E. zone pricing.
72. Some consumers make it a point to go shopping the day after Christmas to stock up on discounted wrapping paper and bows for the following year.
These consumers are
73. Retailers use _____ because they believe their use will induce customers to try new products, convert first-time users to regular users, increase
purchases, and protect market share.
74. Mary decided to purchase an electronic toothbrush priced at $100 because of a special offer from the manufacturer. By sending proof of purchase
and the receipt to the manufacturer, she could receive a $40 check in return, making the final price $60. This pricing tactic is known as a
75. When a new product is not being sold at the rate originally forecasted, the retailer may reduce the price in order to reduce the inventory of the
product. This reduction is known as a
76. Many stores now e-mail codes to their customers that can be used on their websites or printed and brought into the store to receive discounts for
products purchased. In this instance, the customer is using a _______ to receive the discount.
77. What is the difference between a coupon and a rebate?
78. One important reason manufacturers like rebates is that
79. In which of the following tactics does a consumer pay a fee to purchase the right to use a product for a specific amount of time?
80. Cosmetic manufacturers that sell shampoo and conditioner together as one package at a lower price rather than selling each item separately are using
81. Supermarkets often offer great deals on milk or eggs to get customers into their stores, knowing that many customers will also purchase items that
have higher markups for the store. These supermarkets are using a _______ pricing tactic.
82. When Toyota introduced its Scion line of cars, the lowest-price model was listed for $15,000 while the highest-priced model was listed for $21,000,
with two other list prices in between. Each price point represented distinct differences in the features and quality of the cars. Toyota used a ______
pricing approach.
83. When marketers establish a price floor and a price ceiling for an entire line of similar products and then set price points in between for differences in
quality among the products, they are using a _______ pricing approach.
84. All of the following are common business-to-business pricing tactics except
85. The local furniture store will purchase outdoor furniture only during the winter months because the manufacturer offers a better price to the furniture
store. This type of pricing tactic is known as a
86. When Toro offers its lawn mower dealers an additional discount if they place their orders and receive delivery before April 1, prior to the lawn
mowing season, Toro is offering a
87. The primary reasons manufacturers offer seasonal discounts to retailers are to more easily plan production schedules and to
88. General Mills offers three sizes of its popular cereal Cheerios: 10-, 14-, and 18-ounce boxes, and they are priced at approximately $2.99, $3.99, and
$4.49, respectively. The company employs this tactic to
89. Manufacturers use cash discounts primarily because it allows them to benefit from
90. Fees paid to retailers simply to get new products into stores or to gain more or better shelf space for their products are called _______ allowances.
91. A noncumulative B2B quantity discount is
92. Clark Manufactured Housing Company charges $500 for deliveries within 50 miles and $800 for deliveries 51 to 100 miles away from their factory.
The company is using a _______ pricing tactic.
93. The advantage of zone pricing to the seller is the shipping charges typically
94. Price advertisements should never
95. For marketers to advertise a price as their __________ price, the Better Business Bureau recommends that at least 50 percent of the sales of a
product occur at that price.
96. Marketers advertising an artificially high “regular price” are unethically attempting to influence consumers’ __________ perceptions.
97. A reference price might be considered deceptive if
98. __________ pricing tactics lower the price of a product below the store’s cost.
99. In a __________ pricing tactic, sellers advertise very low prices and then aggressively pressure customers to purchase higher-priced versions of the
product advertised with the low price.
100. Bill desperately needed tires for his car, and he found an ad with an incredibly low price. When he got there, he found out that those tires had
supposedly sold out, and he was pressured into buying tires that were more expensive than he wanted. Bill found out later that Marcelo had the same
experience at the store a few weeks earlier. It’s quite possible that both Bill and Marcelo had become the victim of a deceptive pricing tactic known as
101. If a telecommunications company drastically cuts the price for cellular phone service in order to eliminate local competitors, the company could be
charged with
102. A major airline sells an aggressively low-priced ticket compared to a new low-fare airline which is trying to enter the market. The airline may be
accused of engaging in the unethical practice of
103. B2B quantity discounts are legal if
104. The Clayton Act and the Robinson-Patman Act forbid certain types of
105. When a firm colludes with other firms to control prices, it is engaging in
106. __________ price fixing occurs when competitors collude to control prices, and __________ price fixing occurs within a marketing channel to
control prices passed on to consumers.
