Q&A Hero

Q: Marketing executives must translate estimates of customer demand into estimates ofA. personnel.B. advertising expenditures.C. ancillary product support.D. revenues the firm expects to receive.E. supply.

Q: Basic to setting a product's price is the extent of __________. This information is used in estimating the revenues the firm expects to receive. A. management's commitment to the product relative to other products in the line B. curiosity or interest potential consumers expressed during market testing C. customer demand for it D. the firm's promotional budget E. distribution requirements

Q: When Kroger, a national supermarket chain, uses a special promotion to price a six-pack of soda at $2.09 (which is below its customary price level of $4.29), it is attempting to A. drive its competition out of business. B. attract customers in hopes they will buy other products as well. C. fill its parking lot so its store will look successful. D. work with the local bottler to move products that are close to their expiration dates. E. help stimulate the local economy and generate good will with its customers.

Q: Using __________, many retailers deliberately sell products below their normal prices (and sometimes below cost) to attract attention and additional store traffic. A. customary pricing B. below-market pricing C. prestige pricing D. penetration pricing E. loss-leader pricing

Q: Deliberately selling a product below its customary price, not to increase sales, but to attract customers' attention in hopes that they will buy other products as well, is referred to as A. loss-leader pricing. B. bundle pricing. C. magnet pricing. D. predatory pricing. E. below-market pricing.

Q: Loss-leader pricing refers to A. a pricing method where the price the seller charges is below its customary price to attract customers. B. setting a low initial price and gradually but consistently increasing that price so as not to antagonize the consumer. C. deliberately selling a product below its customary price, not to increase sales, but to attract customers' attention in hopes that they will buy other products as well. D. a method of pricing based on a product's tradition, standardized channel of distribution, or other competitive factors. E. pricing a product between 8 and 10 percent lower than nationally branded competitive products.

Q: As the brand manager for Red Bull, what would you conclude from the information provided in the Price Premium Marketing Dashboard above? A. Red Bull has a price premium relative to Monster. B. Rockstar has a price premium relative to Monster. C. Red Bull engaged in price discounting relative to Monster and Rockstar from 2009 to 2010. D. Rockstar sold more product than Monster in 2010. E. In terms of dollar market share, Red Bull has a lower share than the "Other Brands" category.

Q: Price Premium Marketing Dashboard The Price Premium Marketing Dashboard above shows the dollar and unit market shares for selected energy drinks. What is the price premium for Monster in 2009? A. 12.1% B. 0% C. -5.0% D. -5.6% E. -11.1%

Q: Price Premium Marketing Dashboard The Price Premium Marketing Dashboard above shows the dollar and unit market shares for selected energy drinks. What is the price premium for Monster in 2010? A. -12.5% B. -7.5% C. -5.3% D. 0% E. 15.2%

Q: Price Premium Marketing Dashboard The Price Premium Marketing Dashboard above shows the dollar and unit market shares for selected energy drinks. What is the price premium for Red Bull in 2009? A. 12.1% B. 0% C. -5.0% D. -5.6% E. -11.1%

Q: Price Premium Marketing Dashboard The Price Premium Marketing Dashboard above shows the dollar and unit market shares for selected energy drinks. What is the price premium for Red Bull in 2010? A. -12.5% B. -7.5% C. -5.3% D. 0% E. 15.2%

Q: Companies use a price premium to assess whether their products and brands are priced above, at, or below the market. The price premium is the percentage by which the actual price charged for a specific brand exceeds or falls short of a benchmark established for a similar product or basket of products. This price premium equals: A. unit volume market share for a brand divided by dollar sales market share for a brand, minus 1. B. dollar sales market share for a brand divided by unit volume market share for a brand, plus 1. C. dollar sales market share for a brand divided by unit volume market share for a brand, minus 1. D. dollar sales market share for a brand, divided by unit volume market share for a brand, plus 1. E. dollar sales market share for a brand, divided by unit volume market share for a brand, minus the number of competitors against which a brand is being measured.

