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Marketing Management

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When consumers examine products, they often compare an observed price to an internal price they remember. This is known as a(n) ________ price.
reference
________ price refers to what the consumers feel the product should cost.
fair
While shopping at the mall, Jane was asked by one of the sales representatives at the cosmetics counter to try out a new lipstick that her company was test marketing. The company representative asks her how much she would be willing to pay for the lipstick. After trying it out, Jane is of the opinion that $5 is just the right price for it. What type of a reference price is Jane using?
fair price
A company decided to conduct a market survey for its new MP3 player that the company had priced at $150. In the survey, 95 percent of participants said that the maximum they would pay for the MP3 player is $100. This is an example of which of the following possible consumer reference prices?
upper-bound pricing
The minimum price that most consumers would pay for a given product is known as the ________ price.
lower-bound pricing
A company has developed the prototype of a mobile phone that it plans to launch in the next few months. The phone comes equipped with the most advanced technological features. As part of its test marketing efforts, the company allows customers to examine and use the prototype and also gathers feedback regarding product features and price. The results of this test marketing effort show that customers are willing to pay at least $500, considering the phone's various features. As such, the company has discovered customers' ________.
lower-bound pricing
Many consumers are willing to pay $100 for a perfume that contains $10 worth of scent because the perfume is from a well-known brand. What kind of pricing is the company depending on?
image pricing
Customers usually have a lower price threshold below which prices signal inferior or unacceptable quality, as well as an upper price threshold above which prices are prohibitive and the product appears not worth the money.
True
Although consumers may have fairly good knowledge of the range of prices involved, very few can accurately recall specific prices of products
True
When examining products, consumers compare an observed price to an internal reference price they remember or an external frame of reference
True
Many consumers use price as an indicator of quality and value.
True
Pricing cues such as sale signs and prices that end in 9 are more influential when consumers are experienced in the category
False
Traditionally, price was never a major determinant of buyer choice
False
A firm that is plagued with overcapacity, intense competition, or changing consumer desires would do better if it pursues ________ as its major objective.
survival
After estimating the demand and costs associated with alternative prices, a company has chosen to price its product in such a way that it gains the highest rate of return on its investment. The company is looking to ________.
maximum current profit
Companies who believe that higher sales volume leads to lower unit costs and higher long-run profits are attempting to ________.
maximize their market share
A company that is looking to maximize its market share would do well to follow ________ pricing.
market-penetration
A market-penetration pricing strategy is most suitable when ________.
production and distribution costs fall with accumulated production experience
When Apple introduced its iPhone, it was priced at $599. This allowed Apple to earn the maximum amount of revenue from the various segments of the market. Two months after the introduction, the price had come down to $399. What kind of a pricing did Apple adopt?
market-skimming prices
Market skimming pricing makes sense under all the following conditions, EXCEPT if ________.
consumers are likely to delay buying the product until its price drops
Starbucks, Aveda, and BMW have been able to position themselves within their categories by combining quality, luxury, and premium prices with an intensely loyal customer base. These companies are employing a ________ strategy.
product quality leadership
If consumers were largely indifferent to a $0.05 increase in the price of a gallon of milk, the price rise is said to fall within customers' ________.
price indifference band
JJ pays overhead each month, including his company's bills for rent, heat, interest, and salaries, which are examples of ________ costs.
fixed
When ConAgra foods decided to cut $250 million in costs to return to a $1 price point (after sales dropped as a result of raising prices $0.25 to cover higher commodity costs), it was using ________.
targeting cost
A manufacturer has invested $750,000 in a new product and wants to set a price to earn a 15 percent ROI. The cost per unit is $18 and the company expects to sell 50,000 units in the first year. Calculate the company's target-return price for this product.
$20.25
) An umbrella manufacturing company's fixed costs are $275,000. The variable cost per unit is $5 and each umbrella is sold at $10. How many units should the firm sell in order to break even?
55,000
________ pricing takes into account a host of inputs, such as the buyer's image of the product performance, the channel deliverables, the warranty quality, customer support, and attributes such as the supplier's reputation, trustworthiness, and esteem.
perceived value
Matt's retail store offers all products at $2 less than its competitors. The store never runs promotional campaigns or offers special discounts. Matt's retail store is following a(n) ________ pricing policy.
everyday low
In which of the following auctions does the auctioneer first announce a high price for a product and then slowly decreases the price until a bidder accepts?
a Dutch auction with one seller and many buyers
In a(n) ________, the buyer announces something he or she wants to buy, and potential sellers compete to offer the lowest price.
Dutch auction with one buyer and many sellers
________ auctions let would-be suppliers submit only one bid; they cannot know the other bids.
Sealed Bid
Companies strive to maximize their current profits if they are plagued with overcapacity, intense competition, or changing consumer wants.
False
When Sony introduced the first high-definition television to the Japanese market in 1990, it was priced at $43,000, which is an example of partial-cost recovery pricing.