107. When members of the marketing channel collude to control the prices passed on to consumers, they are engaging in
108. Several airlines have agreed to charge the same fare for a single route. The airlines are using
15–26
109. It is the responsibility of __________ to determine the ethical approach to setting prices so consumers find value and the firm can make a profit.
110. If all three grocery stores in town decide to charge the same price for a gallon of milk, what type of pricing tactic is being used?
prices.
Essay Questions
111. John Deere farming equipment has been around for over a century and is known for its durability. Its equipment is usually priced higher than
competitors’ offerings, but over the long run it will eventually cost less to own than the competition. What type of value-based pricing method would be
appropriate for John Deere, and why?
112. Explain the key difference among the three different pricing methods a firm might choose.
113. Explain the difference between the two approaches to value-based pricing methods.
114. Harry’s Industrial Supply Company has always used cost-based pricing. Harry’s son-in-law is joining the business and recommends they change.
Harry enumerates the advantages of cost-based pricing, while his son-in-law points out the disadvantages. What will each of them say?
115. Harry’s Industrial Supply Company has always used cost-based pricing. Harry‘s son-in-law is joining the business and recommends they change to
value-based pricing. Harry enumerates the disadvantages of value-based pricing, while his son-in-law points out the advantages. What will each of them
say?
116. What does an everyday low pricing strategy convey to consumers?
117. Explain the concept of the high/low strategy. Why is this an attractive strategy to marketers?
118. Almost every time a new-to-the-market electronic device (iPods, flat-screen TVs, digital cameras, PlayStation, etc.) has been introduced, the
marketer has used a price skimming strategy. Why?
119. Why do marketers of new and innovative products often start out with a price skimming strategy rather than a penetration strategy?
120. Ryan is the only retailer in his market selling a new, ergonomically designed pen. What are the objectives of using a penetration pricing strategy?
Why would Ryan consider using a market penetration pricing strategy?
121. Why would the manufacturer of custom-made yachts not use a market penetration strategy?
122. Why would a price skimming strategy probably not work for a “me-too” product, something very similar to a new-to-the-market product?
123. What is the experience curve effect? What pricing strategy is it associated with?
124. Most automobile manufacturers appear to use price lining. What is price lining and how does it relate to value-based pricing for automobile
manufacturers?
125. Marketers know that coupons might not result in a net increase in sales, yet they continue to issue them. Why do marketers continue to use
coupons?
126. What is the added benefit to a manufacturer of using rebates rather than coupons?
127. Wilbur sells homemade hot dogs from his stand next to campus. Students flock to his stand to buy his hot dogs, but rarely anything else. What type
of pricing strategy could Wilbur use to improve his sales? Create an example.
128. What is the advantage to a business of price bundling? What is the advantage to a consumer?
129. What are slotting allowances? Why do some marketers consider them unfair?
130. Explain the meaning of “2/10, n/30.”
15–30
131. Describe when each of the following five business-to-business pricing tactics would be most appropriate:
132. How does a loss-leader strategy work? What is the danger of using this strategy?
the low-priced item, you lose money. This pricing practice is illegal in some states and considered a form of bait and switch.
133. At Ben’s college, the local Dunkin’ Donuts gives a 10 percent discount to students. Is this price discrimination? Why or why not?
134. Why do manufacturers set manufacturer’s suggested retail prices (MSRP)? How do they enforce this practice? Is it legal?
135. What is predatory pricing? What federal acts make it illegal? How are consumers hurt by predatory pricing?
Category # of Questions
AACSB: Analytical Thinking 84
AACSB: Ethics 24
15–31
AACSB: Knowledge Application 28
Accessibility: Keyboard Navigation 110
Blooms: Analyze 2
Blooms: Apply 32
Blooms: Remember 28
Blooms: Understand 73
Difficulty: 1 Easy 30
Difficulty: 2 Medium 72
Difficulty: 3 Hard 33
Learning Objective: 15-01 Identify three methods that firms use to set their prices. 25
Learning Objective: 15-02 Describe the difference between an everyday low pricing (EDLP) strategy and a high/low strategy. 14
Learning Objective: 15-03 Explain the difference between a price skimming and a market penetration pricing strategy. 28
Learning Objective: 15-04 Identify tactics used to reduce prices to consumers. 29
Learning Objective: 15-05 Identify tactics used to reduce prices to businesses. 15
Learning Objective: 15-06 List the pricing practices that are illegal or unethical. 24
Topic: Ethical Issues in Pricing 24
Topic: Pricing Strategy 71
Topic: Setting Prices 40