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Chapter 13Pricing Management

ESSAY

1. Describe the six steps of the process that marketers can use to establish prices.

ANS:
Answer not provided.

PTS: 1 DIF: Moderate REF: p. 628


OBJ: 13-01 Describe the six major stages of the process used to establish prices.
NAT: AACSB: Communication | MKTG: Pricing MSC: Knowledge

2. What are some of the objectives a firm might hope to achieve when setting prices?

ANS:
Answer not provided.

PTS: 1 DIF: Moderate REF: p. 628


OBJ: 13-02 Explore issues related to developing pricing objectives.
NAT: AACSB: Analytic | MKTG: Pricing MSC: Knowledge

3. How are pricing objectives similar to a corporation's overall goals? How are they different?

ANS:
Answer not provided.

PTS: 1 DIF: Moderate REF: p. 628


OBJ: 13-02 Explore issues related to developing pricing objectives.
NAT: AACSB: Analytic | MKTG: Pricing | MKTG: Strategy MSC: Knowledge

4. How can a marketer use product quality as a pricing objective to influence purchasing decisions?

ANS:
Answer not provided.

PTS: 1 DIF: Difficult REF: p. 630


OBJ: 13-02 Explore issues related to developing pricing objectives.
NAT: AACSB: Reflective Thinking | MKTG: Pricing MSC: Knowledge

5. How might a marketer find information about a competitor's prices? Why is this information
important?

ANS:
Answer not provided.

PTS: 1 DIF: Moderate REF: p. 631


OBJ: 13-04 Examine how marketers ananlyze competitors' prices.
NAT: AACSB: Reflective Thinking | MKTG: Pricing MSC: Knowledge

6. Explain the difference between cost-plus and markup pricing.


ANS:
Answer not provided.

PTS: 1 DIF: Moderate REF: p. 633


OBJ: 13-05 Describe the basis used for setting prices.
NAT: AACSB: Communication | MKTG: Pricing MSC: Knowledge

7. Describe, compare, and contrast the three major bases for setting prices.

ANS:
Answer not provided.

PTS: 1 DIF: Moderate REF: p. 633-636


OBJ: 13-05 Describe the basis used for setting prices.
NAT: AACSB: Analytic | MKTG: Pricing | MKTG: Strategy MSC: Knowledge

8. Explain differential pricing and then describe the four major types.

ANS:
Answer not provided.

PTS: 1 DIF: Easy REF: p. 636


OBJ: 13-06 Explain the different types of pricing strategies.
NAT: AACSB: Communication | MKTG: Pricing MSC: Knowledge

9. Compare and contrast price skimming and penetration pricing.

ANS:
Answer not provided.

PTS: 1 DIF: Moderate REF: p. 639-640


OBJ: 13-06 Explain the different types of pricing strategies.
NAT: AACSB: Communication | MKTG: Pricing MSC: Knowledge

10. Identify and describe the four types of product-line pricing.

ANS:
Answer not provided.

PTS: 1 DIF: Moderate REF: p. 639


OBJ: 13-06 Explain the different types of pricing strategies.
NAT: AACSB: Communication | MKTG: Pricing MSC: Knowledge

11. Identify and describe six types of psychological pricing.

ANS:
Answer not provided.

PTS: 1 DIF: Moderate REF: p. 641-643


OBJ: 13-06 Explain the different types of pricing strategies.
NAT: AACSB: Communication | MKTG: Pricing MSC: Knowledge

12. What is bundle pricing? Give three examples, each one from a different industry.
ANS:
Answer not provided.

PTS: 1 DIF: Moderate REF: p. 641


OBJ: 13-06 Explain the different types of pricing strategies.
NAT: AACSB: Communication | MKTG: Pricing MSC: Knowledge

13. Explain the ethical implications of professional pricing.

ANS:
Answer not provided.

PTS: 1 DIF: Moderate REF: p. 644


OBJ: 13-06 Explain the different types of pricing strategies.
NAT: AACSB: Communication | MKTG: Pricing MSC: Knowledge

14. Under what conditions would a marketer most likely use a price leader strategy?

ANS:
Answer not provided.

PTS: 1 DIF: Moderate REF: p. 644


OBJ: 13-06 Explain the different types of pricing strategies.
NAT: AACSB: Analytic | MKTG: Pricing | MKTG: Strategy MSC: Knowledge

15. What are some issues to consider when determining a specific price?

ANS:
Answer not provided.

PTS: 1 DIF: Moderate REF: p. 645


OBJ: 13-06 Explain the different types of pricing strategies.
NAT: AACSB: Communication | MKTG: Pricing MSC: Knowledge

MULTIPLE CHOICE
16. When establishing prices, a marketer's first step is to
a. determine demand.
b. develop pricing objectives.
c. select a pricing policy.
d. evaluate competitors' prices.
e. determine a pricing method.
ANS: B PTS: 1 DIF: Moderate REF: p. 628
OBJ: 13-01 Describe the six major stages of the process used to establish prices.
NAT: AACSB: Reflective Thinking | MKTG: Pricing MSC: Knowledge

17. Marketers must take steps to make sure that the pricing objectives they set are consistent with the
organization's ____ objectives and ____ objectives.
a. advertising; marketing
b. overall; marketing
c. marketing; promotional
d. overall; promotional
e. overall; revenue
ANS: B PTS: 1 DIF: Moderate REF: p. 628
OBJ: 13-01 Describe the six major stages of the process used to establish prices.
NAT: AACSB: Analytic | MKTG: Pricing MSC: Knowledge

18. If Wrigley set its pricing objective as attaining 38 percent of the chewing gum market, what else would
be needed to make this a true pricing objective?
a. Statement of demand elasticities
b. Identification of cost structure
c. Breakeven analysis
d. Identification of a time period for accomplishment
e. Establishment of a subsequent pricing policy
ANS: D PTS: 1 DIF: Difficult REF: p. 628
OBJ: 13-01 Describe the six major stages of the process used to establish prices.
NAT: AACSB: Reflective Thinking | MKTG: Pricing MSC: Application

19. Which of the following is a requirement for setting pricing objectives?


a. The objectives should be short-term oriented.
b. There should be only one pricing objective.
c. An evaluation of competitors' prices should be made.
d. The cost structure should be identified.
e. The objectives should be explicitly stated.
ANS: E PTS: 1 DIF: Difficult REF: p. 628
OBJ: 13-02 Explore issues related to developing pricing objectives.
NAT: AACSB: Reflective Thinking | MKTG: Pricing MSC: Knowledge
20. When a company adjusts price levels so that it can increase sales volume to levels that match the
organization's expenses, it is said to employ a ____ objective.
a. market share
b. cash flow
c. return on investment
d. survival
e. profit
ANS: D PTS: 1 DIF: Easy REF: p. 629
OBJ: 13-02 Explore issues related to developing pricing objectives.
NAT: AACSB: Reflective Thinking | MKTG: Pricing MSC: Knowledge

21. Running a big sale in order to generate enough cash flow to pay creditors is typical in a situation in
which a firm's primary pricing objective is
a. status quo.
b. profit.
c. survival.
d. market share.
e. recovery.
ANS: C PTS: 1 DIF: Difficult REF: p. 629
OBJ: 13-02 Explore issues related to developing pricing objectives.
NAT: AACSB: Analytic | MKTG: Pricing MSC: Comprehension

22. Westin Inc. has an objective of achieving a 25 percent return from its overall sales. This is an example
of a ____ pricing objective.
a. market share
b. cash flow
c. return on investment
d. profit
e. status quo
ANS: D PTS: 1 DIF: Moderate REF: p. 629
OBJ: 13-02 Explore issues related to developing pricing objectives.
NAT: AACSB: Analytic | MKTG: Pricing MSC: Application

23. Most pricing objectives based on ____ are achieved by trial and error because not all cost and revenue
data are available when prices are set.
a. market share
b. cash flow
c. return on investment
d. survival
e. profit
ANS: C PTS: 1 DIF: Difficult REF: p. 629
OBJ: 13-02 Explore issues related to developing pricing objectives.
NAT: AACSB: Analytic | MKTG: Pricing MSC: Knowledge

