Q&A Hero

Q: Assume it costs Lady Marion Seafood, Inc. $30 to catch, process, freeze, package, and ship 5-pound packages of Alaskan salmon. The firm adds 60 percent to the cost of its salmon products and charges customers a total of $48 for a postage-paid vacuum-sealed package. What type of pricing does Lady Marion Seafood use to arrive at its final price? A. target return-on-sales pricing B. bundle pricing C. standard markup pricing D. target profit pricing E. customary pricing

Q: How do consumers use price in their assessments of value?

Q: Creative Quilts Studio sells hundreds of colors and types of fabric and thread. To price its inventory, the owners add 50 percent to the cost of each bolt of fabric and every spool of thread. What is this pricing approach called? A. target return-on-sales pricing B. flexible pricing C. cost-plus pricing D. standard markup pricing E. customary pricing

Q: Explain the price equation in the context of a new car purchase.

Q: All of the following statements about standard markup pricing are true EXCEPT:A. high-volume products usually have smaller markups than do low-volume products.B. the percentage markup depends on the type of retail store and the product involved.C. markups must cover all expenses of the store, pay for overhead costs, and contribute something to profits.D. summing the total unit cost of providing a product or service and adding a specific amount to the cost to arrive at a price.E. supermarket managers have such a large number of products that estimating the demand for each product as a means of setting price is impossible.

Q: A single jar of original formula Carmex has different prices for the product depending upon where it is sold, but each price will end in a 9 ($0.99 at mass merchandisers like Walmart or Target; between $1.59 and $1.79 in drug and food retailers). This pricing strategy is called __________. A. standard pricing B. odd-even pricing C. customary pricing D. everyday lower pricing E. at-market pricing

Q: Adding a fixed percentage to the cost of all items in a specific product class is referred to as A. target profit pricing. B. standard markup pricing. C. target return-on-investment pricing. D. customary pricing. E. everyday low pricing.

Q: Carmex uses all of the following approaches to setting the price of its products EXCEPT: A. profit-oriented. B. competition-oriented. C. cost-oriented. D. elasticity-oriented. E. demand-oriented.

Q: Standard markup pricing refers to A. adjusting the price of a product so it is "in line" with that of its largest competitor. B. setting the price of a line of products at a number of different price points. C. setting prices to achieve a profit that is a specified percentage of the sales volume. D. increasing the price slightly to protect against undue profit losses from unforeseen environmental forces. E. adding a fixed percentage to the cost of all items in a specific product class.

Q: The acronym EDLP stands for __________. A. estimated discount leveling policy B. extended discounts for leading products C. everyday low pricing D. either (free) delivery or lower prices E. extended discounts in lieu of lower pricing

Q: Standard markup pricing is considered to be a __________ approach to pricing. A. demand-oriented B. profit-oriented C. cost-oriented D. competition-oriented E. service-oriented

Q: Everyday low pricing refers to A. the pricing strategy of extreme value stores to maintain high price-quality images for the products they sell. B. the pricing strategy of starting a product at standard list price and then lowering the price by a certain percentage until it is sold. C. short-term price reductions when consumer demand takes a significant and unexpected dip. D. the practice of replacing promotional allowances with lower manufacturer list prices. E. a form of predatory pricing used solely for the purpose of undercutting competitors' prices.

Q: Which of the following statements regarding cost-oriented approaches is most accurate? A. These methods focus on the demand side of the pricing problem. B. These methods focus on production and marketing expenses. C. Target return on investment is an example of a cost-oriented method. D. Experience curve pricing is simple to use because costs predictably decrease by 25 percent with each doubling of production. E. Cost-oriented approaches are a subcategory of competition-oriented methods.

Q: The practice of replacing promotional allowances with lower manufacturer list prices is referred to as A. everyday low pricing. B. uniform fair pricing. C. trade-in allowances. D. markdown pricing. E. continuous value pricing.

