chapter 9

Question 1

What are the three major pricing strategies?

Answer 1

1. Customer value based pricing
2. Cost based pricing
3. Competition based pricing

Question 2

Customer perceptions of the products value set the ceiling for prices.

Answer 2

If customers perceive that the price is greater than the products value, they will not buy the product

Question 3

Costs are an important consideration in setting prices, however, cost based pricing is often product driven.

Answer 3

The company designs what it considers to be a good product and sets a price that covers costs plus a target profit

Question 4

Value based pricing assesses customer needs and value perceptions and then sets a target price to match targeted value

Answer 4

The targeted value and price then drive decisions about product design and what costs can be incurred

Question 5

What are internal factors that influence pricing decisions?

Answer 5

1. Company’s marketing strategy
2. Objectives
3. Marketing mix

Question 6

What are external pricing considerations marketers should consider?

Answer 6

1. Economy
2. Reseller needs
3. Government actions

Question 7

The customer weighs the price against the perceived values of using the product

Answer 7

If the price exceeds the sum of the values, consumers will not buy

Question 8

Market skimming pricing

Answer 8

Initially setting prices high to eventually skim the maximum amount of revenue from various segments of the market

Question 9

Market penetration pricing

Answer 9

Setting a low initial price to penetrate the market deeply and win a large market share

Question 10

Product line pricing

Answer 10

When the company decides on price steps for the entire set of products it offers

Question 11

Companies must set prices for these three products

Answer 11

1. Optional products
2. Captive products
3. By-products

Question 12

Optional products

Answer 12

Optional or accessory products included with the main product

Question 13

Captive products

Answer 13

Products that are required for use of the main product

Question 14

By-products

Answer 14

Combinations of products at a reduced price

Question 15

Discount and allowance pricing is…

Answer 15

when the company establishes cash, quantity, functional, or seasonal discounts or varying types of allowances

Question 16

Segmented pricing

Answer 16

Where the company sells a product at two or more prices to accommodate different customers, product lines, locations, or times

Question 17

Dynamic pricing

Answer 17

Companies adjust prices continually to meet the characteristics and needs of individual customers and situations

Question 18

When a firm considers initiating a price change, it must consider customers and competitors reactions

Answer 18

When facing a competitors price change, the company might sit tight, reduce its own price, raise perceived quality, improve quality and raise price, or launch a fighting brand