Question 1

Which of the following pricing practices is widely used in business markets but not in consumer markets?

Accepted Answer

A)   geographic pricing
B)   reference pricing
C)   EDLP
D)   price lining
E)   value-based pricing

Question 2

The inherent goal of product differentiation is to make the demand curve for a product more inelastic. This happens because increased differentiation:

Accepted Answer

A)   reduces the number of perceived substitutes for a product.
B)   makes the product more expensive than its competitors.
C)   increases the quality of the product making it worth the expense.
D)   reduces the time and effort required to obtain the product.
E)   increases the just noticeable differences among competing products.

Question 3

Rather than cutting prices to generate sales, most firms would be better off adjusting their marketing strategy to:

Accepted Answer

A)   build value into the product and justify the current price or even a price increase.
B)   decrease the supply of the product to keep prices high.
C)   heavily promote the product to stimulate sales.
D)   move toward an exclusive distribution strategy to increase the product's image.
E)   increase the availability of the product so more customers can purchase it.

Question 4

Although break-even analysis and cost-plus pricing are important tools in setting prices based on the firm's cost structure, they should never be the driving force behind pricing strategy. Why?

Accepted Answer

A)   because firms want to make a profit, not just break even
B)   because customer expectations are far more important in setting prices
C)   because prices should be based on demand, not costs
D)   because different firms have different cost structures
E)   because competitor's prices are far more important in setting prices

Question 5

Explain how competition and industry structure are related to pricing strategy. In your answer, identify the four basic competitive market structures and how pricing differs across each one.

Accepted Answer

The competitive market structure of the ...

Question 6

In many (if not most) circumstances, cutting prices to increase sales volume is not a good idea. Explain why this is so. What are some alternatives that are preferable to cutting prices?

Accepted Answer

All marketers understand the relationshi...

Question 7

Why are firms so obsessed with the pricing element of the marketing mix?

Accepted Answer

A)   because pricing is the most difficult element of the marketing mix to change
B)   because the firm's pricing has a direct bearing on its ability to increase revenue
C)   because pricing is the only marketing element that matters to customers
D)   because pricing is the best part of the marketing mix in which to make an educated guess about the most appropriate strategy
E)   because pricing is directly responsible for demand B

Question 8

While following a competitor's lead in pricing is acceptable, there can be no signaling of prices to a competitor. This illegal practice, called _____, occurs when two or more competitors collaborate in setting prices.

Accepted Answer

A)   indirect pricing
B)   reference pricing
C)   collaborative pricing
D)   price fixing
E)   price signaling

Question 9

Discuss the process of negotiated pricing. Be sure to explain the goals and process from both sides of the negotiation.

Accepted Answer

Although generally new to consumer marke...

Question 10

What is the basic difference between the seller's and the buyer's perspectives on pricing?

Accepted Answer

A)   Buyers see pricing as negotiable; sellers do not.
B)   Buyers are very concerned about price elasticity; sellers are not.
C)   Sellers tend to inflate prices; buyers tend to see prices as being lower.
D)   Buyers are quite concerned about competitors' prices; sellers are not.
E)   Buyers tend to inflate prices; sellers tend to see prices as being lower.

Question 11

Price elasticity is defined as:

Accepted Answer

A)   a situation where prices routinely move up and down in a short period of time.
B)   customers' responsiveness or sensitivity to changes in price.
C)   the impact on a product's demand when customers are in unique buying situations.
D)   the relative ease with which prices can be changed.
E)   price flexibility-a pricing strategy used by startup firms.

Question 12

Which of the following IS NOT a situation that can cause customers to be less sensitive to price increases?

Accepted Answer

A)   when customers have few product choices
B)   when products are highly differentiated
C)   when the product is a real or a perceived necessity
D)   when the total expenditure is high
E)   when the product is considered to be "worth it" D

Question 13

Identify and discuss reasons why firms become so infatuated with pricing.

Accepted Answer

There is no other component of the marke...

Question 14

Discuss the challenges associated with pricing services. How do service firms use yield management systems to balance price with revenue and maximize capacity utilization?

Accepted Answer

When it comes to buying services, custom...

Question 15

The goal of _____ is to maximize sales, gain widespread market acceptance, and capture a large market share quickly by setting a relatively low initial price.

Accepted Answer

A)   price skimming
B)   odd pricing
C)   penetration pricing
D)   first-mover pricing
E)   market acceptance pricing C

Question 16

The Fairmont Hotel is widely known for its exceptional quality and impeccable customer service. Not surprisingly, the Fairmont sets prices at the top end of all competing hotels. Which pricing strategy is the Fairmont using?