Q: With a cost-oriented pricing strategy, a price setter stresses the __________ side of the pricing problem and the price is set by looking at __________. A. demand; revenue B. cost; consumer tastes C. production and marketing; profit D. demand; target sales E. cost; production and marketing expenses

Q: A promotional allowance refers to A. a one-time discount that must be used within a certain time frame or it expires. B. the cash payments or an extra amount of free goods awarded sellers in the marketing channel for undertaking certain advertising or selling activities to promote the product. C. the return of money based on proof of purchase. D. short-term price reductions when consumer demand takes a significant and unexpected dip. E. incentives, such as trips, cruises, jewelry, etc., presented to brand-loyal customers.

Q: With a __________ pricing strategy, a price setter stresses the __________ side of the pricing problem. A. demand-oriented; cost B. supply-oriented; target ROI C. competition-oriented; marketing channel D. cost-oriented; cost E. profit-oriented; customer preferences

Q: Cash payments or an extra amount of free goods awarded sellers in the channel for undertaking certain advertising or selling activities to promote the product is referred to as a A. promotional allowance. B. quantity discount. C. seasonal discount. D. purchase inducement. E. flexible pricing policy.

Q: Which of the following is a cost-oriented approach to pricing? A. cost-plus pricing B. skimming pricing C. prestige pricing D. loss-leader pricing E. bundle pricing

Q: A new car dealer can reduce the list price of a new Ford F-150 pickup truck by offering you a __________ of $1,000 for your 1998 Nissan Altima. A. cash discount B. functional discount C. seasonal discount D. trade-in allowance E. promotional allowance

Q: Which of the following is a cost-oriented pricing method? A. loss leader pricing B. standard markup pricing C. at-, above-, or below-market pricing D. price lining E. penetration pricing

Q: Which of the following statements regarding a trade-in allowance is most accurate?A. A trade-in allowance is a noncash exchange of one product for another of equal or lesser value.B. A trade-in allowance is an effective way to lower the price a buyer has to pay without formally reducing the list price.C. A trade-in allowance is a cash-back payment when a more expensive item is replaced with a less expensive one.D. A trade-in allowance is the return of money based on proof of purchase.E. A trade-in allowance is a cash payment to a retailer for extra in-store support or special featuring of the brand.

Q: One problem in the interstate trucking industry is the number of trucks that return empty after making a delivery. There is a website where independent interstate truckers can look for loads to carry on their return trips, known as backhauls. Because the trucks would normally return empty, truckers who use this website to generate business they would not have had otherwise receive a reduced shipping rate. This reduced rate for a backhaul is an example of A. penetration pricing. B. target pricing. C. cost-plus pricing. D. odd-even pricing. E. yield management pricing.

Q: A trade-in allowance refers to A. a noncash exchange of one product for another of equal or greater value. B. a cash-back payment when a more expensive item is replaced with a less expensive item. C. the return of money based on proof of purchase. D. a cash payment to a retailer for extra in-store support or special featuring of the brand. E. a price reduction given when a used product is part of the payment on a new product.

Q: Airlines, hotels, and car rental firms all engage in __________ by varying prices based on time, day, week, or season to match supply and demand. A. skimming pricing B. yield management pricing C. bundle pricing D. target pricing E. prestige pricing

Q: A price reduction given when a used product is part of the payment on a new product is referred to as a __________. A. cash discount B. seasonal discount C. trade-in allowance D. promotional allowance E. subsidy discount

Q: Yield management pricing is most consistent with services attempting to deal with A. perceived risk. B. capacity management. C. cognitive dissonance. D. inelasticity of demand. E. new product strategy development.

Q: Reductions from list or quoted prices to buyers for performing some activity are referred to as A. allowances. B. subsidies. C. remittances. D. noncumulative deductions. E. list price deductions.

