1. Describe the six steps of the process that marketers can use to establish prices.
2. What are some of the objectives a firm might hope to achieve when setting prices?
3. How are pricing objectives similar to a corporation’s overall goals? How are they different?
4. How can a marketer use product quality as a pricing objective to influence purchasing decisions?
5. How might a marketer find information about a competitor’s prices? Why is this information important?
6. Explain the difference between cost-plus and markup pricing.
7. Describe, compare, and contrast the three major bases for setting prices.
8. Explain differential pricing and then describe the four major types.
9. Compare and contrast price skimming and penetration pricing.
10. Identify and describe the four types of product-line pricing.
11. Identify and describe seven types of psychological pricing.
12. What is bundle pricing? Give three examples, each one from a different industry.
13. Under what conditions would a marketer most likely use a price leader strategy?
14. What are some issues to consider when determining a specific price?
15. When establishing prices, a marketer’s first step is to
a.
determine demand.
b.
develop pricing objectives.
c.
select a pricing policy.
d.
evaluate competitors’ prices.
e.
determine a pricing method.
MARK.PRID.16.20.01 – LO: 20–01
United States – BUSPROG: Analytic
United States – AK – DISC: Pricing
A-Head: Development Of Pricing Objectives
Bloom’s: Knowledge
16. Marketers must take steps to make sure that the pricing objectives they set are consistent with the organization’s ____
objectives and ____ objectives.
a.
advertising; marketing
b.
overall; marketing
c.
marketing; promotional
d.
overall; promotional
e.
overall; revenue
MARK.PRID.16.20.01 – LO: 20–01
United States – BUSPROG: Analytic
United States – AK – DISC: Pricing
A-Head: Development Of Pricing Objectives
Bloom’s: Knowledge
17. If Wrigley set its pricing objective as attaining 38 percent of the chewing gum market, what else would be needed to
make this a true pricing objective?
a.
Statement of demand elasticities
b.
Identification of cost structure
c.
Breakeven analysis
d.
Identification of a time period for accomplishment
e.
Establishment of a subsequent pricing policy
MARK.PRID.16.20.01 – LO: 20–01
United States – BUSPROG: Analytic
A-Head: Determination Of A Specific Price
Bloom’s: Knowledge
18. Which of the following is a requirement for setting pricing objectives?
a.
b.
c.
d.
e.
e
Moderate
MARK.PRID.16.20.01 – LO: 20–01
United States – BUSPROG: Analytic
United States – AK – DISC: Pricing
A-Head: Development Of Pricing Objectives
Bloom’s: Knowledge
19. The Office Place is an office supplies company who has just adjusted its price levels so that it can increase its sales
volume to match its expenses. The Office Place is most likely employing a(n) ____ objective.
a.
market share
b.
cash flow
c.
return on investment
d.
survival
e.
profit
Moderate
MARK.PRID.16.20.01 – LO: 20–01
United States – BUSPROG: Analytic
United States – AK – DISC: Pricing
A-Head: Development Of Pricing Objectives
Bloom’s: Application
20. Running a big sale in order to generate enough cash flow to pay creditors is typical in a situation in which a firm’s
primary pricing objective is
a.
status quo.
b.
profit.
c.
survival.
d.
market share.
e.
recovery.
Moderate
MARK.PRID.16.20.01 – LO: 20–01
United States – AK – DISC: Pricing
A-Head: Development Of Pricing Objectives
Bloom’s: Application
21. Westin Hotels, Inc. has an objective of achieving a 25 percent return from its overall sales. This is an example of a
____ pricing objective.
a.
market share
b.
cash flow
c.
return on investment
d.
profit
e.
status quo
Moderate
MARK.PRID.16.20.01 – LO: 20–01
United States – BUSPROG: Analytic
United States – AK – DISC: Pricing
A-Head: Development Of Pricing Objectives
Bloom’s: Application
22. Most pricing objectives based on ____ are achieved by trial and error because not all cost and revenue data are
available when prices are set.
a.
market share
b.
cash flow
c.