Accepted Answer

A)   exclusive pricing
B)   image pricing
C)   psychological pricing
D)   prestige pricing
E)   service-based pricing

Question 17

In a price negotiation, the number that each side will use to distinguish between a successful and an unsuccessful negotiation is called the:

Accepted Answer

A)   concession
B)   opening position
C)   aspiration price
D)   limit
E)   breakeven position

Question 18

From the buyer's perspective, two key issues determine pricing strategy for most firms: perceived value and:

Accepted Answer

A)   competitors' prices.
B)   the firm's cost structure.
C)   market demand.
D)   economic conditions.
E)   price sensitivity.

Question 19

Which of the following IS NOT a situation when buyers will have increased power over sellers in a market?

Accepted Answer

A)   when there are a large number of sellers in the market
B)   when there are many substitutes for the product
C)   when product demand is high
D)   when the economy is weak
E)   when product supply is plentiful

Question 20

Retailers use _____ extensively. This occurs when the retailer compares sale prices to regular prices, such as when Best Buy promotes a DVD player as "Regularly $99, Now $49."

Accepted Answer

A)   reference pricing
B)   EDLP
C)   odd pricing
D)   value-based pricing
E)   sale pricing

Exam 8: Pricing Strategy

Which of the following pricing practices is widely used in business markets but not in consumer markets?

Correct AnswerverifiedShow Answer

The inherent goal of product differentiation is to make the demand curve for a product more inelastic. This happens because increased differentiation:

Correct AnswerverifiedShow Answer

Rather than cutting prices to generate sales, most firms would be better off adjusting their marketing strategy to:

Correct AnswerverifiedShow Answer

Although break-even analysis and cost-plus pricing are important tools in setting prices based on the firm's cost structure, they should never be the driving force behind pricing strategy. Why?

Correct AnswerverifiedShow Answer

Explain how competition and industry structure are related to pricing strategy. In your answer, identify the four basic competitive market structures and how pricing differs across each one.

Correct AnswerverifiedThe competitive market structure of the ...View AnswerShow Answer

In many (if not most) circumstances, cutting prices to increase sales volume is not a good idea. Explain why this is so. What are some alternatives that are preferable to cutting prices?

Correct AnswerverifiedAll marketers understand the relationshi...View AnswerShow Answer

Why are firms so obsessed with the pricing element of the marketing mix?

Correct AnswerverifiedB

While following a competitor's lead in pricing is acceptable, there can be no signaling of prices to a competitor. This illegal practice, called _____, occurs when two or more competitors collaborate in setting prices.

Correct AnswerverifiedShow Answer

Discuss the process of negotiated pricing. Be sure to explain the goals and process from both sides of the negotiation.

Correct AnswerverifiedAlthough generally new to consumer marke...View AnswerShow Answer

What is the basic difference between the seller's and the buyer's perspectives on pricing?

Correct AnswerverifiedShow Answer

Price elasticity is defined as:

Correct AnswerverifiedShow Answer

Which of the following IS NOT a situation that can cause customers to be less sensitive to price increases?

Correct AnswerverifiedD

Identify and discuss reasons why firms become so infatuated with pricing.

Correct AnswerverifiedThere is no other component of the marke...View AnswerShow Answer

Discuss the challenges associated with pricing services. How do service firms use yield management systems to balance price with revenue and maximize capacity utilization?

Correct AnswerverifiedWhen it comes to buying services, custom...View AnswerShow Answer

The goal of _____ is to maximize sales, gain widespread market acceptance, and capture a large market share quickly by setting a relatively low initial price.

Correct AnswerverifiedC

The Fairmont Hotel is widely known for its exceptional quality and impeccable customer service. Not surprisingly, the Fairmont sets prices at the top end of all competing hotels. Which pricing strategy is the Fairmont using?

Correct AnswerverifiedShow Answer

In a price negotiation, the number that each side will use to distinguish between a successful and an unsuccessful negotiation is called the:

Correct AnswerverifiedShow Answer

From the buyer's perspective, two key issues determine pricing strategy for most firms: perceived value and:

Correct AnswerverifiedShow Answer

Which of the following IS NOT a situation when buyers will have increased power over sellers in a market?

Correct AnswerverifiedShow Answer

Retailers use _____ extensively. This occurs when the retailer compares sale prices to regular prices, such as when Best Buy promotes a DVD player as "Regularly $99, Now $49."

Correct AnswerverifiedShow Answer

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The competitive market structure of the ...
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All marketers understand the relationshi...
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B

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Although generally new to consumer marke...
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D

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There is no other component of the marke...
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When it comes to buying services, custom...
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C

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