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Exam 12: Pricing Concepts and Management

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Question 111

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Scenario 12.3 Use the following to answer the questions. Suppose that Ray-Ban is considering a new line of sunglasses that would be sold in major department stores. The new line would be positioned as a more distinctive brand than the typical glasses sold through department stores, and would be priced higher than other brands in the store, but a lower price line than the current Ray-Ban lines that are sold through more selective stores. In determining the price for this sunglass line, Ray-Ban wants to gather information about all brands sold in department stores and about customers' perceptions of those brands. Refer to Scenario 12.3. Ray-Ban has decided to promote the new sunglass line as an "affordable luxury" and plans significant promotional expenditures. With these objectives, which of the following should Ray-Ban use to price its product line?

A) competition-based pricing
B) cost-plus pricing
C) markup pricing
D) demand-based pricing
E) differential pricing

F) A) and D)
G) A) and C)

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Question 112

Multiple Choice

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Reductions for transportation and other costs related to the physical distance between buyer and seller are known as

A) base-point pricing.
B) freight absorption pricing.
C) price zoning.
D) location pricing.
E) geographic pricing.

F) A) and E)
G) B) and E)

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Question 113

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Differential pricing means different buyers pay different prices for the same quality and quantity of product.

Justin, a sales representative for Serta Mattress manufacturers, phones Kirk of Southside Furniture to inform him that if he will increase his recent order of 15 mattress sets to 20, he will receive a 14 percent price reduction. This offer is due to a recent overstock condition at the factory and will not be available in the future. The discount offered here is

Which of the following acts does not directly affect pricing decisions?

For most consumers, there is an assumed relationship between

Vanessa is shopping for a new pair of athletic shoes. Since she is concerned about both the price and the quality aspects of a product, Vanessa is most likely a ___ consumer.

A marketer uses only one pricing objective to avoid organizational confusion.

Scenario 12.4 Use the following to answer the questions. Glenwood Pet Hospital is considering implementing a new pricing strategy for its veterinarian services. After reviewing the previous three years' revenue, Glenwood finds that most of its customers bring their pets in for the required annual vaccinations and then only if the animal is ill. Glenwood's objective is to generate more income per customer on an annual basis. The hospital has previously priced its services by charging a flat fee for the office visit, a fee for each vaccine, and a fee for each type of examination beyond the basic office visit. Most customers pay the flat office fee and a fee for a rabies vaccine. Glenwood is now considering a new plan where the pet owner would pay one fee that would cover an office visit, the required rabies vaccine, and additional vaccines that prevent heartworm, kennel-cough, and fleas. Glenwood hopes to encourage the pet owners to view their pet's health as part of a prevention program, rather than a one-time annual visit. Refer to Scenario 12.4. Glenwood has decided that it is going to offer a special package offer if the prevention plan is purchased within the first 30 days of each year's time for vaccinations. This type of pricing strategy would be an example of

Rent is usually a fixed cost.

The management at Allied Electronics is having difficulty in raising the introductory price on system components to cover the increased costs of producing the sensing devices for home security systems. Apparently, Allied used a(n) ____ strategy in pricing these components.

Scenario 12.3 Use the following to answer the questions. Suppose that Ray-Ban is considering a new line of sunglasses that would be sold in major department stores. The new line would be positioned as a more distinctive brand than the typical glasses sold through department stores, and would be priced higher than other brands in the store, but a lower price line than the current Ray-Ban lines that are sold through more selective stores. In determining the price for this sunglass line, Ray-Ban wants to gather information about all brands sold in department stores and about customers' perceptions of those brands. Refer to Scenario 12.3. Ray-Ban's plan of gathering information about the other brands sold in department stores, including their prices, would most likely be used in a ____ basis for pricing.

Markum Industries determines that for its air compressors the following results are achieved at a price of $250: total costs = $250,000; variable costs per unit = $100; fixed costs = $175,000. Given these figures, Markum would break even at ____ units.

Brian is shopping for a new coat at Stein Mart and finds a North Face down jacket that he really likes. He knows that the North Face brand is considered to be high quality and that it's usually very expensive. He's pleasantly surprised to see the price-the "suggested retail price" is $199 and Stein Mart's price is $99. Brian decides to purchase the coat even though it's a little more expensive than he originally thought he'd spend on the jacket. What type of pricing strategy is Stein Mart using to price the North Face jacket and other merchandise?

With prestige products, a firm will always be able to sell more at a higher price.

A company wanting to maximize profits from its new product would use product-line pricing.

Odd-number pricing is

Gambrell Designs thinks its new product, the Automatic Dog Walker, will have a short product life cycle; therefore, its marketing department sets its primary pricing objective as

If demand is elastic, a change in price causes a parallel change in total revenue.

A marketer is most likely to set prices according to a cash-flow objective when a