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Exam 16: Pricing Objectives and Policies

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Question 81

Multiple Choice

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According to the text,

A) price has only a single dimension.
B) managers rarely have a choice in pricing.
C) managers should administer their prices.
D) managers should simply mark up their costs to determine pricing.
E) managers should follow a price leader's strategy.

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

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Question 82

Multiple Choice

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Which of the following is not an example of price?

A) college tuition.
B) doctor's fee.
C) apartment rent.
D) interest on a loan.
E) all of these are examples of price.

F) B) and C)
G) A) and C)

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Question 83

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Price fixing is not illegal unless it hurts a competitor.

There are two kinds of quantity discounts: cumulative and accumulative.

Seasonal discounts tend to smooth out sales during the year and therefore permit year-round operation.

A firm should not simply assume that its profits will grow if its sales grow.

Cash discount terms of 2/10, net 60 on an invoice would--in effect-- amount to borrowing at an annual interest rate of about ________ percent if the buyer did not pay the invoice for 60 days.

Use this information for question that refer to the Pricing 1 case. (WPI) case. As a project for her marketing class, Emily Washington is researching how five local businesses price their products. The following are brief sketches of what she has learned about each company. At Bella Computers, Emily has discovered that the company earned a 6 percent return on investment this year and wants to increase it to 9 percent next year. To its retailer customers, Bella Computers gives cash discount terms of 2/10, net 30. It also gives retailers a 3% reduction on the invoice amount for advertising Bella products locally. Bella gives retailers' salespeople 2% of the sale price for each Bella Computer they sell. At Ross Pharmaceuticals, she learned that the company has invested heavily in developing a new product that recently received a patent. Because cash is tight, the company wants to achieve a rapid return on its investment. The new patented product is badly needed in the market, so a very inelastic demand curve is expected. Digital Imaging makes photographic prints for wedding photographers. It is very concerned about competitor reactions to its pricing, so it has selected prices that will not draw the attention of the competition and not start a price war. Digital Imaging offers customers an 8% discount if their purchases exceed $20,000 a year. Jack's One Hour Cleaners recently opened for business. The company invested a lot of money in new equipment, and feels that it has to quickly get "at least 10% market share to stay in the game." This need obviously influences the company's pricing decisions. Jack's also plans to offer customers 20% discounts on any order over $20. National Printing Equipment (NPE) produces equipment that helps to print newspapers and magazines. The company sells directly to printers and through wholesalers. Its salespeople negotiate prices with individual customers and often have to match competitors' prices. NPE has a new product, the Gutenberg NP201, with some competitive advantages now, but competitors are expected to follow quickly with similar products. The new product is being introduced into a market with elastic demand. In regard to freight charges for its equipment, NPE's invoice reads, "Seller pays the cost of loading equipment onto a common carrier. At the point of loading, title to such products passes to the buyer, who assumes responsibility for damage in transit, except as covered by the transportation agency." National Printing Equipment's new Gutenberg NP201 should probably use:

A value pricer tries to offer a target market the same marketing mix as competitors but with a below-the-market price.

_____ are the prices final customers or users are normally asked to pay for products.

Use this information for question that refer to the Pricing 1 case. (WPI) case. As a project for her marketing class, Emily Washington is researching how five local businesses price their products. The following are brief sketches of what she has learned about each company. At Bella Computers, Emily has discovered that the company earned a 6 percent return on investment this year and wants to increase it to 9 percent next year. To its retailer customers, Bella Computers gives cash discount terms of 2/10, net 30. It also gives retailers a 3% reduction on the invoice amount for advertising Bella products locally. Bella gives retailers' salespeople 2% of the sale price for each Bella Computer they sell. At Ross Pharmaceuticals, she learned that the company has invested heavily in developing a new product that recently received a patent. Because cash is tight, the company wants to achieve a rapid return on its investment. The new patented product is badly needed in the market, so a very inelastic demand curve is expected. Digital Imaging makes photographic prints for wedding photographers. It is very concerned about competitor reactions to its pricing, so it has selected prices that will not draw the attention of the competition and not start a price war. Digital Imaging offers customers an 8% discount if their purchases exceed $20,000 a year. Jack's One Hour Cleaners recently opened for business. The company invested a lot of money in new equipment, and feels that it has to quickly get "at least 10% market share to stay in the game." This need obviously influences the company's pricing decisions. Jack's also plans to offer customers 20% discounts on any order over $20. National Printing Equipment (NPE) produces equipment that helps to print newspapers and magazines. The company sells directly to printers and through wholesalers. Its salespeople negotiate prices with individual customers and often have to match competitors' prices. NPE has a new product, the Gutenberg NP201, with some competitive advantages now, but competitors are expected to follow quickly with similar products. The new product is being introduced into a market with elastic demand. In regard to freight charges for its equipment, NPE's invoice reads, "Seller pays the cost of loading equipment onto a common carrier. At the point of loading, title to such products passes to the buyer, who assumes responsibility for damage in transit, except as covered by the transportation agency." What is Digital Imaging's pricing objective?

A firm that is very concerned about increases in market share should adopt a ______________ pricing objective.

Which pricing policy would probably be best for a profit-oriented producer introducing a really new product with a very inelastic demand curve?

Careful handling of "trade-ins"--to avoid reducing the list price--is especially important for sellers of:

Faced with many "me-too" competitors, Sonic Burgers, Inc. has set its price level to "meet competition"--while emphasizing nonprice competition. Sonic Burgers' pricing objective seems to be a ______________ objective.

The marketing manager for Aerial Photography, Inc. says his sales reps have gotten in the habit of setting prices which do not produce a profit. Aerial Photography apparently is using:

In the market introduction stage of the product life cycle, if a firm has economies of scale and expects competitors to enter the market soon, it would be wise to adopt a skimming pricing policy.

Many nonprofit organizations try to set a price level that will earn a target return figure of zero.

A sales-oriented pricing objective seeks some level of unit sales, dollar sales, or share of market--without referring to profit.

Heritage Brick's marketing manager is setting her pricing policies to "increase market share to 8%." Her pricing objective seems to be: