d.
all consumers have homogeneous tastes.
e.
the initial demand is highly inelastic.
78. A penetration pricing strategy is particularly appropriate when demand is
a.
increasing.
b.
highly elastic.
c.
highly inelastic.
d.
decreasing.
e.
inefficient.
79. If Nabisco wants to quickly gain a large market share with its new line of reduced-fat snack crackers, it
should use
a.
penetration pricing.
b.
random discounting.
c.
captive pricing.
d.
price skimming.
e.
everyday low prices.
80. The management at Allied Electronics is having difficulty in raising the introductory price on system
components to cover the increased costs of producing the sensing devices for home security systems.
Apparently, Allied used a(n) ____ strategy in pricing these components.
a.
odd-even
b.
skimming
c.
lining
d.
penetration
e.
psychological
81. Which of the following would be used in setting the price of a new product if considerable competition
is expected?
a.
Psychological pricing
b.
Penetration pricing
c.
Odd-even pricing
d.
Price skimming
e.
Prestige pricing
82. All of the following are pricing strategies used by companies establishing prices of multiple products
within a product line except
a.
premium pricing.
b.
price lining.
c.
captive pricing.
d.
bait pricing.
e.
penetration pricing.
83. Pricing the basic product in a product line low while pricing related items at a higher level is called
a.
premium pricing.
b.
bait pricing.
c.
captive pricing.
d.
price skimming.
e.
price lining.
84. Lexmark sells some of its color printers for about $100, but the refill cartridges cost over $30 each.
Lexmark’s pricing strategy would be best labeled as
a.
bait pricing.
b.
captive pricing.
c.
customary pricing.
d.
price lining.
e.
complementary pricing.
85. A product that has more features than those of its competition, or that is perceived to be of higher
quality, warrants using which type of pricing strategy?
a.
Custom pricing
b.
Special-event pricing
c.
Premium pricing
d.
Price lining
e.
Bait pricing
86. Breyer’s produces a variety of ice cream flavors and lines of varying qualities. The higher quality ice
cream varieties are priced higher than the basic ones. Breyer’s is using ____ to price its ice cream.
a.
captive pricing
b.
price baiting
c.
premium pricing
d.
bait pricing
e.
differential pricing
87. When a company that produces computer printers prices them somewhat low, but the ink required to
operate the printer is priced higher per relative usage, it is using
a.
bait pricing.
b.
a price leader.
c.
penetration pricing.
d.
price lining.
e.
captive pricing.
88. When Gabriella logs on to Dell’s website, she sees a notebook model priced well below $1,000. As she
continues through the site to view the other options, she realizes the first one she saw was the cheapest
model available, but she of course wants more features. Dell is utilizing
a.
bait and switch.
b.
price lining.
c.
captive pricing.
d.
penetration pricing.
e.
bait pricing.
89. When an organization sets a number of prices for selected groups of merchandise, this is commonly
referred to as
a.
prestige pricing.
b.
price lining.
c.
customary pricing.
d.
odd-even pricing.
e.
ethical pricing.
90. The pricing strategy that assumes that demand is relatively inelastic over certain price ranges is called
a.
price lining.
b.
odd-even pricing.
c.
price skimming.
d.
prestige pricing.
e.
customary pricing.
91. When a satellite dish company uses bundling to combine phone, dish, and broadband Internet access
prices, it is attempting to influence a consumer’s perception of price to make a product’s price more
attractive and reduce “sticker shock.” This is an example of using a ____ pricing strategy.
a.
competition-based
b.
cost-based
c.
promotional
d.
competitive
e.
psychological
92. All of the following are psychological techniques except
a.
customary pricing.
b.
prestige pricing.
c.
reference pricing.
d.
odd-even pricing.
e.
price skimming.
93. Reference pricing is
a.
listing the manufacturer’s suggested retail price on the price tag along with the store’s
lower price.
b.
mentioning the price that other retailers charge for the same product on the display for the
product.
c.
using a consumer’s internal perceptions of what the appropriate price should be to help
price a firm’s products.
d.
pricing a product at a moderate level and positioning it next to a more expensive model or
brand.
e.
using prices in advertising so that customers will have a point of reference when they
come to the retail facility.
94. A Macy’s manager designs the casual clothing department such that one of Macy’s private label pairs
of jeans, priced at $24.99, is positioned next to a national brand of jeans, such as Levis, priced at
$39.99. What is the manager attempting to accomplish?
a.
Everyday low prices strategy
b.
Odd-even pricing strategy
c.
Prestige pricing strategy
d.
Special-event pricing strategy
e.
Reference pricing strategy
95. Bundle pricing may be perceived to be of value by customers because
a.
they always pay a lower price per item than they would have if they bought each item
separately.
b.
they prefer buying a combination of bundled products in a single transaction, which saves
time, effort, and perhaps money.
c.
the companies selling the products can sell them at a lower price because their costs of
packaging are lower.
d.
they are purchasing complementary products, which is convenient for them.
e.
they can purchase items that are consumed frequently in larger quantities.