24. Maintaining or increasing market share


a. can be achieved even if industry sales are flat or decreasing.
b. is an infrequently used pricing objective in most industries.
c. depends upon the overall growth of the total industry.
d. is a profit-related objective based on price.
e. is directly tied to leading an industry in product quality.
ANS: A PTS: 1 DIF: Moderate REF: p. 629
OBJ: 13-02 Explore issues related to developing pricing objectives.
NAT: AACSB: Analytic | MKTG: Pricing MSC: Knowledge

25. If Nabisco had established a pricing objective of selling one out of every three crackers consumed in
the world, it would have established an objective based on
a. cash flow.
b. market share.
c. survival.
d. return on investment.
e. dollar sales volume.
ANS: B PTS: 1 DIF: Easy REF: p. 629
OBJ: 13-02 Explore issues related to developing pricing objectives.
NAT: AACSB: Analytic | MKTG: Pricing MSC: Application

26. A market share objective


a. is not recommended when sales for the total industry are declining.
b. is not especially useful when sales for the total industry are increasing.
c. is not especially useful when sales for the total industry are flat.
d. is useful primarily in an industry where total sales are increasing.
e. can be used effectively whether total industry sales are rising or falling.
ANS: E PTS: 1 DIF: Moderate REF: p. 629
OBJ: 13-02 Explore issues related to developing pricing objectives.
NAT: AACSB: Analytic | MKTG: Pricing MSC: Knowledge

27. A firm establishes which of the following pricing objectives to maintain or increase its product's sales
in relation to total industry sales?
a. Cash flow
b. Sales potential
c. Product quality
d. Market share
e. Status quo
ANS: D PTS: 1 DIF: Easy REF: p. 629
OBJ: 13-02 Explore issues related to developing pricing objectives.
NAT: AACSB: Reflective Thinking | MKTG: Pricing MSC: Knowledge

28. Which of the following pricing objectives sets prices to recover cash as quickly as possible?
a. Market share
b. Profit
c. Cash flow
d. Return on investment
e. Product quality
ANS: C PTS: 1 DIF: Difficult REF: p. 630
OBJ: 13-02 Explore issues related to developing pricing objectives.
NAT: AACSB: Reflective Thinking | MKTG: Pricing MSC: Knowledge
29. A marketer is most likely to set prices according to a cash-flow objective when a
a. trial-and-error approach to the market is acceptable.
b. certain market share must be maintained.
c. quick return on investment is desired.
d. higher price is acceptable to the firm.
e. product is expected to have a long life cycle.
ANS: C PTS: 1 DIF: Moderate REF: p. 629
OBJ: 13-02 Explore issues related to developing pricing objectives.
NAT: AACSB: Analytic | MKTG: Pricing MSC: Knowledge

30. 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
a. market share.
b. cash flow.
c. profit.
d. product quality.
e. status quo.
ANS: B PTS: 1 DIF: Difficult REF: p. 630
OBJ: 13-02 Explore issues related to developing pricing objectives.
NAT: AACSB: Analytic | MKTG: Pricing MSC: Application

31. Maintaining a certain market share, meeting competitors' prices, maintaining a favorable image, and
achieving price stability are all associated with a ____ pricing objective.
a. product quality
b. market share
c. survival
d. profit
e. status quo
ANS: E PTS: 1 DIF: Moderate REF: p. 630
OBJ: 13-02 Explore issues related to developing pricing objectives.
NAT: AACSB: Reflective Thinking | MKTG: Pricing MSC: Knowledge

32. Which pricing objective de-emphasizes price and can lead to a climate of nonprice competition in an
industry?
a. Status quo
b. Return on investment
c. Market share
d. Survival
e. Cash flow
ANS: A PTS: 1 DIF: Difficult REF: p. 630
OBJ: 13-02 Explore issues related to developing pricing objectives.
NAT: AACSB: Reflective Thinking | MKTG: Pricing MSC: Comprehension

33. What type of pricing objective would an organization use if it were in a favorable position and desired
nothing more?
a. Return on investment
b. Cash flow
c. Profit
d. Status quo
e. Survival
ANS: D PTS: 1 DIF: Moderate REF: p. 630
OBJ: 13-02 Explore issues related to developing pricing objectives.
NAT: AACSB: Reflective Thinking | MKTG: Pricing MSC: Knowledge

34. Which type of pricing objective can reduce a firm's risk by helping to stabilize demand for its
products?
a. Status quo
b. Market share
c. Survival
d. Cash flow
e. Return on investment
ANS: A PTS: 1 DIF: Moderate REF: p. 630
OBJ: 13-02 Explore issues related to developing pricing objectives.
NAT: AACSB: Reflective Thinking | MKTG: Pricing | MKTG: Strategy
MSC: Knowledge

35.If an organization sets prices to recover research and development expenses and establish a premium
quality image for its product, it would be using a ____ pricing objective.
a. survival
b. return on investment
c. market share
d. product quality
e. cash flow
ANS: D PTS: 1 DIF: Moderate REF: p. 630
OBJ: 13-02 Explore issues related to developing pricing objectives.
NAT: AACSB: Analytic | MKTG: Pricing | MKTG: Strategy MSC: Knowledge

36. The pricing of Clinique makeup considerably higher than brands such as Cover Girl, Revlon, and
Maybelline is used to communicate ____, which is the company's primary pricing objective.
a. market share
b. product quality
c. status quo
d. profitability
e. cash flow
ANS: B PTS: 1 DIF: Moderate REF: p. 630
OBJ: 13-02 Explore issues related to developing pricing objectives.
NAT: AACSB: Analytic | MKTG: Pricing | MKTG: Strategy MSC: Application

37. Research indicates that both market share and ____ are good indicators of profitability.
a. low pricing
b. product quality
c. limited competition
d. sales growth
e. ROI pricing
ANS: B PTS: 1 DIF: Moderate REF: p. 630
OBJ: 13-02 Explore issues related to developing pricing objectives.
NAT: AACSB: Reflective Thinking | MKTG: Pricing | MKTG: Strategy
MSC: Comprehension
38. When consumers are making do with less expensive products and shopping more selectively,
manufacturers and retailers must focus on the ____ of their products.
a. price
b. quality
c. availability
d. value
e. image
ANS: D PTS: 1 DIF: Moderate REF: p. 630-631
OBJ: 13-03 Understand the importance of identifying the target market's evaluation of price.
NAT: AACSB: Reflective Thinking | MKTG: Pricing | MKTG: Strategy
MSC: Knowledge

39. For customers, value is a function of the product's


a. quality attributes.
b. price.
c. price and durability.
d. quality and functional attributes.
e. quality relative to the quality of competing brands.
ANS: A PTS: 1 DIF: Easy REF: p. 630-631
OBJ: 13-03 Understand the importance of identifying the target market's evaluation of price.
NAT: AACSB: Reflective Thinking | MKTG: Pricing MSC: Knowledge

40. Marketers improve their ability to establish prices appropriately when


a. there is nonprice competition.
b. they know prices charged for competing brands.
c. their products are of better quality than the competition's.
d. the main objective is image building.
e. using psychological pricing.
ANS: B PTS: 1 DIF: Difficult REF: p. 631
OBJ: 13-04 Examine how marketers ananlyze competitors' prices.
NAT: AACSB: Analytic | MKTG: Pricing MSC: Knowledge

41. Some grocery stores collect data on competitive prices


a. by calling their competitors.
b. on a quarterly basis.
c. through stores' purchase data.
d. from their resellers.
e. by using full-time comparison shoppers.
ANS: E PTS: 1 DIF: Difficult REF: p. 631
OBJ: 13-04 Examine how marketers ananlyze competitors' prices.
NAT: AACSB: Analytic | MKTG: Pricing MSC: Knowledge

42. Marketers at organizations engaged in nonprice competition


a. are more concerned about knowing competitors' prices than are marketers in organizations
that are engaged in price competition.
b. are not concerned about the prices of competing brands.
c. need competitive price information to make sure that their products are priced at
approximately the same level as the prices of competing brands.
d. rely on customers to help them gather information regarding the prices of competing
brands.
e. experience high levels of price instability.
ANS: C PTS: 1 DIF: Moderate REF: p. 631
OBJ: 13-04 Examine how marketers ananlyze competitors' prices.
NAT: AACSB: Analytic | MKTG: Pricing MSC: Knowledge