return on investment
d.
survival
e.
profit
c
Moderate
MARK.PRID.16.20.01 – LO: 20–01
United States – BUSPROG: Analytic
United States – AK – DISC: Pricing
A-Head: Development Of Pricing Objectives
Bloom’s: Knowledge
23. Maintaining or increasing market share
a.
can be achieved even if industry sales are flat or decreasing.
b.
is an infrequently used pricing objective in most industries.
c.
depends upon the overall growth of the total industry.
d.
is a profit-related objective based on price.
e.
is directly tied to leading an industry in product quality.
a
Moderate
United States – BUSPROG: Analytic
United States – AK – DISC: Pricing
A-Head: Development Of Pricing Objectives
Bloom’s: Comprehension
24. Nabisco is considering two pricing objectives. The first is to sell one out of every three crackers consumed in the
world, an objective based on _______; the second is to meet, but not beat, competitor’s prices of cookie products, which
is a _____ objective.
a.
cash flow; market share
b.
market share; cash flow
c.
survival; status quo
d.
market share; survival
e.
market share; status quo.
e
Moderate
MARK.PRID.16.20.01 – LO: 20–01
United States – BUSPROG: Analytic
United States – AK – DISC: Pricing
A-Head: Development Of Pricing Objectives
Bloom’s: Application
25. A market share objective
a.
is not recommended when sales for the total industry are declining.
b.
is not especially useful when sales for the total industry are increasing.
c.
is not especially useful when sales for the total industry are flat.
d.
is useful primarily in an industry where total sales are increasing.
e.
can be used effectively whether total industry sales are rising or falling.
e
Moderate
MARK.PRID.16.20.01 – LO: 20–01
United States – BUSPROG: Analytic
United States – AK – DISC: Pricing
A-Head: Development Of Pricing Objectives
Bloom’s: Knowledge
26. Under Armour is establishing a ______ pricing objective to maintain or increase its product’s sales in relation to total
industry sales.
a.
Return on investment
b.
Survival
c.
Product quality
d.
Market share
e.
Status quo
MARK.PRID.16.20.01 – LO: 20–01
United States – BUSPROG: Analytic
United States – AK – DISC: Pricing
A-Head: Development Of Pricing Objectives
Bloom’s: Knowledge
27. Which of the following pricing objectives sets prices to recover cash as quickly as possible?
a.
Market share
b.
Profit
c.
Cash flow
d.
Return on investment
e.
Product quality
c
Moderate
MARK.PRID.16.20.01 – LO: 20–01
United States – BUSPROG: Analytic
United States – AK – DISC: Pricing
A-Head: Development Of Pricing Objectives
Bloom’s: Knowledge
28. A marketer is most likely to set prices according to a cash-flow objective when a
a.
trial-and-error approach to the market is acceptable.
b.
certain market share must be maintained.
c.
quick return on investment is desired.
d.
higher price is acceptable to the firm.
e.
product is expected to have a long life cycle.
c
Moderate
MARK.PRID.16.20.01 – LO: 20–01
United States – BUSPROG: Analytic
United States – AK – DISC: Pricing
A-Head: Development Of Pricing Objectives
Bloom’s: Knowledge
29. Gambrell Designs thinks its new product, the Automatic Dog Walker, will have a short product life cycle; therefore,
its marketing department sets its primary pricing objective as
a.
market share.
b.
cash flow.
c.
profit.
d.
product quality.
e.
status quo.
Easy
MARK.PRID.16.20.01 – LO: 20–01
United States – BUSPROG: Analytic
United States – AK – DISC: Pricing
A-Head: Development Of Pricing Objectives
Bloom’s: Comprehension
30. Maintaining a certain market share, meeting competitors’ prices, maintaining a favorable image, and achieving price
stability are all associated with a ____ pricing objective.
a.
product quality
b.
market share
c.
survival
d.
profit
e.
status quo
e
Moderate
MARK.PRID.16.20.01 – LO: 20–01
United States – BUSPROG: Analytic
United States – AK – DISC: Pricing
A-Head: Development Of Pricing Objectives
Bloom’s: Knowledge
31. Which pricing objective de-emphasizes price and can lead to a climate of nonprice competition in an industry?
a.
