BUS 312 Chapter 11 Practice Test
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Questions and Answers

Market skimming prices are preferred in all of the following conditions except __________.

an initial low price is set by the companies

Market penetration prices are preferred in all of the following conditions except __________.

enough buyers must want the product at a higher price

One major objective associated with a market-penetration pricing strategy is to ________.

win a large market share

Which new product pricing strategy should a company use to maximize its market share and attract many buyers quickly?

<p>Market-penetration pricing</p> Signup and view all the answers

When Apple introduced its iPhone, it was pursuing a(n) ________ new product pricing strategy.

<p>market-skimming</p> Signup and view all the answers

Which statement is true concerning new product pricing strategies?

<p>For a market-skimming strategy to be successful, the costs of producing a smaller volume cannot be so high that they cancel the advantage of charging more.</p> Signup and view all the answers

Companies that make products that must be used along with a main product are using __________.

<p>captive-product pricing</p> Signup and view all the answers

The pricing method in which sellers combine several products and offer a reduced price is known as __________.

<p>product bundle pricing</p> Signup and view all the answers

What pricing strategy is Gillette using when it charges a fairly low price for its razors and a high price for razor blades?

<p>captive-product</p> Signup and view all the answers

Bath & Body Works offers 'three-fer' deals on its soaps and lotions. This is an example of _______ pricing.

<p>product bundle</p> Signup and view all the answers

What type of pricing is exemplified by a car buyer choosing a base model at one price or a premium version at a higher price?

<p>optional-product</p> Signup and view all the answers

The Ford Mustang is offered in several different models. Ford will use ________ pricing to determine the price steps between the different models.

<p>product line</p> Signup and view all the answers

In __________ pricing, the company sells a product or service at two or more prices, even though the difference in prices is not based on differences in costs.

<p>segmented</p> Signup and view all the answers

Some sellers use 00-cent endings on regularly priced items and 99-cent endings on discount merchandise. This is referred to as __________.

<p>psychological pricing</p> Signup and view all the answers

Many state colleges charge one price for in-state students and a higher price for out-of-state students. Which form of segmented pricing are these schools using?

<p>Location-based pricing</p> Signup and view all the answers

Companies that use ________ continually adjust prices to meet the characteristics and needs of individual customers and situations.

<p>dynamic pricing</p> Signup and view all the answers

What do consumers often use as an indicator of quality when choosing a bottle of wine?

<p>price</p> Signup and view all the answers

What geographic pricing method does UPS use when charging different prices for shipping based on the delivery region?

<p>Zone pricing</p> Signup and view all the answers

Techniques that can be used by sellers for avoiding customers' perception of price gouging include all of the following except __________.

<p>rationing products to customers</p> Signup and view all the answers

Techniques that can be used by sellers for avoiding customers' perception of price gouging include all of the following except __________.

<p>low-price fighter items</p> Signup and view all the answers

Which statement is true regarding initiating price cuts?

<p>Cutting prices in an industry loaded with excess capacity might lead to price wars</p> Signup and view all the answers

Assume a competitor has cut prices. What potential actions should the company determine to take?

<p>reducing price, raising perceived value, improving quality and increasing price, and launching a low-price 'fighter' brand</p> Signup and view all the answers

Which statement is true regarding initiating price increases?

<p>Wherever possible, the company should consider ways to meet higher costs or demand without raising prices.</p> Signup and view all the answers

What is a potentially effective action a company could take in response to a competitor's price cut?

<p>Reduce the price.</p> Signup and view all the answers

Federal legislation on __________ states that sellers must set prices without talking to competitors.

<p>price-fixing</p> Signup and view all the answers

What is predatory pricing?

<p>Selling below cost with the intention of punishing a competitor</p> Signup and view all the answers

What was Archer Daniels Midland Co guilty of in the 1990s?

<p>price-fixing</p> Signup and view all the answers

What is the practice of pricing products below cost to harm competitors?

<p>Predatory pricing</p> Signup and view all the answers

What occurs when retailers set an artificially high 'regular price' and then advertise a 'sale price' that is close to their everyday price?

<p>Deceptive pricing</p> Signup and view all the answers

What is the purpose of the Robinson-Putnam Act?

<p>To prevent unfair price discrimination</p> Signup and view all the answers

Study Notes

Pricing Strategies

  • Market Skimming Pricing: Setting a high initial price for a product, generally preferred when low competition exists; aims to recover costs quickly.
  • Market Penetration Pricing: Initial low pricing used to quickly attract a large number of buyers and gain market share; requires sufficient customer demand for higher-priced alternatives.
  • Objective of Market Penetration: Primarily focused on capturing a significant market share swiftly.

Product Pricing Strategies

  • Captive-Product Pricing: A strategy where the main product is sold at a low price, while complementary products are sold at higher prices (e.g., razors and razor blades).
  • Product Bundle Pricing: Offering several products in a package at a reduced rate (e.g., "three-fer" deals).
  • Optional-Product Pricing: Pricing based on base models plus optional features or upgrades (e.g., car sound systems).
  • Product Line Pricing: Setting different prices for different models within a product line to reflect differences in features and performance.

Segmented Pricing Strategies

  • Segmented Pricing: Selling the same product at different prices without cost differences; common in educational institutions charging in-state versus out-of-state tuition.
  • Psychological Pricing: Using pricing techniques like 99-cent endings to enhance consumer perception of value.
  • Dynamic Pricing: Continuously adjusting prices based on customer demand and characteristics.

Geographic and Perception Pricing

  • Zone Pricing: Geographic pricing method where shipping costs vary based on distance (e.g., UPS).
  • Avoiding Price Gouging: Techniques include remaining transparent in pricing and avoiding bad practices like product rationing.

Price Adjustments

  • Price Cut Initiatives: Initiating price cuts may lead to price wars, especially in industries with excess capacity; companies can respond by adjusting prices or enhancing perceived product value.
  • Price Increase Strategies: Companies should explore alternatives to raising prices, like improving value propositions to manage higher costs.
  • Price-Fixing Legislation: Laws prohibit colluding with competitors to set prices; observed in cases like Archer Daniels Midland Co.
  • Predatory Pricing: An unethical strategy involving selling below cost to eliminate competitors; illegal in many jurisdictions.
  • Deceptive Pricing: Occurs when retailers artificially inflate "regular prices" before advertising "discounts."

Statutory Contributions

  • Robinson-Patman Act: A federal regulation aimed at preventing unfair price discrimination, ensuring competition remains fair.

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Description

Test your knowledge on market pricing strategies with this flashcard quiz for BUS 312 Chapter 11. Explore concepts like market skimming and penetration pricing, and how they apply in different scenarios. Perfect for students looking to reinforce their understanding of pricing tactics.

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