43. Competitors' prices, along with the marketing variables they emphasize, are determining factors in
a. the instability of prices in a particular industry.
b. using markup pricing for consumer goods.
c. how much marketing research a firm needs to collect.
d. using differential pricing to demonstrate quality differences.
e. how important price will be to customers.
ANS: E PTS: 1 DIF: Moderate REF: p. 631-632
OBJ: 13-04 Examine how marketers ananlyze competitors' prices.
NAT: AACSB: Analytic | MKTG: Pricing MSC: Knowledge

44. The three primary bases for developing prices are


a. profit, demand, and competition.
b. supply, demand, and marketing objectives.
c. demand, competition, and cost.
d. markup, cost, and cost-plus.
e. negotiation, periodicity, and randomness.
ANS: C PTS: 1 DIF: Easy REF: p. 633-635
OBJ: 13-05 Describe the basis used for setting prices.
NAT: AACSB: Reflective Thinking | MKTG: Pricing MSC: Knowledge

45. When a seller's costs are usually determined during or after a product is made and then a specified
percentage or dollar amount is added to the cost to establish a price, an organization is using ____
pricing.
a. markup
b. demand-based
c. differential
d. cost-plus
e. expensed-based
ANS: D PTS: 1 DIF: Moderate REF: p. 633
OBJ: 13-05 Describe the basis used for setting prices.
NAT: AACSB: Reflective Thinking | MKTG: Pricing MSC: Knowledge

46. For custom-made equipment or commercial construction projects, which pricing method is most likely
used?
a. Prestige
b. Premium
c. Differential
d. Return-on-investment
e. Cost-plus
ANS: E PTS: 1 DIF: Difficult REF: p. 633
OBJ: 13-05 Describe the basis used for setting prices.
NAT: AACSB: Analytic | MKTG: Pricing MSC: Comprehension
47. Steinway produces concert grand pianos, often using the custom materials and designs desired by a
specific customer. The average price of these pianos runs about $50,000 depending on the exact piano.
What type of pricing does Steinway most likely use for these pianos?
a. Markup
b. Competition-based
c. Cost-plus
d. Demand-based
e. Secondary-market
ANS: C PTS: 1 DIF: Difficult REF: p. 633
OBJ: 13-05 Describe the basis used for setting prices.
NAT: AACSB: Reflective Thinking | MKTG: Pricing MSC: Application

48. The federal government often uses ____ pricing when it grants defense contracts.
a. markup
b. differential
c. breakeven
d. cost-plus
e. competition-based
ANS: D PTS: 1 DIF: Moderate REF: p. 633
OBJ: 13-05 Describe the basis used for setting prices.
NAT: AACSB: Reflective Thinking | MKTG: Pricing | MKTG: Strategy
MSC: Knowledge

49. A cost-based pricing method commonly used in retail is called


a. value pricing.
b. cost-plus pricing.
c. cost discounting.
d. differential pricing.
e. markup pricing.
ANS: E PTS: 1 DIF: Easy REF: p. 633
OBJ: 13-05 Describe the basis used for setting prices.
NAT: AACSB: Reflective Thinking | MKTG: Pricing MSC: Knowledge

50. Which of the following statements about markup pricing is correct?


a. The use of similar markups reduces price competition.
b. Markup pricing is inconvenient to use.
c. Markup pricing results in a high price when demand is high and a low price when demand
is low.
d. Markup pricing is a demand-based pricing method.
e. Using markups makes pricing a time-consuming, difficult process.
ANS: A PTS: 1 DIF: Easy REF: p. 633
OBJ: 13-05 Describe the basis used for setting prices.
NAT: AACSB: Reflective Thinking | MKTG: Pricing MSC: Knowledge

51. Markup is measured either as a percentage of ____ or a percentage of ____.


a. selling price; cost
b. cost; profit
c. revenue; contribution margin
d. resources used; cost
e. demand; competition
ANS: A PTS: 1 DIF: Moderate REF: p. 633
OBJ: 13-05 Describe the basis used for setting prices.
NAT: AACSB: Reflective Thinking | MKTG: Pricing MSC: Knowledge

52. When determining markup as a percentage of cost, divide the markup amount by
a. price.
b. cost.
c. quantity.
d. revenue.
e. 100.
ANS: B PTS: 1 DIF: Difficult REF: p. 633
OBJ: 13-05 Describe the basis used for setting prices.
NAT: AACSB: Reflective Thinking | MKTG: Pricing MSC: Knowledge

53. A retailer of Real Dry deodorant prices it at $2.00; it costs the retailer $1.40. What is the approximate
markup as a percentage of selling price?
a. 3 percent
b. 14.3 percent
c. 30 percent
d. 70 percent
e. 20 percent
ANS: C PTS: 1 DIF: Difficult REF: p. 633
OBJ: 13-05 Describe the basis used for setting prices.
NAT: AACSB: Analytic | MKTG: Pricing MSC: Application

54. J.C. Penney's pays $16.50 for a six-ounce bottle of cologne and sells it for $25.95. Its markup as a
percentage of cost is approximately ____ percent for this product.
a. 64
36
c. 18
d. 57
e. 45
ANS: D PTS: 1 DIF: Difficult REF: p. 633
OBJ: 13-05 Describe the basis used for setNAT: AACSB: Analytic |MKTG: Pricing
MSC: Application

55. If a product is priced based on how many or how few people want it at a particular time and place,
____ pricing is being used.
a. markup
b. demand-based
c. competitive
d. peak
e. differential
ANS: B PTS: 1 DIF: Moderate REF: p. 634
OBJ: 13-05 Describe the basis used for setting prices.
NAT: AACSB: Analytic | MKTG: Pricing MSC: Knowledge
56.Amtrak prices its tickets so that it is less expensive to travel on weekends than during the week when there
is heavy business travel. This illustrates ____ pricing.
a. cost-plus
b. demand-based
c. competitive
d. secondary markup
e. seasonal
ANS: B PTS: 1 DIF: Easy REF: p. 634
OBJ: 13-05 Describe the basis used for setting prices.
NAT: AACSB: Analytic | MKTG: Pricing MSC: Application

57. During July and August, Lakewood Links Golf Course, located in South Carolina, offers weekday
rates of $13 for a round of golf with a cart. During the rest of the year, the weekday rates are between
$25 and $35. This is an example of the use of
a. differential pricing.
b. incentives.
c. competition-based pricing.
d. demand-based pricing.
e. random discounting.
ANS: D PTS: 1 DIF: Difficult REF: p. 634
OBJ: 13-05 Describe the basis used for setting prices.
NAT: AACSB: Reflective Thinking | MKTG: Pricing MSC: Application

58. If General Motors determines that it wants to sell 200,000 Chevrolet Acadias and sets the price at
$29,500 because it knows that at that price it will reach that goal, the firm would be using a ____
pricing method.
a. cost-plus
b. competition-based
c. psychological
d. comparison
e. demand-based
ANS: E PTS: 1 DIF: Moderate REF: p. 634
OBJ: 13-05 Describe the basis used for setting prices.
NAT: AACSB: Reflective Thinking | MKTG: Pricing MSC: Application

59. Competition-based pricing is


a. used when costs and revenues are secondary to competitors' prices.
b. not useful as a method of increasing market share.
c. not useful if the competing products are homogeneous.
d. not able to increase sales.
e. used when competing products are heterogeneous.
ANS: A PTS: 1 DIF: Difficult REF: p. 635
OBJ: 13-05 Describe the basis used for setting prices.
NAT: AACSB: Analytic | MKTG: Pricing MSC: Knowledge

60. When products in an industry are relatively homogeneous and price is a key purchase consideration,
a. competition-based pricing becomes more important.
b. demand-based pricing dominates pricing decisions.
c. firms tend to use secondary-market pricing.
d. cost-based methods like markup pricing are dominant.
e. customary pricing is often used.
ANS: A PTS: 1 DIF: Moderate REF: p. 635
OBJ: 13-05 Describe the basis used for setting prices.
NAT: AACSB: Analytic | MKTG: Pricing MSC: Knowledge

61. If General Mills looks at Kellogg's cereal prices as the primary method of determining its own prices,
General Mills is using
a. price fixing.
b. price discrimination.
c. demand-based pricing.
d. market share pricing.
e. competition-based pricing.
ANS: E PTS: 1 DIF: Easy REF: p. 635
OBJ: 13-05 Describe the basis used for setting prices.
NAT: AACSB: Analytic | MKTG: Pricing MSC: Application

