Marketing quốc tế 14 developing pricing strategies and programs

4 The reservation price or the maximum that most consumers would pay for a given product is known as the ________ price.5 A company decided to conduct a market survey for its new MP3 pla

Marketing Management, 14e (Kotler/Keller)

Chapter 14 Developing Pricing Strategies and Programs

1) When consumers examine products, they often compare an observed price to an internal price they remember This is known as a(n) price

3) While shopping at the mall, Jane was asked by one of the sales representatives at the

cosmetics counter to try out a new lipstick that her company was test marketing The company representative asks her how much she would be willing to pay for the lipstick After trying it out, Jane is of the opinion that $5 is just the right price for it What type of a reference price is Jane using?

A) usual discounted price

B) fair price

C) maximum retail price

D) last price paid

E) historical competitor price

4) The reservation price or the maximum that most consumers would pay for a given product is known as the price.

5) A company decided to conduct a market survey for its new MP3 player which it had priced at

$150 However, in the survey, 95 percent of the participants said that the maximum they would pay for the MP3 player is $100 This is an example of which of the following possible consumer reference prices?

A) historical competitor price

B) expected future price

C) usual discounted price

7) A company has developed the prototype of a mobile phone which it plans to launch in the nextfew months The phone comes equipped with the most advanced technological features As part

of its test marketing efforts, it allows customers to examine and use the prototype and also gathers feedback regarding product features and price The results of this test marketing effort show that customers are willing to pay at least $500, considering the phone's various features Assuch, the company has found out about the customers'

A) last paid price

B) expected future price

9) Pricing cues such as sale signs and prices that end in 9 are more influential

A) when customers have substantial knowledge about prices

B) when customers purchase the particular item regularly

C) when product quality is standardized

D) when product designs vary over time

E) when prices do not vary from time to time

Answer: D

Page Ref: 388

Objective: 1

Difficulty: Moderate

10) Which of the following is the first step in setting a pricing policy?

A) selecting a pricing method

B) selecting the pricing objective

A) It should analyze its competitors' costs, prices, and offers

B) It should select its pricing method

C) It should select its final price

D) It should determine the demand for its product

E) It should estimate the cost of its product

A) maximize its market share

B) skim the market

C) become a product-quality leader

D) survive in the market

E) maximize its current profit

Answer: E

Page Ref: 389

Objective: 2

14) Companies who believe that a higher sales volume leads to lower unit costs and higher run profits are attempting to .

long-A) maximize their market share

B) skim the market

C) become a product-quality leader

D) merely survive in the market

E) maximize their current profits

16) A market-penetration pricing strategy is most suitable when _

A) a low price slows down market growth

B) production and distribution costs fall with accumulated production experience

C) a high price dissuades potential competitors from entering the market

D) the market is characterized by inelastic demand

E) a low price encourages actual competition

18) When Apple introduced its iPhone, it was priced at $599 This allowed Apple to earn the maximum amount of revenue from the various segments of the market Two months after the introduction, the price has come down to $399 What kind of a pricing did Apple adopt?A) loss-leader pricing

A) if a sufficient number of buyers have a high current demand

B) if the unit costs of producing a small volume are high enough to cancel the advantage of charging what the traffic will bear

C) if the high initial price does not attract more competitors to the market

D) if consumers are likely to delay buying the product until its price drops

E) if the high price communicates the image of a superior product

Answer: D

Page Ref: 390

Objective: 2

Difficulty: Easy

20) Companies that aim to strive to be affordable luxuries

A) survive in the market

B) partially recover their costs

C) maximize their market share

D) pursue value pricing

21) Starbucks, Aveda, and BMW have been able to position themselves within their categories

by combining quality, luxury, and premium prices with an intensely loyal customer base These companies are employing a strategy

22) The first step in estimating demand is to

A) analyze competitors' cost

B) select a pricing method

C) understand what affects price sensitivity

D) calculate fixed costs

E) decipher the experience curve

Answer: C

Page Ref: 390

Objective: 2

Difficulty: Moderate

23) Consumers are less price sensitive

A) to high cost items

B) when they frequently change their buying habits

C) when there are more substitutes

D) when there are more competitors

E) when they do not readily notice higher prices

Answer: E

Page Ref: 390-391

Objective: 2

Difficulty: Moderate

24) Consumers are less price sensitive when

A) price is only a small part of the total cost spent on the product over its lifetime

B) they perceive the higher prices to be unjustified

C) they change their buying habits regularly

D) there are many substitutes and competitors in the market

E) they are buying high-cost items

Answer: A

Page Ref: 391

Objective: 2

Difficulty: Moderate

25) If demand hardly changes with a small change in price, the demand is said to be A) strained

28) Which of the following is true regarding price elasticity?

