Week 7

Question 1

Price

Answer 1

the money or other considerations exchanged for the ownership or use of a product or service - indicate value

Question 2

pricing objectives (6)

Answer 2

1. sales revenue
2. quantity sold (unit volume)
3. market share
4. profit
5. survival
6. social responsibility

Question 3

considerations in setting price
- pricing constraints

Answer 3

• demand for the product class and brand
• newness of the product
• cost of producing
• single product vs product line
• type of competitive market
• competitor’s prices and consumer’s awareness
• legal and ethical considerations

Question 4

setting a final price

Answer 4

1. identify pricing objectives and constraints
2. estimate demand and revenue
3. determine cost, volume, and profit relationship
4. select an approximate price level
5. set the list or quoted price
6. make special adjustments to the list or quoted price

Question 5

general pricing approaches

Answer 5

finding an approximate price level and use it as a reasonable starting point

Question 6

demand oriented pricing approach

Answer 6

biggest factor is expected customers taste and preferences

Question 7

skimming pricing

Answer 7

high initial price

Question 8

penetration pricing

Answer 8

low initial price

Question 9

prestige pricing

Answer 9

high price

Question 10

price lining

Answer 10

elastic at each price points but inelastic between price points

Question 11

odd even pricing

Answer 11

setting a few dollars or scent under an even number

Question 12

bundle pricing

Answer 12

marketing two or more products in a single package price

Question 13

yield management pricing

Answer 13

charging at different prices to maximize revenue

Question 14

cost oriented pricing approaches

Answer 14

production and marketing costs

Question 15

standard markup pricing

Answer 15

adding a fixed percentage of all items

Question 16

cost plus pricing

Answer 16

adding a specific amount to the cost

Question 17

profit oriented pricing approach

Answer 17

target profit pricing - annual target of a specific dollar volume of profit
target return on sales pricing - profit that is specified percentage of sales vol
target return on investment pricing - annual target return on investment

Question 18

profit equation

Answer 18

total revenue - total cost

Question 19

competition oriented pricing approaches

Answer 19

• customary pricing
• loss leader pricing
• above, at, or below market pricing

Question 20

one price policy and dynamic price policy

Answer 20

• setting one price for all buyers
• different prices in real time in response to demand and supply conditions

Question 21

calculate final price

Answer 21

list price - (incentives + allowance)+extra fees

Question 22

value pricing formula

Answer 22

value = perceived benefits/price

Question 23

pricing objectives-profit

Answer 23

• return on investment (ROI)
• return on assets (ROA)
• managing for long run profits
• maximizing current profit objective
• target return (profit goal)

Question 24

types of competitive market (4)

Answer 24

1. pure competition
2. monopolistic competition
3. oligopoly
4. pure monopoly

Question 25

demand factors (3)

Answer 25

1. consumer's taste 2. price and availability for similar products 3. consumer income

Question 26

assess the effect of price changes on profit

Answer 26

Break even point fixed cost/unit price-unit variable cost

Question 27

price discrimination

Answer 27

charging different prices to different buyers for products of like grade and quality

Question 28

deceptive pricing

Answer 28

involves - price deals that mislead consumers

Question 29

predatory pricing

Answer 29

charging very low prices with the intent of driving competitors out of business

Question 30

price war

Answer 30

successive price cutting by competitors to increase or maintain their unit sales or market share

Question 31

product line pricing is

Answer 31

setting of prices for all items in product line to cover the total cost and produce a profit for the complete line not for each item

Question 32

consider price cutting (3)

Answer 32

1. if the company has competitive advantage 2. if primary demand will grow 3. if price cut is for specific product

Question 33

Quantity discounts - noncumulative quantity discounts - cumulative quantity discounts - seasonal discounts

Answer 33

noncumulative quantity discounts - based on the size of an individual purchase order (encourage large individual purchase order) cumulative quantity discounts - apply to the accumulation of purchases of a product over a given time period, typically a year (encourage repeat buying)

Question 34

step 6: make special adjustments to the list or quoted price

Answer 34

- discounts - allowances - geographical adjustments

Question 35

trade (functional) discounts cash discounts

Answer 35

trade (functional) discounts: rewards retailers for performing marketing functions cash discounts: encourages retailers to pay bills quickly

Question 36

trade in allowances: promotional allowances:

Answer 36

trade in allowances: price reduction for trading used product for new product promotional allowances: cash or free goods awarded sellers in marketing channel for advertising promoting a product - everyday low pricing (EDLP)

Question 37

Step 6: make special adjustments to the list - geographical adjustments

Answer 37

- FOB origin pricing - uniform delivered pricing (4)

Question 38

legal and ethical considerations for pricing

Answer 38

- price fixing (3) - price discrimination - deceptive pricing - predatory pricing

Question 39

5 common deceptive pricing practices

Answer 39

- bait and switch - bargains conditional on other purchases - comparable value comparisons - comparisons with suggested prices - former price comparisons