62. If PepsiCo sets its twelve-pack price at $3.99 to match the price charged by Coca-Cola, Pepsi is using
which of the following pricing methods?
a. Demand-based
b. Cost-based
c. Reference pricing
d. Competition-based
e. Price leader
ANS: D PTS: 1 DIF: Easy REF: p. 635
OBJ: 13-05 Describe the basis used for setting prices.
NAT: AACSB: Analytic | MKTG: Pricing MSC: Application

63. The fact that senior citizens are charged a lower price at movie theaters than younger adults is an
example of ____ pricing.
a. price-line
b. promotional
c. professional
d. differential
e. psychological
ANS: D PTS: 1 DIF: Moderate REF: p. 636
OBJ: 13-06 Explain the different types of pricing strategies.
NAT: AACSB: Analytic | MKTG: Pricing MSC: Application

64. Executives in Japan decided to price Lexus luxury cars in the United States at $55,000 while pricing
them at $66,000 in their own country. This is an example of
a. secondary-market pricing.
b. price skimming.
c. bait pricing.
d. prestige pricing.
e. random discounting.
ANS: A PTS: 1 DIF: Moderate REF: p. 637
OBJ: 13-06 Explain the different types of pricing strategies.
NAT: AACSB: Analytic | MKTG: Pricing | MKTG: Strategy MSC: Application
65. Maria recently put her house on the market at an asking price of $260,000. She realizes, however, that
in order to sell the house, she may have to use
a. secondary-market pricing.
b. reference pricing.
c. negotiated pricing.
d. price lining.
e. professional pricing.
ANS: C PTS: 1 DIF: Moderate REF: p. 637
OBJ: 13-06 Explain the different types of pricing strategies.
NAT: AACSB: Analytic | MKTG: Pricing | MKTG: Strategy MSC: Application

66. A problem associated with ____ is that consumers can predict when prices will be lowered and delay
purchases until that time.
a. random discounting
b. penetration pricing
c. reference pricing
d. everyday low pricing
e. periodic discounting
ANS: E PTS: 1 DIF: Moderate REF: p. 637
OBJ: 13-06 Explain the different types of pricing strategies.
NAT: AACSB: Reflective Thinking | MKTG: Pricing MSC: Knowledge

67.The "White Sale" that many department stores have every year a few weeks after Christmas is an example
of
a. secondary pricing.
b. off-peak pricing.
c. periodic discounting.
d. random discounting.
e. captive pricing.
ANS: C PTS: 1 DIF: Difficult REF: p. 637
OBJ: 13-06 Explain the different types of pricing strategies.
NAT: AACSB: Analytic | MKTG: Pricing | MKTG: Strategy MSC: Application

68. A manager at JC Penney discovers that Sears has reduced the price of its children's Levi's from $31.99
to $24.99, according to an advertisement in the Sunday newspaper. She immediately phones her store
and instructs the salesperson on duty to put a sign up next to their children's Levi's that reads, "SALE:
$24.99." This is an example of what pricing strategy?
a. Secondary-market pricing
b. Bait-pricing
c. Reference pricing
d. Random discounting
e. Comparison discounting
ANS: D PTS: 1 DIF: Difficult REF: p. 638
OBJ: 13-06 Explain the different types of pricing strategies.
NAT: AACSB: Reflective Thinking | MKTG: Pricing MSC: Application
69. If a business decides to reduce its prices once in a while on an unsystematic basis, it is using
a. price reduction planning.
b. random discounting.
c. bait pricing.
d. periodic discounting.
e. penetration pricing.
ANS: B PTS: 1 DIF: Moderate REF: p. 638
OBJ: 13-06 Explain the different types of pricing strategies.
NAT: AACSB: Reflective Thinking | MKTG: Pricing | MKTG: Strategy
MSC: Knowledge

70. A sale that advertised prices "up to 65 percent off" the original price uses
a. tensile pricing.
b. random discounting.
c. periodic discounting.
d. bait pricing.
e. psychological pricing.
ANS: A PTS: 1 DIF: Moderate REF: p. 638
OBJ: 13-06 Explain the different types of pricing strategies.
NAT: AACSB: Reflective Thinking | MKTG: Pricing MSC: Knowledge

71. Price skimming and penetration pricing are both strategies used for
a. product-line pricing.
b. business products only.
c. psychological pricing.
d. new-product pricing.
e. promotional pricing.
ANS: D PTS: 1 DIF: Easy REF: p. 638
OBJ: 13-06 Explain the different types of pricing strategies.
NAT: AACSB: Reflective Thinking | MKTG: Pricing MSC: Knowledge

72. When businesses charge the highest possible price that customers who really want the new product
will pay, they are using
a. premium pricing.
b. prestige lining.
c. captive pricing.
d. price skimming.
e. penetration pricing.
ANS: D PTS: 1 DIF: Easy REF: p. 638
OBJ: 13-06 Explain the different types of pricing strategies.
NAT: AACSB: Reflective Thinking | MKTG: Pricing | MKTG: Strategy
MSC: Knowledge

73. If Norelco introduced a new electric razor that sonically removes hair and priced it first at $175 and
then at $150 before reducing the price to $100, the firm's initial pricing strategy is known as
a. penetration pricing.
b. psychological pricing.
c. price lining.
d. price skimming.
e. odd-even pricing.
ANS: D PTS: 1 DIF: Moderate REF: p. 638
OBJ: 13-06 Explain the different types of pricing strategies.
NAT: AACSB: Analytic | MKTG: Pricing | MKTG: Strategy MSC: Application

74. Sony management decided to use skimming as a pricing strategy for its newest line of high-definition
television (HDTV) sets. It should be aware that this strategy does not
a. generate capital to cover research and development costs.
b. discourage competitors from entering the market.
c. provide flexibility in the introductory base price.
d. protect the firm from covering costs if prices are set too low.
e. reduce the stress that may be placed on the firm's production capabilities.
ANS: B PTS: 1 DIF: Moderate REF: p. 638
OBJ: 13-06 Explain the different types of pricing strategies.
NAT: AACSB: Analytic | MKTG: Pricing | MKTG: Strategy MSC: Application

75. When Sharp first introduced its line of graphing calculators, it set the price quite high; it has lowered
the price as competitors have entered the market. The pricing strategy initially used by Sharp is called
a. customary pricing.
b. odd-even pricing.
c. penetration pricing.
d. price skimming.
e. prestige pricing.
ANS: D PTS: 1 DIF: Difficult REF: p. 638
OBJ: 13-06 Explain the different types of pricing strategies.
NAT: AACSB: Analytic | MKTG: Pricing | MKTG: Strategy MSC: Application

76.A price-skimming strategy assumes that


a. the initial demand is highly elastic.
b. the product is efficient.
c. it will be difficult to recoup development costs.
d. all consumers have homogeneous tastes.
e. the initial demand is highly inelastic.
ANS: E PTS: 1 DIF: Moderate REF: p. 638
OBJ: 13-06 Explain the different types of pricing strategies.
NAT: AACSB: Reflective Thinking | MKTG: Pricing MSC: Knowledge

77. A penetration pricing strategy is particularly appropriate when demand is


a. increasing.
b. highly elastic.
c. highly inelastic.
d. decreasing.
e. inefficient.
ANS: B PTS: 1 DIF: Difficult REF: p. 639
OBJ: 13-06 Explain the different types of pricing strategies.
NAT: AACSB: Analytic | MKTG: Pricing | MKTG: Strategy MSC: Knowledge
78. If Nabisco wants to quickly gain a large market share with its new line of reduced-fat snack crackers, it
should use
a. penetration pricing.
b. random discounting.
c. captive pricing.
d. price skimming.
e. everyday low prices.
ANS: A PTS: 1 DIF: Easy REF: p. 639
OBJ: 13-06 Explain the different types of pricing strategies.
NAT: AACSB: Analytic | MKTG: Pricing | MKTG: Strategy MSC: Application

79. 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.
a. odd-even
b. skimming
c. lining
d. penetration
e. psychological
ANS: D PTS: 1 DIF: Difficult REF: p. 639
OBJ: 13-06 Explain the different types of pricing strategies.
NAT: AACSB: Reflective Thinking | MKTG: Pricing MSC: Application

80. Which of the following would be used in setting the price of a new product if considerable competition
is expected?
a. Psychological pricing
b. Penetration pricing
c. Odd-even pricing
d. Price skimming
e. Prestige pricing
ANS: B PTS: 1 DIF: Moderate REF: p. 639
OBJ: 13-06 Explain the different types of pricing strategies.
NAT: AACSB: Analytic | MKTG: Pricing | MKTG: Strategy MSC: Comprehension

81. All of the following are pricing strategies used by companies establishing prices of multiple products
within a product line except
a. premium pricing.
b. price lining.
c. captive pricing.
d. bait pricing.
e. penetration pricing.

