Final Exam - Chapter 21

Question 1

6 Steps of Pricing Process

Answer 1

development of pricing objectives, assessment of target market’s evaluation of price, evaluation of competitors’ prices, selection of a basis for pricing, selection of a pricing strategy, determination of a specific price

Question 2

PP Step 1 - Development of Pricing Objectives

Answer 2

goals that describe what a firm wants to achieve through pricing

Question 3

Survival

Answer 3

adjust price levels so the firm can increase sales volume to match organizational expenses

Question 4

Profit

Answer 4

identify price and cost levels that allow the firm to maximize profit

Question 5

Return on Investment

Answer 5

identify price levels that enable the firm to yield targeted ROI

Question 6

Market Share

Answer 6

adjust price levels so the firm can maintain or increase sales relative to competitors’ sales

Question 7

Cash Flow

Answer 7

set price levels to encourage rapid sales

Question 8

Status Quo

Answer 8

identify price levels that help stabilize demand and sales

Question 9

Product Quality

Answer 9

set prices to recover research and development expenditures and establish a high-quality image

Question 10

PP Step 2 - Assessment of the Target Market’s Evaluation of Prices

Answer 10

depends on type of product, type of target market, purchase situation; value combines a product’s price and quality attributes (ex: cut lettuce vs. whole head)

Question 11

PP Step 3 - Evaluation of Competitor’s Prices

Answer 11

marketers should use competitors’ prices to help them establish their own prices

Question 12

PP Step 4 - Selection of a Basis for Pricing

Answer 12

can choose to price based on cost, demand, or competition; market costs usually end up bouncing between all three

Question 13

Things to Consider When Selecting A Basis

Answer 13

type of product, market structure, brand’s market share, customer characteristics

Question 14

Cots-Based Pricing

Answer 14

adding a dollar amount or percentage to the cost of the product

Question 15

Cost-Plus Pricing

Answer 15

determine the seller’s cost and add a specified dollar to it; used when production costs are difficult to predict (ex: WWII)

Question 16

Markup Pricing

Answer 16

adding a redetermined percentage of the cost to the price of the product (based on either cost or price)

Question 17

Demand-Based Pricing

Answer 17

customers pay a higher price when demand for the product is strong and a lower price when demand is weak

Question 18

Competition-Based Pricing

Answer 18

pricing influenced primarily by competitors’ prices

Question 19

Non-Price Factors Affecting Demand

Answer 19

market competition, competitors reactions, economic conditions, product quality, available substitutes, service support, ads/promo

Question 20

PP Step 5 - Selecting a Pricing Strategy

Answer 20

an approach or course of action designed to achieve pricing and marketing objectives

Question 21

Differential Pricing

Answer 21

charging different prices to different buyers for the same quality and quantity of producer (ex: diff. tuition charges for diff. majors)

Question 22

Negotiated Pricing

Answer 22

establishing a final price through bargaining between seller and customer (ex: house/car)

Question 23

Secondary-Market PRicing

Answer 23

one price for primary target market and a diff. price for another market (ex: prices in the US and in a 3rd world country)

Question 24

Periodic Discounting Pricing

Answer 24

Temporary reduction of prices on a patterned or systematic basis (Cars, year old models discounted in fall) May train consumers to wait.

Question 25

Random Discounting Pricing

Answer 25

Temporary reduction of prices on an unsystematic basis

Question 26

Price Skimming

Answer 26

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

Question 27

Penetration Pricing

Answer 27

Setting the price below those of competing brands to penetrate a market and gain a significant market share quickly (Amazon-limit competitors)

Question 28

Product-Line Pricing

Answer 28

Establishing and adjusting prices of multiple products within a product line

Question 29

Captive Pricing

Answer 29

Pricing the basic product in a product line low to increase demand while pricing related items higher (ex: razors and blades)

Question 30

Premium Pricing

Answer 30

Pricing the highest-quality or most versatile products higher than other models in the product line (ex: Apple Computer, Beer, Appliances)

Question 31

Bait Pricing

Answer 31

Pricing an item in a product line low with the intention of selling a higher-priced item in the line. (Bait and Switch) Mattress for $20 have none but have many priced at $60

Question 32

Price LIning

Answer 32

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

Question 33

Psychological Pricing

Answer 33

Pricing that attempts to influence a customer’s perception of price to make a product’s price more attractive (use of $.99)

Question 34

Reference Pricing

Answer 34

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

Question 35

Bundle Pricing

Answer 35

bundling together two or more complementary products and selling them at a single price. (Vacations packages, Happy Meal, Internet/phone/Cable Cable channels are bundled)

Question 36

Multiple-Unit Pricing

Answer 36

Packaging together two or more identical products and selling them at a single price. Warehouse clubs like Costco 4 packs, 12 packs- increase consumption/increase consumer inventory

Question 37

Everyday Low Prices (EDLP)

Answer 37

Pricing products low on a consistent basis/JC Penny tried to do this and it did not work. Mark up less than competition (Garment exploration)

Question 38

Odd-Even Pricing

Answer 38

Ending the price with certain numbers to influence buyers’ perceptions of the price or product $.95, $.99 or $1.00

Question 39

Customary Pricing

Answer 39

Pricing certain goods on the basis of tradition, Candy Bars/Gum everyone priced the same.

Question 40

Prestige Pricing

Answer 40

Setting prices at an artificially high level to convey prestige or a quality image (Cosmetics, Jewelry Mercedes-no real relationship to cost)

Question 41

Professional Pricing

Answer 41

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

Question 42

Price Leader

Answer 42

products priced below the usual markup, near cost, or below cost (loss leader)

Question 43

Special-Event Pricing

Answer 43

Advertised sales or price-cutting is used to increase sales volume and is linked to a holiday, a season, or other event

Question 44

Comparison Discounting

Answer 44

The pricing of a product at a specific level and simultaneously comparing it to a higher price

Question 45

PP Step 6 - Determination of Price

Answer 45

sets price using price strategies