Q: Companies use a __________ to assess whether its products and brands are above, at, or below the market. A. customary price B. prestige price C. price premium D. price lining E. benchmark

Q: An ad campaign by Suave shampoo asked television viewers to identify the heads of hair of women who used Suave shampoo and conditioner and those that used the much more expensive salon hair-care products. The idea of the ad was that no one could tell which woman used the much cheaper Suave brand. By making price its selling point, Suave is most likely using __________. A. customary pricing B. loss-leader pricing C. prestige pricing D. skimming pricing E. below-market pricing

Q: Manufacturers of generic brands use which method of competition-oriented pricing? A. penetration pricing B. below-market pricing C. loss-leader pricing D. prestige pricing E. skimming pricing

Q: According to the textbook, Revlon cosmetics uses __________ pricing. A. above-market B. at-market C. below-market D. prestige E. everyday low

Q: Swedish company Asko, which prides itself on manufacturing and marketing some of the best-built and most expensive appliances in the world, would probably use which competition-oriented pricing approach? A. customary pricing B. above-market pricing C. loss-leader pricing D. at-market pricing E. penetration pricing

Q: According to the textbook, clothing manufacturer Hart Schaffner & Marx and retailer Bloomingdale's use __________ pricing. A. above-market B. at-market C. below-market D. prestige E. everyday low

Q: For most products, it is difficult to identify a specific market price for a product or product class. Still, marketing managers often have a subjective feel for the competitors' price or market price. Using this benchmark, they then may deliberately choose a strategy of A. above-, at-, or below-market pricing. B. loss-leader pricing. C. penetration pricing. D. standard markup pricing. E. experience curve pricing.

Q: The __________ of a product is what customers are generally willing to pay, and is sometimes used as a benchmark for pricing. A. customary price B. asking price C. target price D. discount price E. market price

Q: Setting a market price for a product or product class based on a subjective feel for the competitors' price or market price as the benchmark is referred to as A. customary pricing. B. above-, at-, or below-market pricing. C. standard markup pricing. D. competitive margin pricing. E. experience curve pricing.

Q: Consumers buy water and soda from vending machines. Traditionally, the price of each of these products is about $1.25. If a marketer charges a significantly higher price for such products dispensed by vending machines, such as $2.00 per item, sales are likely to decline. Thus marketers tend to be very consistent in the prices they charge for vending machine products. This is an example of marketers employing a __________ strategy. A. below-market pricing B. skimming pricing C. penetration pricing D. loss-leader pricing E. customary pricing

Q: Southern gardeners normally pay $5 for a 2-cubit-foot bag of pine bark mulch that they buy at their local gardening-supply and home-improvement stores to keep the weeds down in their gardens. If the price being charged by a retailer is not within a narrow range that gardeners feel is appropriate, they will use substitutions - newspaper, grass clippings, or some other kind of ground covering. When pricing pine bark mulch, a garden-supply or home-improvement retailer should use A. customary pricing. B. at-market pricing. C. loss-leader pricing. D. penetration pricing. E. bundle pricing.

Q: What is the difference between and EDLP retailer and a High-Low retailer? Why does Carmex charge them a different price?

Q: Setting a price that is dictated by tradition, a standardized channel of distribution, or other competitive factors is referred to as __________. A. cost-plus pricing B. customary pricing C. standard markup pricing D. loss leader pricing E. target profit pricing

Q: Which of the four approaches does Carmex use to set prices for its products?

Q: Customary pricing refers to A. a pricing method where the price the seller quotes includes all transportation costs. B. setting the same price for similar customers who buy the same product and quantities under the same conditions. C. deliberately selling a product below its list price to attract attention to it. D. setting a price that is dictated by tradition, a standardized channel of distribution, or other competitive factors. E. pricing based on what the market will bear.

Q: Why do manufacturers offer seasonal discounts to channel members? Provide an example of how one would work.

Q: Rather than emphasize demand, cost, or profit factors, a price setter can stress what __________ is (are) doing. A. the service sector B. the market or competitors C. consumers D. suppliers E. the financial markets

Q: What are the four kinds of discounts that are especially important in marketing pricing strategy?

Q: All of the following are competition-oriented approaches to selecting an approximate price level EXCEPT: A. loss leader pricing. B. customary pricing. C. above-market pricing. D. skimming. E. at-market pricing.

