Chapter 21

Question 1

Pricing Objectives

Answer 1

Goals that describe what a firm wants to achieve through pricing.

Question 2

Cost-Based Pricing

Answer 2

Adding a dollar amount or percentage to the cost of the product.

Question 3

Cost-Plus Pricing

Answer 3

Adding a specified dollar amount or percentage to the seller’s cost.

Question 4

Markup Pricing

Answer 4

Adding to the cost of the product a predetermined percentage of that cost.

Question 5

Demand-Based Pricing

Answer 5

Pricing based on the level of demand for the product.

Question 6

Competition-Based Pricing

Answer 6

Pricing influenced primarily by competitor’s prices.

Question 7

Differential Pricing

Answer 7

Charging different prices to different buyers for the same quality and quantity of product.

Question 8

Negotiated Pricing

Answer 8

Establishing a final price through bargaining between seller and customer.

Question 9

Secondary-Market Pricing

Answer 9

Setting one price for the primary target market and a different price for another market.

Question 10

Periodic Discounting

Answer 10

Temporary reduction of prices on a patterned or systematic basis.

Question 11

Random Discounting

Answer 11

Temporarily reduction of prices on an unsystematic basis.

Question 12

Price Skimming

Answer 12

Charging the highest possible price that buyers who most desire the product will pay.

Question 13

Penetration Pricing

Answer 13

Setting prices below those of competing brands to penetrate a market and gain a significant market share quickly.

Question 14

Product-Line Pricing

Answer 14

Establishing and adjusting prices of multiple products within a product line.

Question 15

Captive Pricing

Answer 15

Pricing the basic product in a product line low, while pricing related items higher.

Question 16

Premium Pricing

Answer 16

Pricing the highest-quality or most versatile products higher than other models in the product line.

Question 17

Bait Pricing

Answer 17

Pricing an item in a product line low with the intention of selling a higher-priced item in the line.

Question 18

Price Lining

Answer 18

Setting a limited number of prices for selected groups or lines of merchandise.

Question 19

Psychological Pricing

Answer 19

Pricing that attempts to influence a customer’s perception of price to make a product’s price more attractive.

Question 20

Reference Pricing

Answer 20

Pricing a product at a moderate level and displaying it next to a more expensive model or brand.

Question 21

Bundle Pricing

Answer 21

Packaging together two or more complementary products and selling them at a single price.

Question 22

Multiple-Unit Pricing

Answer 22

Packaging together two or more identical products and selling them at a single price.

Question 23

Everyday Low Prices (EDLP)

Answer 23

Pricing products low on a consistent basis.

Question 24

Odd-Even Pricing

Answer 24

Ending the price with certain numbers to influence buyers’ perceptions of the price or product.

Question 25

Customary Pricing

Answer 25

Pricing on the basis of tradition.

Question 26

Prestige Pricing

Answer 26

Setting prices at an artificially high level to convey prestige or a quality image.

Question 27

Professional Pricing

Answer 27

Fees set by people with great skill or experience in a particular field.

Question 28

Price Leaders

Answer 28

A product priced below the usual markup, near cost, or below cost.

Question 29

Special-Event Pricing

Answer 29

Advertised sales or price cutting linked to a holiday, a season, or an event.

Question 30

Comparison Discounting

Answer 30

Setting a price at a specific level and comparing it with a higher price.