A) The higher the elasticity, the lesser is the volume growth resulting from a 1 percent price reduction

B) Within the price indifference band, price changes have little or no effect on demand

C) If demand is elastic, sellers will consider increasing the price

D) Price elasticity does not depend on magnitude and direction of the contemplated price change.E) When demand is inelastic, sellers should lower prices in order to increase total revenue.Answer: B

Page Ref: 392

Objective: 2

29) Costs that do not vary with production levels or sales revenue are known as .A) overhead costs

33) is the cost per unit at that level of production.

A) assumes competitors are weak followers

B) allows products to project a high quality image

C) is applicable only to manufacturing costs

D) focuses on reducing fixed costs

37) Competitors are most likely to react to a price change, when .

A) the firm has a weak value proposition

B) the firm enjoys a monopoly

C) there are few competing firms

D) the product is heterogeneous

E) buyers have limited information

B) By tying the price to cost, the pricing task becomes more sophisticated

C) When all firms in the industry use markup pricing, price competition flourishes

D) Sellers take advantage of buyers when the latter's demand becomes acute

E) Many people feel that cost-plus pricing is fairer to both buyers and sellers

41) An umbrella manufacturing company's fixed costs are $275,000 The variable cost per unit is

$5 and each umbrella is sold at $10 How many units should the firm sell in order to break even?A) 18000

43) The key to perceived-value pricing is to

A) reengineer the company's operations

B) deliver more unique value than competitors

C) adopt subtle marketing tactics compared to competitors

D) deliver more value but at a lower cost

E) invest heavily in advertising in order to convey superior value

Answer: B

Page Ref: 399

Objective: 2

Difficulty: Moderate

44) pricing is a matter of reengineering the company's operations to become a cost producer without sacrificing quality.

A) auction-type pricing policy

B) target-plus pricing policy

C) everyday low pricing policy

D) high-low pricing policy

E) going-rate pricing policy

47) Everyday low pricing is most suitable if .

A) consumers are willing to perform activities such as clip coupons to avail of discountsB) consumers tend to associate price with quality

C) customers are insensitive to changes in price

D) the cost of conducting frequent sales and promotions is high

E) consumers have sufficient time to find the best prices

A) a Dutch auction with one buyer and many sellers

B) an English auction with one seller and many buyers

C) an ascending bid auction

51) In a(n) , the buyer announces something he or she wants to buy, and potential sellers compete to offer the lowest price.

A) Dutch auction with one buyer and many sellers

B) English auction with one buyer and many sellers

C) English auction with one seller and many buyers

54) A Japanese firm is ready to sell its recent technological innovation to the U.S government But it has asked for 80 percent in cash and the rest in mica The Japanese firm is looking to enter into a(n) with the U.S government.

57) are offered by a manufacturer to trade-channel members if they will perform certain functions, such as selling, storing, and record keeping.

61) reward dealers for participating in advertising and sales support programs.

A) longer payment term

B) warranty contract

C) service contract

D) special customer price

E) special event price

64) In , the seller charges a separate price to each customer depending on the intensity

of his or her demand

A) second-degree price discrimination

B) third-degree price discrimination

65) In second-degree price discrimination, the seller charges

A) less to buyers of larger volumes

B) different prices depending on the season, day, or hour

C) a separate price to each customer depending on the intensity of his or her demand

D) different prices for different versions of the same product

E) different prices for the same product depending on the channel through which it is soldAnswer: A

Page Ref: 406

Objective: 3

Difficulty: Moderate

66) In , the seller charges different amounts to different classes of buyers

A) perceived value pricing

B) third-degree price discrimination

C) first-degree price discrimination

D) second-degree price discrimination

67) When museums charge a lower admission fee to students and senior citizens, then this form

of price discrimination is known as

68) Madame Tussaud's wax museum is a popular tourist attraction in London The museum charges higher entry rates for tourists compared to locals This form of price discrimination is known as .