Q: What are two special adjustments to the list or quoted price?

Q: Target return-on-investment (ROI) is frequently used by A. contractors. B. public utilities. C. business-to-business markets. D. supermarkets. E. small privately owned firms.

Q: What is the difference between a one-price policy and a flexible-price policy?

Q: Which of the following companies would be most likely to use target return-on-investment pricing? A. a farmer B. a florist shop C. a book publisher D. a veterinarian E. an automobile manufacturer

Q: What are the three major steps involved in setting prices?

Q: The __________ is the ratio of profit to the investment used to earn that profit. A. markup B. selling margin C. return on investment D. return on assets E. markdown

Q: Explain predatory pricing.

Q: Setting a price to achieve an annual target return-on-investment (ROI) is referred to as A. target return-on-investment pricing. B. target return-on-profit pricing. C. target return-on-sales pricing. D. target profit pricing. E. customary pricing.

Q: What is bait and switch? Give an example of it.

Q: Target return-on-investment pricing refers to A. setting a price that allows the firm to invest in research and development for next year. B. adding a fixed percentage to the cost of all items in a specific product class. C. setting prices to achieve a profit that is a specified percentage of the sales volume. D. setting a price to achieve an annual target ROI. E. setting a price based on an annual specific dollar target volume of profit.

Q: Describe the pricing constraints a firm is likely to face.

Q: What pricing method is often used because of the difficulty in establishing a benchmark of sales or investment to show how much of a firm's effort is needed to achieve the target? A. target return-on-investment pricing B. target return-on-sales pricing C. standard markup pricing D. target pricing E. loss-leader pricing

Q: Describe a profit objective used by many Japanese manufacturing firms.

Q: Setting a price to achieve a profit that is a specified percentage of the sales volume is referred to as __________. A. target return-on-investment pricing B. target return-on-sales pricing C. loss-leader pricing D. target pricing E. standard markup pricing

Q: The price-setting process includes identifying pricing objectives and constraints. Describe the reasons these objectives may change and give examples of objectives a firm may set.

Q: Target return-on-sales pricing refers toA. adjusting the price of a product so it is within 10% of its largest competitor.B. setting the price of a line of products at a number of different price points.C. adding a fixed percentage to the cost of all items in a specific product class.D. setting prices to achieve a profit that is a specified percentage of the sales volume.E. setting a price based on a specific annual dollar target profit volume.

Q: What are the six broad objectives that an organization may pursue that tie in directly to its pricing policies?

Q: The manager of a small gasoline station observes that while gasoline sales have been steady, the service side of the business has fallen off, and mechanics are often idle. He decides to offer a promotion, a $20 off coupon for an oil change mailed to 800 households within a two-mile radius. The cost of printing and mailing is $1,000. The normal cost of an oil change is $40. Materials and labor per oil change costs $15. If 200 customers use the coupon, what will be the total profit of the promotion based on the profit equation? A. ($4,000) B. ($1,000) C. $0 D. $1,000 E. $4,000

Q: Marketing managers often use break-even analysis to analyze the relationship between total revenue and total cost to determine profitability at various levels of output. What is the break-even formula? Use the formula to calculate how many DVD players a dealer must sell if her fixed costs are $100,000, unit variable costs are $150, and the selling price is $200.

Q: Lady Marion Seafood, Inc. sells 5-pound packages of Alaskan salmon. Assume that its unit variable cost per package is $30 and its fixed cost is $250,000. It wants a target profit of $38,000 based on a volume of 16,000 packages. What should the firm charge for a 5-pound package of salmon? A. $25.00 B. $33.94 C. $40.00 D. $48.00 E. $61.25

Q: What is the difference between fixed costs and variable costs?

Q: A custom tailor wishes to use target profit pricing to establish a price for a custom-designed business suit. Assume variable cost is $200 per suit, fixed cost is $44,000, and the target profit is $50,000 based on a volume of 50 suits. What price should be charged for a typical custom suit? A. $520 B. $1,040 C. $1,880 D. $2,080 E. $10,000

Q: Explain why price elasticity is important to marketing managers.

