining the price of his company’s new small-business accounting software, Richard is assessing how much better his company’s software is
as compared to alternative products available in the market. Richard is using _______ pricing.
32. Each generation of cell phones has provided greater clarity, range, security, and multifunctionality. If marketers of cell phones use these features as
a basis for pricing, they would be using _______ pricing.
33. The pricing method that considers what consumers may be willing to pay for a particular product based on the value received over the product’s
entire lifetime is the _______ pricing method.
34. Milton owns a lawncare business. From experience, Milton has found that John Deere equipment lasts almost twice as long as competitors’
machines. For John Deere, Milton’s perception about its products makes _______ pricing a logical choice.
35. One of the difficulties associated with value-based pricing is that
36. Value-based pricing can be difficult to implement because
37. An everyday low pricing strategy stresses the continuity of retail prices
38. Everyday low pricing (EDLP) provides value to consumers by
39. Dan is especially price sensitive. He has been known to line up on “Black Friday” (the day after Thanksgiving) at 4 a.m. to be among the first to buy
sale items. Dan would likely respond to a _______ pricing strategy.
40. When Walmart communicates to consumers that, for any given group of often-purchased items, its prices will tend to be lower than that of any other
competitor, Walmart is exhibiting what type of pricing strategy?
41. In a(n) _______ pricing strategy, marketers rely on the promotion of sales, during which prices are temporarily reduced to encourage purchases.
Feedback: High/low pricing strategies adopt a regular, higher price and then occasionally offer lower sales prices to encourage purchases.
42. It is important to Joanne to get value for her money, but she does not want to spend time comparison shopping. Joanne will likely respond to
_______ pricing, but not to _______ pricing.
out which stores have which items on sale.
43. What makes a high/low pricing strategy appealing to sellers?
44. A reference price is
45. In determining the price for his company’s new pocket digital camera, Matt determines what consumers consider the regular or original price for
similar cameras available in the market. Matt is assessing the influence of __________ on pricing strategy.
46. Developing pricing strategies for __________ is one of the most challenging tasks a manager can undertake.
47. Pricing _______ products is especially challenging because little or nothing is known about consumers’ perceptions of its value.
48. Charging a relatively high price for new and innovative products to those consumers most willing and able to pay the high price is called price
49. Price skimming focuses on selling products to __________ and __________ in the consumer adoption process model.
50. When Burroughs Wellcome introduced the first anti-AIDS drugs, it initially set the price at $10,000 for a year’s supply. Burroughs Wellcome was
probably pursuing a(n) __________ pricing strategy.
51. For marketers using a price skimming strategy, once the initial demand is met for new and innovative products, they will likely
52. When Apple introduced the iPhone—a combination phone, MP3 player, and Internet access device—in 2007, it was priced at $499, considerably
higher than either the iPod or competing cell phones. Hoping to attract innovators and early adopters, Apple was most likely pursuing a __________
pricing strategy.
53. For a price skimming strategy to work, the product or service must
54. One reason marketers of new, innovative products often start out with a price skimming strategy rather than a market penetration strategy is that
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55. What is one of the drawbacks of using a price skimming strategy?
56. With a __________ pricing strategy, marketers set a low initial price for the introduction of a new product or service.
57. Mario is the first retailer in town to sell games for Sony’s latest version of its PlayStation gaming console. Mario wants to quickly capture as much
of the market for the new games as possible. Mario will likely use a __________ pricing strategy.
58. The major objectives associated with a market penetration pricing strategy are to
59. The __________ occurs when unit cost drops as the quantity sold increases.
60. Production of the DeLorean car, made famous in the film Back to the Future, never got above 25,000 units during its lifetime. Automobile industry
analysts estimate that production of this car needed to reach around 300,000 units to achieve the __________, which refers to a decrease in unit cost as
product volume increases.
61. If a market penetration pricing strategy results in lower per-unit cost, competitors might be discouraged from entering the market because
62. Marlie designs and manufactures specialty furniture. She has a number of unique products but can only produce in limited quantities. Marlie will
probably not use a market penetration strategy because
64. The saying “leaving money on the table” is associated with
65. A pricing strategy is
66. A pricing tactic is
67. Generally, a _______ represents either a short-term response to a competitive threat or a broadly accepted method of calculating a final price for the
customer that is short term in nature.
68. Retailers use _______ to get rid of slow-moving or obsolete merchandise.
69. The most common form of a quantity discount for consumers is a
70. One of the benefits of offering a size discount to consumers is they will purchase more of a marketer’s product and
71. Price reductions offered on products and services to stimulate demand during off-peak seasons are referred to as