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112. Scenario 20.2
Use the following to answer the questions.
Glenwood Pet Hospital is considering implementing a new pricing strategy for its veterinarian services. After reviewing
the previous three years' revenue, Glenwood finds that most of its customers bring their pets in for the required annual
vaccinations and then only if the animal is ill. Glenwood's objective is to generate more income per customer on an annual
basis. The hospital has previously priced its services by charging a flat fee for the office visit, a fee for each vaccine, and a
fee for each type of examination beyond the basic office visit. Most customers pay the flat office fee and a fee for a rabies
vaccine. Glenwood is now considering a new plan where the pet owner would pay one fee that would cover an office visit,
the required rabies vaccine, and additional vaccines that prevent heartworm, kennel-cough, and fleas. Glenwood hopes to
encourage the pet owners to view their pet's health as part of a prevention program, rather than a one-time annual visit.
Refer to Scenario 20.2. Glenwood has decided that it is going to offer a special package offer if the prevention plan is
purchased within the first 30 days of each year's time for vaccinations. This type of pricing strategy would be an example
of
a.
customary pricing.
b.
secondary-market pricing.
c.
introductory pricing.
d.
periodic discounting.
e.
random discounting.
113. Scenario 20.2
Use the following to answer the questions.
Glenwood Pet Hospital is considering implementing a new pricing strategy for its veterinarian services. After reviewing
the previous three years' revenue, Glenwood finds that most of its customers bring their pets in for the required annual
vaccinations and then only if the animal is ill. Glenwood's objective is to generate more income per customer on an annual
basis. The hospital has previously priced its services by charging a flat fee for the office visit, a fee for each vaccine, and a
fee for each type of examination beyond the basic office visit. Most customers pay the flat office fee and a fee for a rabies
vaccine. Glenwood is now considering a new plan where the pet owner would pay one fee that would cover an office visit,
the required rabies vaccine, and additional vaccines that prevent heartworm, kennel-cough, and fleas. Glenwood hopes to
encourage the pet owners to view their pet's health as part of a prevention program, rather than a one-time annual visit.
Refer to Scenario 20.2. Glenwood's closest competitor, The Hearthstone Pet Hospital, currently charges $60 for each basic
office visit. If Glenwood were to price its basic office visit at $45, it would most likely be employing which of the
following?
a.
customary pricing.
b.
penetration pricing.
c.
prestige pricing.
d.
price skimming.
e.
cost-based pricing.
114. Scenario 20.2
Use the following to answer the questions.
Glenwood Pet Hospital is considering implementing a new pricing strategy for its veterinarian services. After reviewing
the previous three years' revenue, Glenwood finds that most of its customers bring their pets in for the required annual
vaccinations and then only if the animal is ill. Glenwood's objective is to generate more income per customer on an annual
basis. The hospital has previously priced its services by charging a flat fee for the office visit, a fee for each vaccine, and a
fee for each type of examination beyond the basic office visit. Most customers pay the flat office fee and a fee for a rabies
vaccine. Glenwood is now considering a new plan where the pet owner would pay one fee that would cover an office visit,
the required rabies vaccine, and additional vaccines that prevent heartworm, kennel-cough, and fleas. Glenwood hopes to
encourage the pet owners to view their pet's health as part of a prevention program, rather than a one-time annual visit.
Refer to Scenario 20.2. Glenwood is considering a markup pricing basis, with the cost for office visit plus vaccines at $45.
If Glenwood were to add a markup of 33.3 percent of the costs, its price would be ____.
a.
$79
b.
$65
c.
$55
d.
$78
e.
$60
115. The six stages of setting prices should always be followed if prices are to be set correctly.
a.
True
b.
False
116. A marketer uses only one pricing objective to avoid organizational confusion.
a.
True
b.
False
117. Pricing objectives should be considered overall goals to aid the organization in its long-range plans.
a.
True
b.
False
118. The objective of profit maximization is rarely operational because its achievement is difficult to measure.
a.
True
b.
False
119. The objective of maintaining or increasing market share depends on growth in industry sales.
a.
True
b.
False
120. The use of market share as a pricing objective oversimplifies the value of price in contributing to profits.
a.
True
b.
False
121. The role played by attitudes toward price in the overall evaluation of the marketing mix is a minor concern in
identifying the target market.
a.
True
b.
False
122. Knowing the target market's evaluation of price allows the marketer to know how much emphasis to place on price
and how to price a product relative to competition.
a.