96. When Mia and Shane are planning their honeymoon, their travel agent tells them that if they buy a
special package, their trip to Paris will include meals, tickets to the theater, and a rental car in addition
to airfare and a hotel. This is an example of the use of
a.
multiple-unit pricing.
b.
bundle pricing.
c.
prestige pricing.
d.
price lining.
e.
price packaging.
97. Products such as light bulbs, canned soft drinks, and ice cream sandwiches are usually priced using
______ usually resulting in a ____
a.
multiple-unit pricing; lower per unit price.
b.
reference pricing; lower per unit price.
c.
multiple-unit pricing; more convenient package.
d.
bundle pricing; lower per unit price.
e.
bundle pricing; more convenient package.
98. The decision of Macy’s to use even prices such as $60 for a Ralph Lauren Polo is an application of
____; where ____ prices are often used to _____.
a.
odd-even pricing; even; give a product an upscale or exclusive image.
b.
odd-even pricing; odd; show customers products are priced based on tradition.
c.
prestige; premium; give a product an upscale or exclusive image.
d.
prestige; even; make it easier for consumers to compare.
e.
odd-even; even; facilitate comparison to competitors’ prices.
99. Odd-even pricing is
a.
a cost-based strategy.
b.
competition-based.
c.
a rarely used technique.
d.
a psychological pricing strategy.
e.
a form of unethical pricing.
100. If REVO sets the price for its sunglasses at $240, it is most likely using _____pricing to convey
______.
a.
product-line; prestige.
b.
product-line; quality.
c.
psychological; quality.
d.
psychological; prestige.
e.
price skimming; quality.
101. Services that are performed by lawyers, dentists, or doctors are typically priced using ____; sometimes
these prices are not based on the amount of time that is spent in each situation, but are based on a flat
fee regardless of the difficulty involved.
a.
traditional pricing.
b.
professional pricing.
c.
everyday low prices.
d.
price lining.
e.
customary pricing.
102. What type of pricing strategy is used in a situation where demand for a product is price inelastic and
the seller has an ethical responsibility not to overcharge the client?
a.
Price lining
b.
Prestige pricing
c.
Professional pricing
d.
Customary pricing
e.
Price skimming
103. Price leaders, comparison discounting, and special-event pricing are applications of
a.
psychological pricing.
b.
professional pricing.
c.
product-line pricing.
d.
bait-and-switch.
e.
promotional pricing.
104. If Kroger Food Stores advertises 2-liter bottles of Pepsi for 89 cents to generate store traffic that will
purchase other items at regular prices, the grocer is using
a.
reference pricing.
b.
a price leader.
c.
special-event pricing.
d.
comparison discounting.
e.
professional pricing.
105. A product is a price leader when
a.
it is sold at the highest price.
b.
its price maximizes profits.
c.
an increase or decrease in price leads to increased revenue or lower costs.
d.
it is sold at less than cost in the hope that sales of other products will increase.
e.
its price leads the industry in sales.
106. To attract customers into a store, Safeway advertises its milk at less than cost, hoping that customers
will purchase other groceries as well. This pricing strategy is called
a.
price lining.
b.
special-event pricing.
c.
differential pricing.
d.
comparison discounting.
e.
price leader pricing.
107. Which of the following pricing strategies often results in a retailer losing money on the product?
a.
Price leader
b.
Psychological discounting
c.
Penetration pricing
d.
Special-event pricing
e.
Ethical pricing
108. Chris is planning three sales during the third quarter of the year at Toys R’ Us. The first is at the
beginning of the school year, the second is the week before Halloween, and the third is Black Friday.
These sales would be considered to be
a.
psychological pricing.
b.
calendar discounting.
c.
sales promotion pricing.
d.
special-event pricing.
e.
captive pricing.
109. Showing a product’s price along with its previous price, the price of a competing brand, or the price at
another retail outlet is called
a.
competition-based pricing.
b.
reference pricing.
c.
comparison discounting.
d.
captive pricing.
e.
psychological pricing.
110. The manager at Target puts a sign up next to a Samsung audio system that reads, “Only $299.99! $60
less than at Best Buy .” This is an example of what type of pricing strategy?
a.
Random discounting
b.
Periodic discounting
c.
Comparison discounting
d.
Penetration pricing
e.
Everyday low prices
111. Pricing strategies and methods
a.
help direct and structure the selection of a final price.
b.
are the last decisions made for a new product.
c.
are the same for all of a company’s products.
d.
are the most important decisions made for a product.
e.
require limited planning on the part of management.
Scenario 21.1
Use the following to answer the questions.
Suppose that Ray-Ban is considering a new line of sunglasses that would be sold in major department
stores. The new line would be positioned as a more distinctive brand than the typical glasses sold
through department stores, and would be priced higher than other brands in the store, but a lower price
line than the current Ray-Ban lines that are sold through more selective stores. In determining the price
for this sunglass line, Ray-Ban wants to gather information about all brands sold in department stores
and about customers’ perceptions of those brands.