ANS: E PTS: 1 DIF: Moderate REF: p. 639


OBJ: 13-06 Explain the different types of pricing strategies.
NAT: AACSB: Reflective Thinking | MKTG: Pricing | MKTG: Strategy
MSC: Knowledge
82.Pricing the basic product in a product line low while pricing related items at a higher level is called
a. premium pricing.
b. bait pricing.
c. captive pricing.
d. price skimming.
e. price lining.
ANS: C PTS: 1 DIF: Moderate REF: p. 639
OBJ: 13-06 Explain the different types of pricing strategies.
NAT: AACSB: Reflective Thinking | MKTG: Pricing | MKTG: Strategy
MSC: Knowledge

83. Lexmark sells some of its color printers for about $100, but the refill cartridges cost over $30 each.
Lexmark's pricing strategy would be best labeled as
a. bait pricing.
b. captive pricing.
c. customary pricing.
d. price lining.
e. complementary pricing.
ANS: B PTS: 1 DIF: Moderate REF: p. 639
OBJ: 13-06 Explain the different types of pricing strategies.
NAT: AACSB: Analytic | MKTG: Pricing | MKTG: Strategy MSC: Application

84. A product that has more features than those of its competition, or that is perceived to be of higher
quality, warrants using which type of pricing strategy?
a. Custom pricing
b. Special-event pricing
c. Premium pricing
d. Price lining
e. Bait pricing
ANS: C PTS: 1 DIF: Moderate REF: p. 640
OBJ: 13-06 Explain the different types of pricing strategies.
NAT: AACSB: Analytic | MKTG: Pricing | MKTG: Strategy MSC: Knowledge

85. Breyer's produces a variety of ice cream flavors and lines of varying qualities. The higher quality ice
cream varieties are priced higher than the basic ones. Breyer's is using ____ to price its ice cream.
a. captive pricing
b. price baiting
c. premium pricing
d. bait pricing
e. differential pricing
ANS: C PTS: 1 DIF: Moderate REF: p. 640
OBJ: 13-06 Explain the different types of pricing strategies.
NAT: AACSB: Analytic | MKTG: Pricing | MKTG: Strategy MSC: Application

86. When a company prices one item in a line low with the intention of selling a higher-priced item in the
same line, it is using
a. bait pricing.
b. a price leader.
c. penetration pricing.
d. price lining.
e. captive pricing.
ANS: A PTS: 1 DIF: Easy REF: p. 640
OBJ: 13-06 Explain the different types of pricing strategies.
NAT: AACSB: Reflective Thinking | MKTG: Pricing | MKTG: Strategy
MSC: Knowledge

87. When Gabriella logs on to Dell's website, she sees a notebook model priced well below $1,000. As she
continues through the site to view the other options, she realizes the first one she saw was the cheapest
model available, but she of course wants more features. Dell is utilizing
a. bait and switch.
b. price lining.
c. captive pricing.
d. penetration pricing.
e. bait pricing.
ANS: E PTS: 1 DIF: Difficult REF: p. 640
OBJ: 13-06 Explain the different types of pricing strategies.
NAT: AACSB: Analytic | MKTG: Pricing | MKTG: Strategy MSC: Application

88. When an organization sets a number of prices for selected groups of merchandise, this is commonly
referred to as
a. prestige pricing.
b. price lining.
c. customary pricing.
d. odd-even pricing.
e. ethical pricing.
ANS: B PTS: 1 DIF: Moderate REF: p. 640
OBJ: 13-06 Explain the different types of pricing strategies.
NAT: AACSB: Reflective Thinking | MKTG: Pricing | MKTG: Strategy
MSC: Knowledge

89. The pricing strategy that assumes that demand is relatively inelastic over certain price ranges is called
a. price lining.
b. odd-even pricing.
c. price skimming.
d. prestige pricing.
e. customary pricing.
ANS: A PTS: 1 DIF: Easy REF: p. 640
OBJ: 13-06 Explain the different types of pricing strategies.
NAT: AACSB: Reflective Thinking | MKTG: Pricing | MKTG: Strategy
MSC: Knowledge

90. When a company attempts to influence a consumer's perception of price to make a product's price
more attractive and reduce "sticker shock," it is using a ____ pricing strategy.
a. competition-based
b. professional
c. promotional
d. comparison
e. psychological
ANS: E PTS: 1 DIF: Easy REF: p. 641
OBJ: 13-06 Explain the different types of pricing strategies.
NAT: AACSB: Analytic | MKTG: Pricing | MKTG: Strategy MSC: Knowledge

91. All of the following are psychological techniques except


a. customary pricing.
b. prestige pricing.
c. reference pricing.
d. odd-even pricing.
e. price skimming.
ANS: E PTS: 1 DIF: Easy REF: p. 641
OBJ: 13-06 Explain the different types of pricing strategies.
NAT: AACSB: Reflective Thinking | MKTG: Pricing | MKTG: Strategy
MSC: Knowledge

92. Reference pricing is


a. listing the manufacturer's suggested retail price on the price tag along with the store's
lower price.
b. mentioning the price that other retailers charge for the same product on the display for the
product.
c. using a consumer's internal perceptions of what the appropriate price should be to help
price a firm's products.
d. pricing a product at a moderate level and positioning it next to a more expensive model or
brand.
e. using prices in advertising so that customers will have a point of reference when they
come to the retail facility.
ANS: D PTS: 1 DIF: Moderate REF: p. 641
OBJ: 13-06 Explain the different types of pricing strategies.
NAT: AACSB: Reflective Thinking | MKTG: Pricing | MKTG: Strategy
MSC: Knowledge

93. A Macy's manager designs the casual clothing department such that one of Macy's private label pairs
of jeans, priced at $24.99, is positioned next to a national brand of jeans, such as Levis, priced at
$39.99. What is the manager attempting to accomplish?
a. Everyday low prices strategy
b. Odd-even pricing strategy
c. Prestige pricing strategy
d. Special-event pricing strategy
e. Reference pricing strategy
ANS: E PTS: 1 DIF: Easy REF: p. 641
OBJ: 13-06 Explain the different types of pricing strategies.
NAT: AACSB: Analytic | MKTG: Pricing | MKTG: Strategy MSC: Application

94. Bundle pricing may be perceived to be of value by customers because


a. they always pay a lower price per item than they would have if they bought each item
separately.
b. they prefer buying a combination of bundled products in a single transaction, which saves
time, effort, and perhaps money.
c. the companies selling the products can sell them at a lower price because their costs of
packaging are lower.
d. they are purchasing complementary products, which is convenient for them.
e. they can purchase items that are consumed frequently in larger quantities.
ANS: B PTS: 1 DIF: Difficult REF: p. 641
OBJ: 13-06 Explain the different types of pricing strategies.
NAT: AACSB: Reflective Thinking | MKTG: Pricing MSC: Knowledge

95. When Mia and Shane are planning their honeymoon, their travel agent tells them that if they buy a
special package, their trip to Paris will include meals, tickets to the theater, and a rental car in addition
to airfare and a hotel. This is an example of the use of
a. multiple-unit pricing.
b. bundle pricing.
c. prestige pricing.
d. price lining.
e. price packaging.
ANS: B PTS: 1 DIF: Easy REF: p. 641
OBJ: 13-06 Explain the different types of pricing strategies.
NAT: AACSB: Analytic | MKTG: Pricing MSC: Application

96. Products such as light bulbs, canned soft drinks, and ice cream sandwiches are usually priced using
a. multiple-unit pricing.
b. reference pricing.
c. price lining.
d. bundle pricing.
e. odd-even pricing.
ANS: A PTS: 1 DIF: Easy REF: p. 642
OBJ: 13-06 Explain the different types of pricing strategies.
NAT: AACSB: Reflective Thinking | MKTG: Pricing MSC: Knowledge