True
b.
False
123. The price of a hotel room is more important to a business traveler than to a tourist.
a.
True
b.
False
124. The importance of price depends on the type of product, the type of target market, and the purchase situation.
a.
True
b.
False
125. A marketer is usually in a better position to establish prices when it knows the prices charged for competing brands.
a.
True
b.
False
126. Some stores employ comparison shoppers to learn what prices their competitors are charging.
a.
True
b.
False
127. It is usually easy to obtain an accurate price list for a competitor's products.
a.
True
b.
False
128. Marketers that evaluate competitors' prices do so to set their own prices slightly below those of competitors.
a.
True
b.
False
129. Cost-based pricing strategies result in a percentage being added to the cost of the product.
a.
True
b.
False
130. Cost-based pricing results in a high price when demand is high and a low price when demand is low.
a.
True
b.
False
131. One pitfall of cost-plus pricing for the buyer is that the seller may increase costs to establish a larger profit base.
a.
True
b.
False
132. Cost-plus pricing is popular in periods of rapid inflation.
a.
True
b.
False
133. Markup pricing is not used often by marketers because establishing a percentage markup greatly increases the
complexity of the decision-making process.
a.
True
b.
False
134. Markup can be stated as a percentage of the cost or as a percentage of the selling price.
a.
True
b.
False
135. A major reason why retailers use markup pricing is that it is convenient.
a.
True
b.
False
136. The effectiveness of demand-based pricing often depends on a marketer's ability to determine all the costs associated
with the product.
a.
True
b.
False
137. Demand-based pricing strategies are easy to use.
a.
True
b.
False
138. A firm that considers costs and revenue secondary to competitors' prices when setting its own prices is using a
competition-based pricing strategy.
a.
True
b.
False
139. The government frequently uses competition-based pricing in granting defense contracts.
a.
True
b.
False
140. Competition-based pricing is important if competing products are almost homogeneous or if price is the key variable
in the marketing strategy.
a.
True
b.
False
141. A pricing strategy is a course of action designed to achieve pricing and marketing objectives.
a.
True
b.
False
142. Differential pricing means different buyers pay different prices for the same quality and quantity of product.
a.
True
b.
False
143. Differential pricing is effective mainly when focusing on only one market segment.
a.
True
b.
False
144. Grocery stores use negotiated pricing strategies.
a.
True
b.
False
145. An early-bird special offered by a restaurant during off-peak hours is an example of the secondary-market pricing
strategy.
a.
True
b.
False
146. Periodic discounting is often predictable so consumers wait to make purchases until they can benefit from the price
reductions.
a.
True
b.
False
147. Random discounting means discounting various products on a systematic basis.
a.
True
b.
False
148. Two types of new-product pricing are price skimming and product-line pricing.
a.
True
b.
False
149. Penetration pricing and price skimming of the market are two types of new-product pricing.
a.
True
b.
False
150. Price skimming is designed to yield maximum unit sales volume.
a.
True
b.
False
151. The use of price skimming discourages competitors from entering a market.
a.
True
b.
False
152. Penetration pricing is one new-product pricing approach that provides the most flexible introductory price.
a.
True
b.
False
153. A company wanting to maximize profits from its new product would use product-line pricing.
a.
True
b.
False
154. Captive pricing, premium pricing, bait pricing, and price lining are all strategies aimed at maximizing the profits of
an entire product line rather than an individual product.
a.
True
b.
False
155. Grocery stores that position their less expensive, private brands next to more expensive, well-known manufacturer
brands on the shelf are using the concept of reference pricing.
a.
True
b.
False
156. A psychological price is designed to encourage purchases on the basis of rational response rather than on the basis of
emotional reactions.
a.
True
b.
False
157. In some cases, prices are assigned to goods on the basis of nothing more than custom.
a.
True
b.
False
158. Prestige pricing is used when a higher price is consistent with buyers' attitudes toward the quality or image of a
product.
a.
True
b.
False
159. A price-leader approach is a pricing approach most often used in supermarkets to attract consumers by giving them
special low prices on a few items.
a.
True
b.
False
160. The local florist advertises a discount on arrangements during the month of April because the anniversary of the
store's opening is in April. This is an example of special-event pricing.
a.
True
b.
False
161. The way that pricing is used in the marketing mix will influence the determination of the final price.
a.
True
b.