Q: A __________ approach often changes prices based on time, day, week, or season. A. skimming pricing B. bundle pricing C. yield management pricing D. target return on investment pricing E. standard markup pricing

Q: Allowances, like discounts, refer to A. rewards given to retailers to encourage early payment. B. payment extensions given to cash-strapped consumers during the current recession. C. list price deductions based on surges in consumer demand. D. list price deductions based on sudden drops in consumer demand. E. reductions from list or quoted prices to buyers for performing some activity.

Q: Charging different prices to maximize revenue for a set amount of capacity at any given time is referred to as A. demand backward pricing. B. target pricing. C. skimming pricing. D. yield management pricing. E. penetration pricing.

Q: When Jeremy bought gas, he noticed the convenience store offered him a 2 percent reduction in price if he paid cash rather than if he used his credit card to pay for his purchase. The convenience store was offering him aA. trade discount.B. cash discount.C. promotional allowance.D. rebate.E. functional discount.

Q: Yield management pricing refers toA. controlling the production of products based upon seasonal demand.B. 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.C. charging the same prices during different times of the day or days of the week to reflect variations in supply for the service.D. offering significant price discounts to wholesalers who agree to purchase products in advance for a period of a year or more at a time.E. charging different prices to maximize revenue for a set amount of capacity at any given time.

Q: Larry's Lawn Care allows customers to use a credit card for purchases. Larry pays 4 percent of the sale to the credit card company. To promote more business, Larry decides to offer a lower price to customers paying cash - that price being 3 percent less than the standard list price. Larry is giving his customers a(n) A. functional discount. B. trade-in allowance. C. promotional allowance. D. cash discount. E. everyday low price.

Q: Yield management is considered to be a __________ approach to pricing. A. demand-oriented B. cost-oriented C. profit-oriented D. competition-oriented E. service-oriented

Q: A construction company was offered a 3 percent reduction in price off all invoices from a lumber yard for paying them within 10 days of issue. The lumber yard was offering aA. trade discount.B. cash discount.C. promotional allowance.D. rebate.E. flexible price.

Q: Individuals can choose to purchase Microsoft stand-alone software packages, such as the Microsoft Office 2013 Home and Student versions of Word, Excel, and PowerPoint for $109.99 each. Alternately, they may choose to purchase the Microsoft Office 2013 Home and Student Suite, which has these three applications plus OneNote in the same package for a price of $139.99. Microsoft is using a __________ pricing strategy. A. penetration B. prestige C. bundle D. odd-even E. standard mark-up

Q: The purpose of a cash discount is to A. reward retailers for making large quantity purchases. B. encourage purchasing items during periods of low demand. C. prevent competitors from obtaining shelf space. D. counteract the introduction of a new product by a competitor. E. encourage retailers to pay their bills promptly.

Q: A box of Cascade dishwasher detergent shrink-wrapped with a bottle of Jet Dry for 10 cents more than the regular price of the dishwasher detergent is an example of __________ pricing. A. penetration B. prestige C. bundle D. odd-even E. standard mark-up

Q: To encourage retailers to pay their bills quickly, manufacturers offer them A. quantity discounts. B. cash discounts. C. flexible pricing policies. D. promotional allowances. E. manufacturer's inducements.

Q: When Dell sells various laptops, it also pre-installs Microsoft Office and other software customers order at a discount before a laptop is shipped. This is an example of A. price lining. B. product line pricing. C. bundle pricing. D. customary pricing. E. prestige pricing.

Q: Trade discounts are offered to resellers in the marketing channel on the basis of the marketing activities they are expected to perform in the future and A. the frequency of the order. B. where they are in the channel. C. when orders are placed during the year. D. the length of the relationship with the manufacturer. E. the size of the order.