Status quo
b.
Return on investment
c.
Market share
d.
Survival
e.
Cash flow
a
Moderate
MARK.PRID.16.20.01 – LO: 20–01
United States – BUSPROG: Analytic
United States – AK – DISC: International Perspectives
A-Head: Development Of Pricing Objectives
Bloom’s: Comprehension
32. What type of pricing objective would an organization use if it were in a favorable position and desired nothing more?
a.
Return on investment
b.
Cash flow
c.
Profit
d.
Status quo
e.
Survival
Challenging
MARK.PRID.16.20.01 – LO: 20–01
United States – BUSPROG: Analytic
United States – AK – DISC: Pricing
A-Head: Development Of Pricing Objectives
Bloom’s: Application
33. Which type of pricing objective can reduce a firm’s risk by helping to stabilize demand for its products?
a.
Status quo
b.
Market share
c.
Survival
d.
Cash flow
e.
Return on investment
a
Moderate
MARK.PRID.16.20.01 – LO: 20–01
United States – BUSPROG: Analytic
United States – AK – DISC: Pricing
A-Head: Development Of Pricing Objectives
Bloom’s: Knowledge
34. If an organization sets prices to recover research and development expenses and establish a premium quality image for
its product, it would be using a ____ pricing objective.
a.
survival
b.
return on investment
c.
market share
d.
product quality
e.
cash flow
Moderate
MARK.PRID.16.20.01 – LO: 20–01
United States – BUSPROG: Analytic
United States – AK – DISC: Pricing
A-Head: Development Of Pricing Objectives
Bloom’s: Knowledge
35. The pricing of Clinique makeup considerably higher than brands such as Cover Girl, Revlon, and Maybelline is used
to communicate ____, which is the company’s primary pricing objective.
a.
market share
b.
product quality
c.
status quo
d.
profitability
e.
cash flow
Moderate
MARK.PRID.16.20.01 – LO: 20–01
United States – BUSPROG: Analytic
United States – AK – DISC: Pricing
A-Head: Development Of Pricing Objectives
Bloom’s: Knowledge
36. When consumers are making do with less expensive products and shopping more selectively, manufacturers and
retailers must focus on the ____ of their products.
a.
price
b.
quality
c.
availability
d.
value
e.
image
Moderate
MARK.PRID.16.20.02 – LO: 20–02
United States – BUSPROG: Analytic
United States – AK – DISC: Pricing
Bloom’s: Knowledge
37. Kendra has been doing research for a smartphone manufacturing company. She has just been reviewing the results of
several focus groups and has found that for customers, value is a function of the product’s
a.
quality attributes.
b.
price and brand name.
c.
price and durability.
d.
quality and functional attributes.
e.
quality relative to the quality of competing brands.
a
Easy
MARK.PRID.16.20.02 – LO: 20–02
United States – BUSPROG: Analytic
United States – AK – DISC: International Perspectives
A-Head: Assessment Of The Target Market’s Evaluation Of Price
Bloom’s: Knowledge
38. Marketers improve their ability to establish prices appropriately when
a.
there is nonprice competition.
b.
they know prices charged for competing brands.
c.
their products are of better quality than the competition’s.
d.
the main objective is image building.
e.
using psychological pricing.
Moderate
MARK.PRID.16.20.01 – LO: 20–01
United States – BUSPROG: Analytic
United States – AK – DISC: Pricing
A-Head: Development Of Pricing Objectives
Bloom’s: Application
39. Some grocery stores collect data on competitive prices
a.
by calling their competitors.
b.
on a quarterly basis.
c.
through stores’ purchase data.
d.
from their resellers.
e.
by using full-time comparison shoppers.