False
162. You are head of sales and marketing for your firm and you are meeting with the CEO to establish pricing objectives
for the upcoming product year.
Which of the following factors are you going to consider as you establish your firm’s pricing objectives?
a.
Consumer advocacy groups’ concerns
b.
Sales reps compensation packages
c.
Competitor complaints
d.
The firm’s survival
e.
Dissident shareholders’ complaints
163. You are a brand manager for a large chain of grocery stores. You have been working overtime for the last two weeks
to prepare for your pricing objectives meeting with the head of sales and marketing. You walk into the meeting with a
high degree of confidence in the strategy that you have for setting the pricing objectives for your brand category for the
upcoming year. You are speechless when the marketing head tells you that no changes in the pricing objectives will be
made for your brand category. He says he believes it is most prudent to leave the existing pricing objectives as they are for
the upcoming year.
Which of the following statements is the best explanation for the marketing head’s decision to leave the existing pricing
objectives in place with no change?
a.
A status quo pricing objective can reduce a firm’s risks by helping stabilize demand for its products.
b.
The company intends to focus on product quality instead of pricing to win market share.
c.
The company expects its market share to increase if it leaves its pricing objectives the same.
d.
Profit maximization is not an objective in the upcoming year.
e.
The company is not concerned about cash flow.
164. You are the head of pricing strategy for your firm and you are very excited about a new point-of-sale system that has
just been installed in all your firm’s retail outlets. The system is a state-of-the-art, real-time information system that
captures the details of every sale made in your retail outlets. Now, you will have up-to-the-minute data on sales volume
trends and performances for your entire product line. You plan to use this data to set prices based on these volume trends.
Which of the following basis for pricing are you intending to use?
a.
Markup pricing
b.
Competition-based pricing
c.
Demand-based pricing
d.
Cost-based pricing
e.
Cost-plus pricing
165. You are the marketing manager for a multi-state auto dealership in the Southeast United States. It is that time of year
when your fleet of autos goes through a major model year change. You are putting the final touches on your pricing
strategy to facilitate this change in your inventory of autos.
Which of the following pricing strategies will you use to facilitate this model year change?
a.
Negotiated pricing
b.
Secondary-market pricing
c.
Differential pricing
d.
Random discounting
e.
Periodic discounting
166. Which of the following is true about the target market’s evaluation of price?
a.
The importance of price depends on the unemployment rate.
b.
The importance of price depends on the type of product.
c.
The importance of price does not depend on the target market.
d.
The target market’s perception of value combines a product’s price and size attributes.
e.
The target market’s perception of value combines a product’s price and availability attributes.
167. Understanding the consumers’ expectations of _____________, helps a marketer correctly assess the target market’s
evaluation of price.
a.
value and quality
b.
reverse distribution
c.
low prices
d.
price rebates
e.
technical assistance
168. Which of the following is true about the evaluation of competitors’ prices?
a.
This is done in stage three of the price setting process.
b.
This is done in stage four of the price setting process.
c.
This is done in stage five of the price setting process.
d.
This is done in stage six of the price setting process.
e.
This is done in stage two of the price setting process.
169. Information about competitors’ prices ________________________.
a.
cannot be uncovered during marketing research
b.
is not a consideration in the price setting process
c.
is essential in an industry dominated by non-price competition
d.
is often a closely guarded secret
e.
is readily available to all industry participants
170. Which of the following basis for pricing is most commonly used by retailers?
a.
Negotiated pricing
b.
Markup pricing
c.
Demand-based pricing
d.
Cost-plus pricing
e.
Differential pricing
171. ____________ is setting the price lower than competing brands in order to enter a market and quickly gain a
significant share of the market.
a.
Price skimming
b.
Premium pricing
c.
Penetration pricing
d.
Bait pricing
e.
Captive pricing
172. Which of the following statements is true about the determination of a specific price for a product?
a.
Price elasticity is not relevant when determining a specific price.
b.
It occurs in the fifth stage of the price setting process.
c.
Only fixed costs should be considered when setting the specific price.
d.
When no government controls exist, pricing is a flexible way to adjust the marketing mix.
e.
Demand is not a consideration when establishing a specific price.
173. _____________ is pricing a product at a moderate level and positioning it next to a more expensive model or brand.
a.
Reference pricing
b.
Odd-even pricing
c.
Customary pricing
d.
Prestige pricing
e.
Professional pricing
