June 5, 2014

Pricing Strategies and Programs - Concept Questions


Multiple Choice

1.   ________ communicates to the market the company’s intended value positioning of its product or brand.
      a.   Packaging 
      b.   Price
      c.   Place
d.   Promotion
e.   Physical evidence 
Answer: b                    

2.   Price has operated as the major determinant of buyer choice among poorer nations, among poorer groups, and with ________ products.
a.   identical
b.   over the Internet
c.   similar
d.   commodity-type
e.   none of the above
Answer: d                   

3.   Companies price their products in a number of ways. Small companies prices are set by the boss, in larger companies, pricing is handled by division and product-line managers. In industries where price is a key factor, companies often establish a ________ department reporting to other internal departments.
a.   financial
b.   pricing
c.   sales
d.   marketing
e.   distribution
Answer: b                    

4.   One of the common mistakes made are: Price is not revised often enough to capitalize on market changes; price is set ________ of the rest of the marketing mix rather than an intrinsic element of a marketing-positioning strategy.
a.   divergently
b.   too high
c.  intrinsically
d.  independently
e.  concurrently
Answer: d                   

5.   “Power prices” use price as a key strategic tool. These “power pricers” have discovered the highly ________ effect of price on the bottom line.
a.   dramatic 
b.   abrasive
c.   leveraged
d.   direct
e.   soothing
Answer: c                    

6.   Purchase decisions are based on how consumers perceive prices and what they consider to be the ________ price—not the marketer’s stated price.
a.   current actual
b.   last purchased price
c.   current sale price
d.   referent price
e.   none of the above
Answer: a                    

7.  The definition of ________ prices is: In considering an observed price, consumers often compare it to an internal memory reference price or an external frame of reference (such as a posted “regular retail price”).
a.   historical
b.   reference
c.   promotional
d.   everyday low price
e.   none of the above
Answer: b                    

8. Many consumers use price as an indicator of ________. Image pricing is especially effective with ego-sensitive products such as perfumes and expensive cars.
a.   status
b.   quality
c.   ability
d.   capability
e.   size
Answer: b                    

9.   Pricing cues, such as sale signs and prices that end in a 9, become less effective the more they are employed. Anderson and Simester maintain that they must be used judiciously on those items where consumers’ price knowledge may be poor. Which of the following is NOT one of these signs?
a.   Quality or sizes vary across stores.
b.   Product designs vary over time.
c.   The store caters to low-involvement shoppers.
d.   Customers are new.
e.   Customers purchase the item infrequently. 
Answer: c                    

10. A firm must set a price for the first time when it develops a new product, when it introduces its regular product into a new distribution channel or geographical area, and when it ________.
a.   needs to increase bottom line results
b.   raises prices due to cost escalation
c.   rolls out an improved product
d.   enters bids on new contract work
e.   changes styles
Answer: d                   

11. Consumers often rank brands according to price tiers in a category. Within any tier, there is a range of acceptable prices, called ________. These provide managers with some indication of the flexibility and breadth they can adopt in pricing their brands within a particular price tier.
a.   price bands
b.   price clusters
c.   price groups
d.   price cues
e.   none of the above
Answer: a                    

12. A firm has to consider many factors in setting its pricing policy. We list these as a six-step process. Which of the following is NOT one of these steps?
a.   Determining demand.
b.   Selecting the pricing objective.
c.   Researching reference prices in the target market.
d.   Selecting the final price.
e.   Selecting a pricing method.
Answer: c                    

13. A firm first decides where it wants to position its market offering. A company can pursue any of five major objectives through pricing. Which of the following is NOT one of these objectives?
      a.   Predatory pricing
b.   Survival
c.   Maximum current profit
d.   Maximum market share
e.   Product-quality leadership
Answer: a                    

14. In market-penetration pricing, the company’s objective in pricing is to ________, believing that higher sales volume will lead to lower unit costs and higher long-run profits.
a.   block competitive launches
b.   maximize their market share
c.   minimize their market share
d.   maximize volume
e.   none of the above
Answer: b                    

15. Market-skimming prices make sense under the following conditions EXCEPT ________.
a.   the high price communicates high value
b.   the high initial price blocks competition from entering the market
c.   the unit costs of producing a small number of units is high
d.   the product is a “me-too” and contains no new technology or points of difference
e.   a sufficient number of buyers have a high current demand
Answer: d                   

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