Q: What is critical when using target profit pricing? A. a good estimate of demand B. a higher-than average price C. a low potential for currency exchange rates to change D. a lower-than average price E. a new or innovative product

Q: Price elasticity of demand measures how sensitive consumer demand and the firm's revenues are to changes in the product's price. Explain the difference between a product with elastic demand and a product with inelastic demand.

Q: Setting an annual target of a specific dollar volume of profit is referred to as __________. A. target profit pricing B. target return-on-investment pricing C. loss leader pricing D. at-, above-, or below-market pricing E. yield management pricing

Q: Distinguish between elastic demand and inelastic demand.

Q: Target profit pricing refers to A. adjusting the price of a product so it is in line with that of its largest competitor. B. setting an annual target of a specific dollar volume of profit. C. setting the price of a line of products at a number of different price points. D. adding a fixed percentage to the cost of all items in a specific product class. E. setting prices to achieve a profit that is a specified percentage of production costs.

Q: What is the difference between a movement along a demand curve and a shift of a demand curve?

Q: With profit-oriented approaches to pricing, a price setter may choose to balance both __________ and __________ to set price. A. revenue; profit B. tangible goods; services C. cost; revenue D. demand; supply E. cost; demand

Q: There are factors other than price that affect demand. What are they and how do they work?

Q: All of the following are profit-oriented approaches to select an approximate price level EXCEPT: A. target ROI pricing. B. target profit pricing. C. target return-on-sales pricing. D. target return-on-investment pricing. E. cost-plus percentage-of-cost pricing.

Q: List four key factors used to estimate demand.

Q: Which of the following is a profit-oriented pricing method? A. target return-on-sales pricing B. loss leader pricing C. above-, at-, or below-market pricing D. price lining E. penetration pricing

Q: What is loss-leader pricing and why do retailers use it?

Q: Which of the following is a profit-oriented approach to pricing? A. skimming pricing B. target pricing C. loss-leader pricing D. target profit pricing E. standard markup pricing

Q: What is standard markup pricing and when would it be used?

Q: Rather than billing clients by the hour, some lawyers and their clients agree on a fixed fee based on expected costs plus an agreed upon level of profit for the law firm. Which pricing approach are they using? A. target pricing B. cost-plus pricing C. customary pricing D. experience curve pricing E. bundle pricing

Q: Give an example of yield management pricing and explain why it is used.

Q: The most commonly used pricing method for business products is __________. A. target return on investment B. customary C. standard markup D. target profit E. cost-plus pricing

Q: Explain why odd-even pricing may be successful.

Q: Rock and Roll Hall of Fame Photo What pricing strategy did the architectural firm use to set the construction price for the Rock and Roll Hall of Fame, which is shown in the photo above? A. cost-plus pricing B. customary pricing C. standard markup pricing D. yield management pricing E. prestige pricing

Q: What are the conditions favoring the use of penetration pricing?

Q: Cost-plus pricing refers toA. summing the total unit cost of providing a product or service and adding a specific amount to the cost to arrive at the price.B. setting the price of a line of products at a number of different price points.C. adding a fixed percentage to the cost of all items in a specific product class.D. setting prices to achieve a profit that is a specified percentage of the sales volume.E. increasing the price slightly to protect against undue profit losses from unforeseen environmental forces.

Q: When is skimming pricing an effective strategy?

Q: Summing the total unit cost of providing a product or service and adding a specific amount to the cost to arrive at a price is referred to as __________. A. standard markup pricing B. experience curve pricing C. cost-plus pricing D. product-line pricing E. target return-on-investment pricing

Q: List four of the seven demand-oriented approaches to selecting an approximate price level and define what they are.

Q: Supermarket managers use standard markup pricing because it is particularly suited to situations when A. there is a large number of products and estimating the demand for each would be difficult and time consuming. B. there is a large number of product lines, all with basically the same product attributes. C. there is a specific profit goal that needs to be achieved. D. there is a policy of selling every item in a product line at the same price regardless of the product class. E. the products are perishable or seasonal.

Q: There are four common approaches to selecting an approximate price level. List and provide a brief description for each one.