97. The decision of Macy's to use even prices such as $60 for a Ralph Lauren Polo shirt is an application
of odd-even pricing, and even prices are often used to
a. give a product an upscale or exclusive image.
b. show customers products are priced based on tradition.
c. coordinate efforts with a promotional campaign.
d. indicate prices have been cut to the last penny.
e. facilitate comparison to competitors' prices.
ANS: A PTS: 1 DIF: Easy REF: p. 643
OBJ: 13-06 Explain the different types of pricing strategies.
NAT: AACSB: Analytic | MKTG: Pricing | MKTG: Strategy MSC: Application

98. Odd-even pricing is


a. a cost-based strategy.
b. competition-based.
c. a rarely used technique.
d. a psychological pricing strategy.
e. a form of unethical pricing.
ANS: D PTS: 1 DIF: Difficult REF: p. 643
OBJ: 13-06 Explain the different types of pricing strategies.
NAT: AACSB: Reflective Thinking | MKTG: Pricing MSC: Knowledge

99. If REVO sets the price for its sunglasses at $240, it is using psychological pricing to convey
a. thrift.
b. cost cutting.
c. value.
d. prestige.
e. availability.
ANS: D PTS: 1 DIF: Easy REF: p. 643
OBJ: 13-06 Explain the different types of pricing strategies.
NAT: AACSB: Analytic | MKTG: Pricing | MKTG: Strategy MSC: Application

100. Goods that are priced primarily based on the way they have always been priced are examples of
a. traditional pricing.
b. professional pricing.
c. everyday low prices.
d. price lining.
e. customary pricing.
ANS: E PTS: 1 DIF: Easy REF: p. 643
OBJ: 13-06 Explain the different types of pricing strategies.
NAT: AACSB: Reflective Thinking | MKTG: Pricing | MKTG: Strategy
MSC: Knowledge

101. What type of pricing strategy is used in a situation where demand for a product is price inelastic and
the seller has an ethical responsibility not to overcharge the client?
a. Price lining
b. Prestige pricing
c. Professional pricing
d. Customary pricing
e. Price skimming
ANS: C PTS: 1 DIF: Moderate REF: p. 644
OBJ: 13-06 Explain the different types of pricing strategies.
NAT: AACSB: Analytic | MKTG: Pricing | MKTG: Strategy MSC: Comprehension

102. Price leaders, comparison discounting, and special-event pricing are applications of
a. psychological pricing.
b. professional pricing.
c. product-line pricing.
d. bait-and-switch.
e. promotional pricing.
ANS: E PTS: 1 DIF: Moderate REF: p. 644
OBJ: 13-06 Explain the different types of pricing strategies.
NAT: AACSB: Reflective Thinking | MKTG: Pricing MSC: Knowledge

103. If Kroger Food Stores advertises 2-liter bottles of Pepsi for 89 cents to generate store traffic that will
purchase other items at regular prices, the grocer is using
a. reference pricing.
b. a price leader.
c. special-event pricing.
d. comparison discounting.
e. professional pricing.
ANS: B PTS: 1 DIF: Difficult REF: p. 644
OBJ: 13-06 Explain the different types of pricing strategies.
NAT: AACSB: Analytic | MKTG: Pricing | MKTG: Strategy MSC: Application
104. A product is a price leader when
a. it is sold at the highest price.
b. its price maximizes profits.
c. an increase or decrease in price leads to increased revenue or lower costs.
d. it is sold at less than cost in the hope that sales of other products will increase.
e. its price leads the industry in sales.
ANS: D PTS: 1 DIF: Difficult REF: p. 644
OBJ: 13-06 Explain the different types of pricing strategies.
NAT: AACSB: Reflective Thinking | MKTG: Pricing | MKTG: Strategy
MSC: Comprehension

105. To attract customers into a store, Safeway advertises its milk at less than cost, hoping that customers
will purchase other groceries as well. This pricing strategy is called
a. price lining.
b. special-event pricing.
c. differential pricing.
d. comparison discounting.
e. price leader pricing.
ANS: E PTS: 1 DIF: Moderate REF: p. 644
OBJ: 13-06 Explain the different types of pricing strategies.
NAT: AACSB: Analytic | MKTG: Pricing | MKTG: Strategy MSC: Application

106. Which of the following pricing strategies often results in a retailer losing money on the product?
a. Price leader
b. Psychological discounting
c. Penetration pricing
d. Special-event pricing
e. Ethical pricing
ANS: A PTS: 1 DIF: Difficult REF: p. 644
OBJ: 13-06 Explain the different types of pricing strategies.
NAT: AACSB: Reflective Thinking | MKTG: Pricing MSC: Comprehension

107. A sale at The Bon Marche the day after Thanksgiving to kick off the Christmas season would be
considered
a. psychological pricing.
b. comparison discounting.
c. customary pricing.
d. special-event pricing.
e. captive pricing.
ANS: D PTS: 1 DIF: Easy REF: p. 644
OBJ: 13-06 Explain the different types of pricing strategies.
NAT: AACSB: Analytic | MKTG: Pricing | MKTG: Strategy MSC: Application

108. Showing a product's price along with its previous price, the price of a competing brand, or the price at
another retail outlet is called
a. competition-based pricing.
b. reference pricing.
c. comparison discounting.
d. captive pricing.
e. psychological pricing.
ANS: C PTS: 1 DIF: Easy REF: p. 644
OBJ: 13-06 Explain the different types of pricing strategies.
NAT: AACSB: Reflective Thinking | MKTG: Pricing MSC: Knowledge

109. The manager at Best Buy puts a sign up next to a Pioneer audio system that reads, "Only $199.99! $60
less than Circuit City." This is an example of what type of pricing strategy?
a. Random discounting
b. Periodic discounting
c. Comparison discounting
d. Penetration pricing
e. Everyday low prices
ANS: C PTS: 1 DIF: Easy REF: p. 644
OBJ: 13-06 Explain the different types of pricing strategies.
NAT: AACSB: Analytic | MKTG: Pricing | MKTG: Strategy MSC: Application

110. Pricing strategies and methods


a. help direct and structure the selection of a final price.
b. are the last decisions made for a new product.
c. are the same for all of a company's products.
d. are the most important decisions made for a product.
e. require limited planning on the part of management.
ANS: A PTS: 1 DIF: Moderate REF: p. 644
OBJ: 13-06 Explain the different types of pricing strategies.
NAT: AACSB: Reflective Thinking | MKTG: Pricing MSC: Knowledge

Scenario 13.1
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.

111. Refer to Scenario 13.1. 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.
a. Cost
b. Competition
c. Demand
d. Customer
e. Market
ANS: B PTS: 1 DIF: Easy REF: p. 635
OBJ: 13-04 Examine how marketers ananlyze competitors' prices.
NAT: AACSB: Analytic | MKTG: Pricing | MKTG: Strategy MSC: Application

112. Refer to Scenario 13.1. Given Ray-Ban's plan for positioning the new sunglass line, they should use a
____ strategy when introducing their new product.
a. promotional
b. penetration
c. price-skimming
d. reference
e. secondary-market
ANS: C PTS: 1 DIF: Moderate REF: p. 638
OBJ: 13-06 Explain the different types of pricing strategies.
NAT: AACSB: Analytic | MKTG: Pricing | MKTG: Strategy MSC: Application

113. Refer to Scenario 13.1. 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
ANS: D PTS: 1 DIF: Moderate REF: p. 634
OBJ: 13-05 Describe the basis used for setting prices.
NAT: AACSB: Analytic | MKTG: Pricing | MKTG: Strategy MSC: Application

114. Refer to Scenario 13.1. If Ray-Ban selected the prices for its new sunglasses to be $60, $70, or $80,
this would most likely be an example of using ____ pricing to enhance its distinctive positioning
strategy.
a. product-line
b. odd-even
c. professional
d. promotional
e. penetration
ANS: B PTS: 1 DIF: Moderate REF: p. 643
OBJ: 13-06 Explain the different types of pricing strategies.
NAT: AACSB: Analytic | MKTG: Pricing | MKTG: Strategy MSC: Application

Scenario 13.2
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.