A) customer-segment pricing

B) image pricing

C) location pricing

D) special customer pricing

E) special event pricing

69) When Coca-Cola carries a different price depending on whether the consumer purchases it in

a fine restaurant, a fast-food restaurant, or a vending machine, then this form of price

71) When hotels drop their rates on the weekends, then this form of price discrimination is known as

74) For price discrimination to work .

A) the market must be segmentable and the segments must show similar intensities of demandB) members in the lower-price segment must be able to resell the product to the higher-price segment

C) competitors must be able to undersell the firm in the higher-price segment

D) the practice must not breed customer resentment and ill will

E) the extra revenue derived from price discrimination must not exceed the cost of segmenting and policing the market

77) A company does not set a final price until the product is finished or delivered This is known

A) shrink the amount of the product available

B) substitute expensive materials or ingredients

C) reduce product features

D) reduce product services

E) augment the product

Answer: E

Page Ref: 409

Objective: 5

81) Price is one of the two elements of the marketing mix that produces revenue

88) Many consumers use price as an indicator of quality and value

95) Price elasticity depends upon the magnitude and direction of the contemplated price change Answer: TRUE

102) The U.S government often uses Dutch auctions to procure supplies.

109) In first-degree price discrimination, the seller charges less to buyers of larger volumes.Answer: FALSE

116) In a price-war trap, higher-priced competitors match the firm's lower prices but have longer staying power because of deeper cash reserves

121) How does the Internet help sellers discriminate between buyers and vice-versa?

Answer: The Internet helps buyers to:

• Get instant price comparisons from thousands of vendors

• Name their price and have it met

• Get products free

The Internet helps sellers to:

• Monitor customer behavior and tailor offers to individuals

• Give certain customer access to special prices

The Internet helps both buyers and sellers to negotiate prices in online auctions and exchanges oreven in person

Page Ref: 384-386

Objective: 1

Difficulty: Moderate

122) What are the different possible consumer reference prices?

Answer: Although consumers have fairly good knowledge of price ranges, surprisingly few can accurately recall specific prices When examining prices, consumers often employ reference prices, comparing an observed price to an internal reference price they remember or an external frame of reference such as a posted "regular retail price."

These reference prices include:

• Fair price - what consumers feels the product should cost

• Typical price

• Last price paid

• Upper-bound price - reservation price or the maximum most consumers would pay

• Lower-bound price - lower threshold price or the minimum most consumers would pay

• Historical competitor price

• Expected future price

• Usual discounted price

Page Ref: 387

Objective: 1

Difficulty: Moderate

123) Briefly describe the different types of pricing objectives.

Answer: When a company is preparing to sets its price, first of all it has to select its pricing objectives The five major objectives available to a company are: survival, maximum current profit, maximum market share, maximum market skimming, and product-quality leadership

• Survival - Companies pursue survival as their major objective if they are plagued with

overcapacity, intense competition, or changing consumer wants As long as prices cover variablecosts and some fixed costs, the company stays in business

• Maximum current profit - Companies who try to maximize their current profit, estimate the demand and costs associated with alternative prices and choose the price that produces maximumcurrent profit, cash flow, or rate of return on investment This strategy assumes the firm knows its demand and cost functions, but in reality, these are difficult to estimate

• Maximum market share - Companies that want to maximize their market share believe that a higher sales volume will lead to lower unit costs and higher long-run profit They set the lowest price, assuming the market is price sensitive This is a market-penetration pricing strategy

• Maximum market skimming - Companies unveiling a new technology favor setting high prices

to maximize market skimming Companies that use this, introduce their products at a high price and slowly drop the price over time

• Product-quality leadership - Companies that aim to be product quality leaders strive to be affordable luxuries, i.e., they want their products and services to be characterized by high levels

of perceived quality, taste, and status with a price just high enough not to be out of the

consumer's reach

Page Ref: 389-390

Objective: 2

Difficulty: Moderate