Q: If you were to buy one peach tree and one apple tree from the Stark Bros. fruit trees and landscaping catalog in two separate orders, you would pay a total of $109.99. However, if you order the peach and apple tree in the same order, you pay only $89.99. When selling the two trees together for a reduced price, what pricing strategy does Stark Bros. employ? A. product line pricing B. prestige pricing C. price lining D. discount pricing E. bundle pricing

Q: Functional discounts are offered to resellers in the marketing channel on the basis of where they are in the channel and A. the size of the order. B. the frequency of the order. C. when orders are placed during the year. D. the length of the relationship with the manufacturer. E. the marketing activities they are expected to perform in the future.

Q: Which one of the following statements regarding bundle pricing is most accurate? A. Bundle pricing is intended to benefit the consumer, not the seller. B. Bundle pricing is really "bundle packaging" since the price charged is for two or more of the same products that are shrink-wrapped together. C. Bundle pricing is often associated with a skimming strategy. D. Bundle pricing often provides a lower total cost to buyers and lower marketing costs to sellers. E. Bundle pricing is based on the idea that consumers value the individual items more than they value the group contained in the package.

Q: What type of discount to resellers is based in part on where they are in the channel? A. seasonal discounts B. trade discounts C. cash discounts D. promotional allowances E. trade-in allowances

Q: Bundle pricing refers to A. an extra amount of free goods awarded sellers in the channel of distribution for promoting a product. B. marketing two or more products in a single package price. C. using BOGOs - requiring customers to buy one to get one free - as a strategy to increase sales and profits. D. setting the price of a line of products at two specific pricing points. E. the practice of charging two or more prices depending upon the outlet carrying the product.

Q: To reward wholesalers and retailers for marketing functions they will perform in the future, a manufacturer often gives __________ discounts. A. seasonal B. cash C. trade D. quantity E. cumulative

Q: Marketing two or more products in a single package price is referred to as A. package pricing. B. loss-leader pricing. C. bundle pricing. D. tie-in pricing. E. multi-product pricing.

Q: The reward a manufacturer gives to wholesalers and retailers for marketing functions they will perform in the future is referred to as __________. A. seasonal discounts B. cash discounts C. promotional allowances D. trade discounts E. trade-in allowances

Q: Which of the following is a demand-oriented approach to pricing? A. customary pricing B. target profit pricing C. standard markup pricing D. bundle pricing E. service-oriented pricing

Q: What type of discount would Toro most likely offer its channel members to carry and sell its riding lawn mowers during the winter months? A. noncumulative discounts B. cumulative discounts C. functional discounts D. seasonal discounts E. trade discounts

Q: Bundle pricing is considered to be a __________ pricing practice. A. demand-oriented B. cost-oriented C. profit-oriented D. competition-oriented E. product line-oriented

Q: To encourage buyers to stock inventory earlier than their normal demand would require, manufacturers often use A. noncumulative discounts. B. cumulative discounts. C. seasonal discounts. D. trade discounts. E. functional discounts.

Q: The Swedish manufacturer of Asko dishwashers concluded that consumers would be willing to pay approximately $1000 for a dishwasher that was quieter than any other on the market. Asko determined about $250 in markups would have to be given to wholesalers and retailers, and then designed the quietest product that it could make for $750. Asko used A. prestige pricing. B. price lining. C. cost-plus pricing. D. target pricing. E. customary pricing.

Q: Seasonal discounts are used by manufacturers to A. get rid of dated merchandise. B. prevent retailers from purchasing competitors' products. C. prolong the peak seasonal selling season. D. establish an immediate feeling of goodwill between the buyer and seller that hopefully will continue when prices return to normal. E. entice dealers to purchase seasonal merchandise earlier in the selling season.

Q: Which of the following pricing techniques results in the manufacturers deliberately adjusting the composition and features of a product to achieve the desired price for consumers? A. cost-plus percentage-of-cost pricing B. standard markup pricing C. cost-plus fixed-fee pricing D. experience curve pricing E. target pricing

Q: Manufacturers use seasonal discounts toA. get rid of expired merchandise.B. prevent retailers from purchasing competitors' products.C. extend the peak seasonal selling season.D. encourage buyers to stock inventory earlier than their normal demand would require.E. temporarily spur primary demand during periods of soft sales, such as the beginning of a month, after which prices will return to normal when selective demand picks up.