115. Refer to Scenario 13.2. Glenwood's previous pricing strategy is an example of ____ pricing, while the
new strategy is an example of ____ pricing.
a. percentage; cost-based
b. cost-based; psychological
c. sales-based; customary
d. a la carte; bundle
e. demand-based; bundling
ANS: D PTS: 1 DIF: Easy REF: p. 641
OBJ: 13-06 Explain the different types of pricing strategies.
NAT: AACSB: Analytic | MKTG: Pricing | MKTG: Strategy MSC: Application

116. Refer to Scenario 13.2. 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
a. customary pricing.
b. secondary-market pricing.
c. introductory pricing.
d. periodic discounting.
e. random discounting.
ANS: D PTS: 1 DIF: Moderate REF: p. 637
OBJ: 13-06 Explain the different types of pricing strategies.
NAT: AACSB: Analytic | MKTG: Pricing | MKTG: Strategy MSC: Application

117. Refer to Scenario 13.2. Glenwood's closest competitor, The Hearthstone Pet Hospital, currently
charges $60 for each basic office visit. If Glenwood were to price its basic office visit at $45, it would
most likely be employing which of the following?
a. customary pricing.
b. penetration pricing.
c. prestige pricing.
d. price skimming.
e. cost-based pricing.
ANS: B PTS: 1 DIF: Moderate REF: p. 639
OBJ: 13-06 Explain the different types of pricing strategies.
NAT: AACSB: Analytic | MKTG: Pricing | MKTG: Strategy MSC: Application

118. Refer to Scenario 13.2. Glenwood is considering a markup pricing basis, with the cost for office visit
plus vaccines at $45. If Glenwood were to add a markup of 33.3 percent of the costs, its price would be
____.
a. $79
b. $65
c. $55
d. $78
e. $60
ANS: E PTS: 1 DIF: Easy REF: p. 633
OBJ: 13-05 Describe the basis used for setting prices.
NAT: AACSB: Analytic | MKTG: Pricing | MKTG: Strategy MSC: Application

TRUE/FALSE

119. The six stages of setting prices should always be followed if prices are to be set correctly.

ANS: F PTS: 1 DIF: Easy REF: p. 628


OBJ: 13-02 Explore issues related to developing pricing objectives.
NAT: AACSB: Reflective Thinking | CBE: Model Pricing MSC: Knowledge

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

ANS: F PTS: 1 DIF: Easy REF: p. 628


OBJ: 13-02 Explore issues related to developing pricing objectives.
NAT: AACSB: Analytic | MKTG: Pricing | MKTG: Strategy MSC: Knowledge
121. Pricing objectives should be considered overall goals to aid the organization in its long-range plans.

ANS: T PTS: 1 DIF: Easy REF: p. 628


OBJ: 13-02 Explore issues related to developing pricing objectives.
NAT: AACSB: Reflective Thinking | MKTG: Pricing | MKTG: Strategy
MSC: Knowledge

122. The objective of profit maximization is rarely operational because its achievement is difficult to
measure.

ANS: T PTS: 1 DIF: Moderate REF: p. 629


OBJ: 13-02 Explore issues related to developing pricing objectives.
NAT: AACSB: Reflective Thinking | MKTG: Pricing MSC: Knowledge

123. The objective of maintaining or increasing market share depends on growth in industry sales.

ANS: F PTS: 1 DIF: Moderate REF: p. 629


OBJ: 13-02 Explore issues related to developing pricing objectives.
NAT: AACSB: Reflective Thinking | MKTG: Pricing | MKTG: Strategy
MSC: Knowledge

124. The use of market share as a pricing objective oversimplifies the value of price in contributing to
profits.

ANS: F PTS: 1 DIF: Difficult REF: p. 629


OBJ: 13-02 Explore issues related to developing pricing objectives.
NAT: AACSB: Analytic | MKTG: Pricing | MKTG: Strategy MSC: Knowledge

125. The role played by attitudes toward price in the overall evaluation of the marketing mix is a minor
concern in identifying the target market.

ANS: F PTS: 1 DIF: Moderate REF: p. 631


OBJ: 13-03 Understand the importance of identifying the target market's evaluation of price.
NAT: AACSB: Analytic | MKTG: Pricing | MKTG: Strategy MSC: Knowledge

126. Knowing the target market's evaluation of price allows the marketer to know how much emphasis to
place on price and how to price a product relative to competition.

ANS: T PTS: 1 DIF: Easy REF: p. 631


OBJ: 13-03 Understand the importance of identifying the target market's evaluation of price.
NAT: AACSB: Reflective Thinking | MKTG: Pricing | MKTG: Strategy
MSC: Knowledge

127. The price of a hotel room is more important to a business traveler than to a tourist.

ANS: F PTS: 1 DIF: Moderate REF: p. 631


OBJ: 13-03 Understand the importance of identifying the target market's evaluation of price.
NAT: AACSB: Analytic | MKTG: Pricing | MKTG: Customer MSC: Knowledge

128. The importance of price depends on the type of product, the type of target market, and the purchase
situation.

ANS: T PTS: 1 DIF: Easy REF: p. 631


OBJ: 13-03 Understand the importance of identifying the target market's evaluation of price.
NAT: AACSB: Reflective Thinking | MKTG: Pricing | MKTG: Marketing Plan
MSC: Knowledge

129. A marketer is usually in a better position to establish prices when it knows the prices charged for
competing brands.

ANS: T PTS: 1 DIF: Easy REF: p. 632


OBJ: 13-04 Examine how marketers ananlyze competitors' prices.
NAT: AACSB: Reflective Thinking | MKTG: Pricing MSC: Knowledge

130. Some stores employ comparison shoppers to learn what prices their competitors are charging.

ANS: T PTS: 1 DIF: Easy REF: p. 632


OBJ: 13-04 Examine how marketers ananlyze competitors' prices.
NAT: AACSB: Reflective Thinking | MKTG: Pricing | MKTG: Strategy
MSC: Knowledge

131. It is usually easy to obtain an accurate price list for a competitor's products.

ANS: F PTS: 1 DIF: Easy REF: p. 632


OBJ: 13-04 Examine how marketers ananlyze competitors' prices.
NAT: AACSB: Reflective Thinking | MKTG: Pricing MSC: Knowledge

132. Marketers that evaluate competitors' prices do so to set their own prices slightly below those of
competitors.

ANS: F PTS: 1 DIF: Moderate REF: p. 632


OBJ: 13-04 Examine how marketers ananlyze competitors' prices.
NAT: AACSB: Analytic | MKTG: Pricing | MKTG: Strategy MSC: Knowledge

133. Cost-based pricing strategies result in a percentage being added to the cost of the product.

ANS: T PTS: 1 DIF: Easy REF: p. 633


OBJ: 13-05 Describe the basis used for setting prices.
NAT: AACSB: Reflective Thinking | MKTG: Pricing MSC: Knowledge

134. Cost-based pricing results in a high price when demand is high and a low price when demand is low.

ANS: F PTS: 1 DIF: Moderate REF: p. 633


OBJ: 13-05 Describe the basis used for setting prices.
NAT: AACSB: Analytic | MKTG: Pricing | MKTG: Strategy MSC: Knowledge

135. One pitfall of cost-plus pricing for the buyer is that the seller may increase costs to establish a larger
profit base.

ANS: T PTS: 1 DIF: Easy REF: p. 633


OBJ: 13-05 Describe the basis used for setting prices.
NAT: AACSB: Reflective Thinking | MKTG: Pricing | MKTG: Strategy
MSC: Knowledge

136. Cost-plus pricing is popular in periods of rapid inflation.

ANS: T PTS: 1 DIF: Moderate REF: p. 633


OBJ: 13-05 Describe the basis used for setting prices.
NAT: AACSB: Analytic | MKTG: Pricing | MKTG: Strategy MSC: Knowledge

137. Markup pricing is not used often by marketers because establishing a percentage markup greatly
increases the complexity of the decision-making process.

ANS: F PTS: 1 DIF: Moderate REF: p. 633


OBJ: 13-05 Describe the basis used for setting prices.
NAT: AACSB: Analytic | MKTG: Pricing | MKTG: Strategy MSC: Knowledge

138. Markup can be stated as a percentage of the cost or as a percentage of the selling price.

ANS: T PTS: 1 DIF: Easy REF: p. 633


OBJ: 13-05 Describe the basis used for setting prices.
NAT: AACSB: Reflective Thinking | MKTG: Pricing MSC: Knowledge

139. A major reason why retailers use markup pricing is that it is convenient.

ANS: T PTS: 1 DIF: Easy REF: p. 633


OBJ: 13-05 Describe the basis used for setting prices.
NAT: AACSB: Reflective Thinking | MKTG: Pricing MSC: Knowledge

140. The effectiveness of demand-based pricing often depends on a marketer's ability to determine all the
costs associated with the product.