False
A marketer who has unit costs of $16 and wants to earn a 20 percent markup on sales would charge a markup price of $20.
True
Caterpillar uses target-return pricing to set prices on its construction equipment, and justifies a higher price by showing lower lifetime operating costs.
False
The US government often uses Dutch auctions to procure supplies.
False
If a calculator company produces 100,000 hand calculators at a cost of $10, but the cost drops to $9 when it produces 200,000 and $8 when it produces 400,000 hand calculators, the decline in average cost with accumulated product experience is called the price elasticity of demand.
False
In which of the following forms of countertrade do buyers and sellers directly exchange goods, with no money and no third party is involved?
Barter
A Japanese firm is ready to sell its recent technological innovation to the US government. But it has asked for 80 percent in cash and the rest in mica. The Japanese firm is looking to enter into a(n) ________ with the US government.
compensation deal
Armac Ltd. is a sluice-box manufacturer based in China. A sluice-box is used for gold prospecting. Armac is interested in selling a few of its machines to an American mining company, but it wants 95 percent of the machines' price in gold and the rest in ores recovered by using the machines. This is an example of a ________.
buyback arrangement
ROC Engineering, a Chinese shipbuilding company, agrees to build a fleet of submarines for the Sri Lankan navy, for which it will be paid in the local Sri Lankan currency. As per the agreement, ROC must also spend a substantial amount of the money it generates through this deal within the country. In accordance with the contract, ROC buys Sri Lankan tea at a reduced rate. This is an example of which of the following forms of countertrade?
offset
________ are offered by a manufacturer to trade-channel members if they will perform certain functions, such as selling, storing, and recordkeeping.
Functional Discount
When supermarkets and department stores drop the price on well-known brands to stimulate store traffic, they are said to be following ________ pricing.
loss-leader
When museums charge a lower admission fee to students and senior citizens, this form of price discrimination is known as ________ pricing.
customer-segment
Madame Tussaud's wax museum is a popular tourist attraction in London. The museum charges higher entry rates for tourists compared to locals. This form of price discrimination is known as ________ pricing.
customer-segment
When Coca-Cola carries a different price depending on whether the consumer purchases it in a fine restaurant, a fast-food restaurant, or a vending machine, then this form of price discrimination is known as ________ pricing.
channel
The prices of tickets to the opera vary depending on where the person would like to be seated — in the gallery or in the stalls. This is an example of ________ pricing.
location
When hotels drop their rates on the weekends, this form of price discrimination is known as ________ pricing.
time
The airline and hospitality industries use ________, by which they offer discounted but limited early purchases, higher-priced late purchases, and the lowest rates on unsold inventory just before it expires.
yield pricing
For price discrimination to work ________.
the practice must not breed customer resentment and ill will
When a movie theater charges a lower ticket fee for children and senior citizens, it is engaging in ________ pricing.
customer-segment
In a compensation deal, the seller sells a plant, equipment, or technology to another country and agrees to accept as partial payment products manufactured with the supplied equipment.
False
Psychological discounting involves setting an artificially high price and then offering the product at substantial savings.
True
When firms charge different prices to different customer groups for the same product or service, it is a case of second-degree price discrimination.
False
The airline industries implement yield pricing by offering discounted but limited early purchases, higher-priced late purchases, and the lowest rates on unsold inventory just before it expires.
True
Price discrimination in all forms is illegal in the United States
False
When PepsiCo sold its cola syrup to Russia for rubles and agreed to buy Russian vodka at a certain rate for sale in the United States, it was engaged in the form of countertrade known as an offset.
True
A low price buys market share but not market loyalty. The same customers will shift to any lower-priced product that may come along. This is called the ________ trap.
fragile-market-share
When higher-priced competitors match lower prices of their competitors but have longer staying power because of deeper cash reserves, it leads to a(n) ________ trap.
shallow-pockets
A company does not set a final price until the product is finished or delivered. This is known as ________.
delayed quotation pricing
In a price-war trap, higher-priced competitors match the firm's lower prices but have longer staying power because of deeper cash reserves
False
Escalator clauses are found in contracts for major industrial projects, such as aircraft construction and bridge building.
True
Shrinking the amount of product instead of raising the price is a good way to counteract consumer resistance to price increases.
True
When a company requires customers to pay today's price and all or part of any inflation increase that takes place before delivery, it is known as ________.
escalator clauses
When a company maintains its price but removes or prices separately one or more elements that were part of the former offer, such as free delivery or installation, it is known as ________.
unbundling
In markets that are characterized by products that are highly homogeneous, how should a firm react to a competitor's reduction in price?
augment the product
A company must consider the product's stage in the life cycle and its importance in the company's portfolio before responding to a competitor's price cut.
True
A firm in a homogeneous market that has the ability to augment its product is more likely to need to meet a competitive price reduction than one that does not have the ability to augment its product.
False