Q: Which of the following pricing techniques is most sensitive to customers' responses to price? A. cost-plus percentage-of-cost pricing B. target pricing C. experience curve pricing D. cost-plus fixed-fee pricing E. standard markup pricing

Q: Mike Morgan, a sales representative for a major food service distributor of Betty Crocker's Warm Delights, wanted to encourage larger purchases by supermarkets and mass merchandisers. In order to accomplish this objective, Morgan offered the following discounts to his customers: a 10 percent discount for buying 1-49 cases of Warm Delights within a calendar month. The discount increases to 12 percent if 50-99 cases of Warm Delights are purchased and to 15 percent if 100 or more cases of Warm Delights are purchased within the same calendar month. What type of discount was Morgan offering his customers? A. a seasonal discount B. a quantity discount C. a cash discount D. a trade discount E. a case allowance discount

Q: The pricing approach that: (1) estimates the price that ultimate consumers would be willing to pay for a product; (2) works backward through markups taken by retailers and wholesalers to determine what price to charge wholesalers; and (3) results in the manufacturer deliberately adjusting the composition and features of the product to achieve the price to consumers is referred to as __________. A. cost-benefit pricing B. cost-plus percentage-of-cost pricing C. target pricing D. cost-plus fixed-fee pricing E. product feature pricing

Q: Your local instant photocopying service charges 10 cents a copy up to 25 copies, 9 cents a copy for 26 to 99 copies, and 8 cents a copy for 100 copies or more. What kind of adjustment to its list or quoted price of 10 cents per copy is the photocopying service using? A. experience curve pricing B. loss-leader pricing C. a quantity discount D. a promotional discount E. everyday low pricing

Q: Target pricing refers to A. a method of selecting specific prices wholesalers and retailers are willing to pay based upon the elasticity of each given item. B. a method of charging different prices to maximize revenue for a set amount of capacity at any given time. C. the practice of simultaneously increasing product and service benefits while maintaining or decreasing price. D. estimating the price that ultimate consumers would be willing to pay for a product, then working backward through markups taken by retailers and wholesalers to determine what price to charge wholesalers. E. a method of estimating the price that ultimate consumers would be willing to pay for a product, then determining how much wholesalers wish to charge its customers, deliberately adjusting the composition and features of the product to achieve the price to consumers.

Q: Quantity discounts refer to A. price reductions in unit costs for placing a larger order. B. price reductions for placing long-term pre-scheduled orders. C. price reductions to encourage retailers to stock inventory earlier than their normal demand would require. D. reductions that are offered for paying bills early. E. reductions in unit costs for taking merchandise that will soon be replaced by new and improved versions of the original product.

Q: Target pricing is considered to be a __________ approach to pricing. A. cost-oriented B. profit-oriented C. demand-oriented D. competition-oriented E. service-oriented

Q: Reductions in unit costs for a larger order are referred to as A. promotional allowances. B. economic order discounts. C. penetration pricing. D. quantity discounts. E. case allowances.

Q: The prices for all furniture sold at American Furniture Warehouse end in $9.99, such as $599.99, $899.99, etc. American Furniture Warehouse uses A. odd-even pricing. B. dynamic pricing. C. price lining. D. bundle pricing. E. product line pricing.

Q: The four types of discounts are A. quantity, trade-in, promotional, and cash. B. quantity, seasonal, trade (functional), and cash. C. quantity, seasonal, promotional, and FOB. D. cash, trade-in, seasonal, and promotional. E. trade-in, promotional, geographic, and functional.