112. Refer to Scenario 21.1. Ray-Ban’s plan of gathering information about the other brands sold in
department stores, including their prices, would most likely be used in a ____ basis for pricing.
a.
Cost
b.
Competition
c.
Demand
d.
Customer
e.
Market
113. Refer to Scenario 21.1. Given Ray-Ban’s plan for positioning the new sunglass line, they should use a
____ strategy when introducing their new product.
a.
promotional
b.
penetration
c.
price-skimming
d.
reference
e.
secondary-market
114. Refer to Scenario 21.1. Ray-Ban has decided to promote the new sunglass line as an “affordable
luxury” and plans significant promotional expenditures. With these objectives, which of the following
should Ray-Ban use to price its product line?
a.
competition-based pricing
b.
cost-plus pricing
c.
markup pricing
d.
demand-based pricing
e.
differential pricing
115. Refer to Scenario 21.1. If Ray-Ban selected the prices for its new sunglasses to be $60, $70, or $80,
this would most likely be an example of using ____ pricing to enhance its distinctive positioning
strategy.
a.
product-line
b.
odd-even
c.
professional
d.
promotional
e.
penetration
Scenario 21.2
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.
116. Refer to Scenario 21.2. Glenwood’s previous pricing strategy is an example of ____ pricing, while the
new strategy is an example of ____ pricing.
a.
percentage; cost-based
b.
cost-based; psychological
c.
sales-based; customary
d.
a la carte; bundle
e.
demand-based; bundling
117. Refer to Scenario 21.2. 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.
118. Refer to Scenario 21.2. 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.
119. Refer to Scenario 21.2. 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
TRUE/FALSE
120. The six stages of setting prices should always be followed if prices are to be set correctly.
121. A marketer uses only one pricing objective to avoid organizational confusion.
122. Pricing objectives should be considered overall goals to aid the organization in its long-range plans.
123. The objective of profit maximization is rarely operational because its achievement is difficult to
measure.
124. The objective of maintaining or increasing market share depends on growth in industry sales.
125. The use of market share as a pricing objective oversimplifies the value of price in contributing to
profits.
126. The role played by attitudes toward price in the overall evaluation of the marketing mix is a minor
concern in identifying the target market.
127. 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.
128. The price of a hotel room is more important to a business traveler than to a tourist.
129. The importance of price depends on the type of product, the type of target market, and the purchase
situation.
130. A marketer is usually in a better position to establish prices when it knows the prices charged for
competing brands.
131. Some stores employ comparison shoppers to learn what prices their competitors are charging.
132. It is usually easy to obtain an accurate price list for a competitor’s products.
133. Marketers that evaluate competitors’ prices do so to set their own prices slightly below those of
competitors.
134. Cost-based pricing strategies result in a percentage being added to the cost of the product.
135. Cost-based pricing results in a high price when demand is high and a low price when demand is low.
136. One pitfall of cost-plus pricing for the buyer is that the seller may increase costs to establish a larger
profit base.
137. Cost-plus pricing is popular in periods of rapid inflation.
138. Markup pricing is not used often by marketers because establishing a percentage markup greatly
increases the complexity of the decision-making process.
139. Markup can be stated as a percentage of the cost or as a percentage of the selling price.
140. A major reason why retailers use markup pricing is that it is convenient.
141. The effectiveness of demand-based pricing often depends on a marketer’s ability to determine all the
costs associated with the product.
142. Demand-based pricing strategies are easy to use.
143. A firm that considers costs and revenue secondary to competitors’ prices when setting its own prices is
using a competition-based pricing strategy.
144. The government frequently uses competition-based pricing in granting defense contracts.
145. Competition-based pricing is important if competing products are almost homogeneous or if price is
the key variable in the marketing strategy.
146. A pricing strategy is a course of action designed to achieve pricing and marketing objectives.
147. Differential pricing means different buyers pay different prices for the same quality and quantity of
product.
148. Differential pricing is effective mainly when focusing on only one market segment.
149. Grocery stores use negotiated pricing strategies.
150. An early-bird special offered by a restaurant during off-peak hours is an example of the secondary-
market pricing strategy.
151. Periodic discounting is often predictable so consumers wait to make purchases until they can benefit
from the price reductions.
152. Random discounting means discounting various products on a systematic basis.
153. Two types of new-product pricing are price skimming and product-line pricing.
154. Penetration pricing and price skimming of the market are two types of new-product pricing.
155. Price skimming is designed to yield maximum unit sales volume.
156. The use of price skimming discourages competitors from entering a market.
157. Penetration pricing is one new-product pricing approach that provides the most flexible introductory
price.
158. A company wanting to maximize profits from its new product would use product-line pricing.
159. 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.
160. 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.
161. A psychological price is designed to encourage purchases on the basis of rational response rather than
on the basis of emotional reactions.
162. In some cases, prices are assigned to goods on the basis of nothing more than custom.
163. Prestige pricing is used when a higher price is consistent with buyers’ attitudes toward the quality or
image of a product.
164. 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.
165. 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.
166. The way that pricing is used in the marketing mix will influence the determination of the final price.