MARK.PRID.16.20.03 – LO: 20–03
United States – BUSPROG: Analytic
United States – AK – DISC: Pricing
A-Head: Evaluation Of Competitors’ Prices
Bloom’s: Knowledge
40. Marketers at organizations engaged in nonprice competition
a.
are more concerned about knowing competitors’ prices than are marketers in organizations that are engaged in
price competition.
b.
are not concerned about the prices of competing brands.
c.
need competitive price information to make sure that their products are priced at approximately the same level
as the prices of competing brands.
d.
rely on customers to help them gather information regarding the prices of competing brands.
e.
experience high levels of price instability.
MARK.PRID.16.20.03 – LO: 20–03
United States – BUSPROG: Analytic
United States – AK – DISC: Pricing
A-Head: Evaluation Of Competitors’ Prices
Bloom’s: Knowledge
41. Competitors’ prices, along with the marketing variables they emphasize, are determining factors in
a.
the instability of prices in a particular industry.
b.
using markup pricing for consumer goods.
c.
how much marketing research a firm needs to collect.
d.
using differential pricing to demonstrate quality differences.
MARK.PRID.16.20.03 – LO: 20–03
United States – BUSPROG: Analytic
United States – AK – DISC: Pricing
A-Head: Evaluation Of Competitors’ Prices
Bloom’s: Knowledge
e.
how important price will be to customers.
42. The three primary bases for developing prices are
a.
profit, demand, and competition.
b.
supply, demand, and marketing objectives.
c.
demand, competition, and cost.
d.
markup, cost, and cost-plus.
e.
negotiation, periodicity, and randomness.
c
Easy
MARK.PRID.16.20.04 – LO: 20–04
United States – BUSPROG: Analytic
United States – AK – DISC: Pricing
A-Head: Selection Of A Basis For Pricing
Bloom’s: Knowledge
43. When a seller’s costs are usually determined during or after a product is made and then a specified percentage or dollar
amount is added to the cost to establish a price, an organization is using ____ pricing.
a.
markup
b.
demand-based
c.
differential
d.
cost-plus
e.
expensed-based
Moderate
MARK.PRID.16.20.04 – LO: 20–04
United States – BUSPROG: Analytic
United States – AK – DISC: Pricing
A-Head: Selection Of A Basis For Pricing
Bloom’s: Knowledge
44. For custom-made equipment or commercial construction projects, which pricing method is most likely used?
a.
Prestige
b.
Premium
c.
Differential
d.
Return-on-investment
e
Moderate
MARK.PRID.16.20.03 – LO: 20–03
United States – BUSPROG: Analytic
United States – AK – DISC: Pricing
A-Head: Evaluation Of Competitors’ Prices
Bloom’s: Knowledge
e.
Cost-plus
45. Steinway produces concert grand pianos, often using the custom materials and designs desired by a specific customer.
The average price of these pianos runs about $50,000 depending on the exact piano. What type of pricing does Steinway
most likely use for these pianos?
a.
Markup
b.
Competition-based
c.
Cost-plus
d.
Demand-based
e.
Secondary-market
c
Challenging
MARK.PRID.16.20.04 – LO: 20–04
United States – BUSPROG: Analytic
United States – AK – DISC: Pricing
Bloom’s: Application
46. The federal government often uses ____ pricing when it grants defense contracts.
a.
markup
b.
differential
c.
breakeven
d.
cost-plus
e.
competition-based
Moderate
MARK.PRID.16.20.04 – LO: 20–04
United States – BUSPROG: Analytic
United States – AK – DISC: Pricing
A-Head: Selection Of A Basis For Pricing
Bloom’s: Knowledge
47. Wet Seal, a retailer of swimwear, employs a commonly used cost-based pricing method called
a.
value pricing.
b.
cost-plus pricing.
c.
cost discounting.
e
Moderate
MARK.PRID.16.20.04 – LO: 20–04
United States – BUSPROG: Analytic
United States – AK – DISC: Pricing
A-Head: Selection Of A Basis For Pricing
Bloom’s: Comprehension
d.
differential pricing.
e.
markup pricing.
48. Which of the following statements about markup pricing is correct?
a.
The use of similar markups reduces price competition.
b.