Q: Which of the following statements regarding odd-even pricing is most accurate? A. Odd-even pricing is designed to give the consumer a better set of pricing alternatives. B. Odd-even pricing can be used in conjunction with a skimming pricing strategy, but should not be used with a penetration pricing strategy. C. Odd-even pricing does not work if the product is healthcare-related. D. Overuse of odd-ending prices tends to mute its effect on demand. E. Odd-ending prices are best used with large ticket items; it loses its effectiveness with moderate- to low-ticket items.

Q: Discounts refer to reductions from the __________ that a seller gives a buyer as a reward for some activity of the buyer that is favorable to the seller. A. final price B. list price C. wholesaler's cost D. manufacturer's cost E. retailer's cost

Q: To be successful, odd-even pricing depends on A. a retailers' ranges of prices. B. the wholesalers' markups. C. a manufacturer's costs. D. competitors' price assumptions. E. customers' perceptions of price.

Q: A reduction from the list price that a seller gives a buyer as a reward for some activity of the buyer that is favorable to the seller is called A. the pretax price. B. the list price. C. the manufacturer's suggested retail price (MSRP). D. a discount. E. a trade-in allowance.

Q: Setting prices a few dollars or cents under an even number is referred to as __________. A. odd-even pricing B. prestige pricing C. price lining D. above-, at-, or below-market pricing E. every day fair pricing

Q: Two types of adjustments to list or quoted price are A. profit-oriented and marginal adjustments. B. fixed-price and dynamic price adjustments. C. discounts and marginal adjustments. D. discounts and allowances. E. incremental costs and incremental revenues.

Q: Odd-even pricing refers to A. setting prices one way for product lines and another way for individual brands. B. setting prices of luxury items at even price points and setting the price of necessities at odd price points. C. setting prices a few dollars or cents under an odd number. D. adding a fixed percentage to the cost of all items in a specific product class. E. setting prices a few dollars or cents under an even number.

Q: Which of the following statements regarding new car purchases in the U.S. is most accurate? A. While men of all races pay basically the same price, women, regardless of race, pay considerably less. B. Seventy-nine percent of all men purchasing cars cite haggling over price as the most exciting aspect of the purchase. C. A fixed price policy is now the standard in the automobile industry due to violations of the Robinson-Patman Act. D. Female automobile salespeople rarely, if ever, offer flexible pricing to women customers. E. African-Americans, women, and Hispanics pay higher prices than the average price paid for a new car.

Q: Odd-even pricing is considered to be a __________ approach to pricing. A. cost-oriented B. profit-oriented C. demand-oriented D. competition-oriented E. service-oriented

Q: Flexible Pricing Chart Consider the dynamic pricing chart above, which shows the results of a National Bureau of Economic Research study of 750,000 car purchases. The data indicate that some groups of car buyers, on average, paid roughly $105, $423, and $483 respectively for a new car in the $21,000 range than the typical purchaser. Who are the car buyers in C? A. women B. the elderly C. Hispanics D. African Americans E. Asian Americans

Q: In response to Duracell's introduction of the Duracell Ultra battery, Energizer introduced an Advanced Formula battery. But unlike Duracell, Energizer priced its batteries at a low initial price to attract the mass market. Was Energizer's pricing strategy to take market share from Duracell a success? A. No, because consumers are price-insensitive when it comes to batteries. B. Yes, because of the positive association with the "Energizer Bunny" marketing campaign. C. No, because consumers were unable to perceive the improved quality due to the low price. D. Yes, because consumers typically respond positively to cost-plus pricing. E. Yes, because the demand for batteries has unitary elasticity.

Q: Flexible Pricing Chart Consider the dynamic pricing chart above, which shows the results of a National Bureau of Economic Research study of 750,000 car purchases. The data indicate that some groups of car buyers, on average, paid roughly $105, $423, and $483 respectively for a new car in the $21,000 range than the typical purchaser. Who are the car buyers in B? A. women B. the elderly C. Hispanics D. African Americans E. Asian Americans