ANS: F PTS: 1 DIF: Moderate REF: p. 634


OBJ: 13-05 Describe the basis used for setting prices.
NAT: AACSB: Analytic | MKTG: Pricing MSC: Knowledge

141. Demand-based pricing strategies are easy to use.

ANS: F PTS: 1 DIF: Easy REF: p. 634


OBJ: 13-05 Describe the basis used for setting prices.
NAT: AACSB: Reflective Thinking | MKTG: Pricing MSC: Knowledge

142. A firm that considers costs and revenue secondary to competitors' prices when setting its own prices is
using a competition-based pricing strategy.

ANS: T PTS: 1 DIF: Difficult REF: p. 635


OBJ: 13-05 Describe the basis used for setting prices.
NAT: AACSB: Analytic | MKTG: Pricing MSC: Knowledge

143. The government frequently uses competition-based pricing in granting defense contracts.

ANS: F PTS: 1 DIF: Moderate REF: p. 635


OBJ: 13-05 Describe the basis used for setting prices.
NAT: AACSB: Analytic |MKTG: Pricing MSC: Knowledge

144. Competition-based pricing is important if competing products are almost homogeneous or if price is
the key variable in the marketing strategy.

ANS: T PTS: 1 DIF: Difficult REF: p. 635


OBJ: 13-05 Describe the basis used for setting prices.
NAT: AACSB: Analytic | MKTG: Pricing | MKTG: Strategy MSC: Comprehension
145. A pricing strategy is a course of action designed to achieve pricing and marketing objectives.

ANS: T PTS: 1 DIF: Moderate REF: p. 636


OBJ: 13-06 Explain the different types of pricing strategies.
NAT: AACSB: Reflective Thinking | MKTG: Pricing | MKTG: Strategy
MSC: Knowledge

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

ANS: T PTS: 1 DIF: Moderate REF: p. 636


OBJ: 13-06 Explain the different types of pricing strategies.
NAT: AACSB: Reflective Thinking | MKTG: Pricing MSC: Knowledge

147. Differential pricing is effective mainly when focusing on only one market segment.

ANS: F PTS: 1 DIF: Moderate REF: p. 636


OBJ: 13-06 Explain the different types of pricing strategies.
NAT: AACSB: Analytic | MKTG: Pricing | MKTG: Strategy MSC: Knowledge

148. Grocery stores use negotiated pricing strategies.

ANS: F PTS: 1 DIF: Moderate REF: p. 637


OBJ: 13-06 Explain the different types of pricing strategies.
NAT: AACSB: Analytic | MKTG: Pricing | MKTG: Strategy MSC: Application

149. An early-bird special offered by a restaurant during off-peak hours is an example of the secondary-
market pricing strategy.

ANS: T PTS: 1 DIF: Easy REF: p. 637


OBJ: 13-06 Explain the different types of pricing strategies.
NAT: AACSB: Analytic | MKTG: Pricing | MKTG: Strategy MSC: Application

150. Periodic discounting is often predictable so consumers wait to make purchases until they can benefit
from the price reductions.

ANS: T PTS: 1 DIF: Moderate REF: p. 637


OBJ: 13-06 Explain the different types of pricing strategies.
NAT: AACSB: Reflective Thinking | MKTG: Pricing | MKTG: Customer
MSC: Knowledge

151. Random discounting means discounting various products on a systematic basis.

ANS: F PTS: 1 DIF: Easy REF: p. 638


OBJ: 13-06 Explain the different types of pricing strategies.
NAT: AACSB: Reflective Thinking | MKTG: Pricing MSC: Knowledge

152. Two types of new-product pricing are price skimming and product-line pricing.

ANS: F PTS: 1 DIF: Easy REF: p. 638-639


OBJ: 13-06 Explain the different types of pricing strategies.
NAT: AACSB: Reflective Thinking | MKTG: Pricing MSC: Knowledge
153. Penetration pricing and price skimming of the market are two types of new-product pricing.

ANS: T PTS: 1 DIF: Easy REF: p. 638-639


OBJ: 13-06 Explain the different types of pricing strategies.
NAT: AACSB: Reflective Thinking | MKTG: Pricing MSC: Knowledge

154. Price skimming is designed to yield maximum unit sales volume.

ANS: F PTS: 1 DIF: Moderate REF: p. 638


OBJ: 13-06 Explain the different types of pricing strategies.
NAT: AACSB: Reflective Thinking | MKTG: Pricing | MKTG: Strategy
MSC: Knowledge

155. The use of price skimming discourages competitors from entering a market.

ANS: F PTS: 1 DIF: Moderate REF: p. 638


OBJ: 13-06 Explain the different types of pricing strategies.
NAT: AACSB: Analytic | MKTG: Pricing | MKTG: Strategy MSC: Knowledge

156. Penetration pricing is one new-product pricing approach that provides the most flexible introductory
price.

ANS: F PTS: 1 DIF: Moderate REF: p. 639


OBJ: 13-06 Explain the different types of pricing strategies.
NAT: AACSB: Analytic | MKTG: Pricing | MKTG: Strategy MSC: Knowledge

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

ANS: F PTS: 1 DIF: Difficult REF: p. 639


OBJ: 13-06 Explain the different types of pricing strategies.
NAT: AACSB: Analytic | MKTG: Pricing | MKTG: Strategy MSC: Comprehension

158. Captive pricing, premium pricing, bait pricing, and price lining are all strategies aimed at maximizing
the profits of an entire product line rather than an individual product.

ANS: T PTS: 1 DIF: Moderate REF: p. 639


OBJ: 13-06 Explain the different types of pricing strategies.
NAT: AACSB: Analytic | MKTG: Pricing | MKTG: Strategy MSC: Knowledge

159. Grocery stores that position their less expensive, private brands next to more expensive, well-known
manufacturer brands on the shelf are using the concept of reference pricing.

ANS: T PTS: 1 DIF: Easy REF: p. 641


OBJ: 13-06 Explain the different types of pricing strategies.
NAT: AACSB: Analytic | MKTG: Pricing | MKTG: Strategy MSC: Application

160. A psychological price is designed to encourage purchases on the basis of rational response rather than
on the basis of emotional reactions.

ANS: F PTS: 1 DIF: Moderate REF: p. 641


OBJ: 13-06 Explain the different types of pricing strategies.
NAT: AACSB: Reflective Thinking | MKTG: Pricing | MKTG: Strategy
MSC: Knowledge
161. In some cases, prices are assigned to goods on the basis of nothing more than custom.

ANS: T PTS: 1 DIF: Easy REF: p. 643


OBJ: 13-06 Explain the different types of pricing strategies.
NAT: AACSB: Reflective Thinking | MKTG: Pricing | MKTG: Strategy
MSC: Knowledge

162. Prestige pricing is used when a higher price is consistent with buyers' attitudes toward the quality or
image of a product.

ANS: T PTS: 1 DIF: Moderate REF: p. 643


OBJ: 13-06 Explain the different types of pricing strategies.
NAT: AACSB: Reflective Thinking | MKTG: Pricing | MKTG: Strategy
MSC: Knowledge

163. A price-leader approach is a pricing approach most often used in supermarkets to attract consumers by
giving them special low prices on a few items.

ANS: T PTS: 1 DIF: Moderate REF: p. 644


OBJ: 13-06 Explain the different types of pricing strategies.
NAT: AACSB: Analytic | MKTG: Pricing | MKTG: Strategy MSC: Knowledge

164. The local florist advertises a discount on arrangements during the month of April because the
anniversary of the store's opening is in April. This is an example of special-event pricing.

ANS: T PTS: 1 DIF: Easy REF: p. 644


OBJ: 13-06 Explain the different types of pricing strategies.
NAT: AACSB: Analytic | MKTG: Pricing | MKTG: Strategy MSC: Application

165. The way that pricing is used in the marketing mix will influence the determination of the final price.

ANS: T PTS: 1 DIF: Moderate REF: p. 644


OBJ: 13-06 Explain the different types of pricing strategies.
NAT: AACSB: Reflective Thinking | MKTG: Pricing | MKTG: Marketing Plan
MSC: Knowledge