Markup pricing is inconvenient to use.
c.
Markup pricing results in a high price when demand is high and a low price when demand is low.
d.
Markup pricing is a demand-based pricing method.
e.
Using markups makes pricing a time-consuming, difficult process.
a
Easy
MARK.PRID.16.20.04 – LO: 20–04
United States – BUSPROG: Analytic
United States – AK – DISC: Pricing
A-Head: Selection Of A Basis For Pricing
Bloom’s: Knowledge
49. Markup is measured either as a percentage of ____ or a percentage of ____.
a.
selling price; cost
b.
cost; profit
c.
revenue; contribution margin
d.
resources used; cost
e.
demand; competition
a
Moderate
MARK.PRID.16.20.04 – LO: 20–04
United States – BUSPROG: Analytic
United States – AK – DISC: Pricing
A-Head: Selection Of A Basis For Pricing
Bloom’s: Knowledge
50. When determining markup as a percentage of cost, divide the markup amount by
a.
price.
b.
cost.
c.
quantity.
d.
revenue.
e
Easy
MARK.PRID.16.20.04 – LO: 20–04
United States – BUSPROG: Analytic
United States – AK – DISC: Pricing
A-Head: Selection Of A Basis For Pricing
Bloom’s: Knowledge
e.
100.
51. A retailer of Real Dry deodorant prices it at $2.00; it costs the retailer $1.40. What is the approximate markup as a
percentage of selling price?
a.
3 percent
b.
14.3 percent
c.
30 percent
d.
70 percent
e.
20 percent
c
Challenging
MARK.PRID.16.20.04 – LO: 20–04
United States – BUSPROG: Analytic
United States – AK – DISC: Pricing
A-Head: Selection Of A Basis For Pricing
Bloom’s: Application
52. Kohl’s pays $16.50 for a six-ounce bottle of cologne and sells it for $25.95. Its markup as a percentage of cost is
approximately ____ percent for this product.
a.
64
b.
36
c.
18
d.
57
e.
45
Challenging
MARK.PRID.16.20.04 – LO: 20–04
United States – BUSPROG: Analytic
United States – AK – DISC: Pricing
A-Head: Selection Of A Basis For Pricing
Bloom’s: Application
53. If a product is priced based on how many or how few people want it at a particular time and place, ____ pricing is
being used.
a.
markup
b.
demand-based
Moderate
MARK.PRID.16.20.04 – LO: 20–04
United States – BUSPROG: Analytic
United States – AK – DISC: International Perspectives
A-Head: Selection Of A Basis For Pricing
Bloom’s: Knowledge
c.
competitive
d.
peak
e.
differential
54. Amtrak is considering two pricing strategies for its service. One is to price its train tickets so that it is less expensive to
travel on weekends than during the week when there is heavy business travel, which illustrates ____ pricing. The second
is to price its train tickets so that the further away the travel date, the greater the discount, which is best described as ___
a.
demand-based; secondary market pricing.
b.
demand-based; differential pricing.
c.
demand-based; periodic discounting.
d.
cost-plus; secondary markup.
e.
cost-plus; periodic discounting.
Challenging
United States – BUSPROG: Analytic
United States – AK – DISC: Pricing
Bloom’s: Application
55. During July and August, Lakewood Links Golf Course, located in South Carolina, offers weekday rates of $13 for a
round of golf with a cart. During the rest of the year, the weekday rates are between $25 and $35. This is an example of
the use of
a.
differential pricing.
b.
incentives.
c.
competition-based pricing.
d.
demand-based pricing.
e.
random discounting.
Challenging
MARK.PRID.16.20.04 – LO: 20–04
United States – BUSPROG: Analytic
United States – AK – DISC: Pricing
A-Head: Selection Of A Basis For Pricing
Bloom’s: Application
Moderate
MARK.PRID.16.20.04 – LO: 20–04
United States – BUSPROG: Analytic
United States – AK – DISC: Pricing
A-Head: Selection Of A Basis For Pricing
Bloom’s: Knowledge