Marketing Pricing Strategies Quiz
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Questions and Answers

What is the primary goal of market-penetration pricing?

  • To gain a large market share through low initial pricing (correct)
  • To maximize profits immediately from a small customer base
  • To price the product according to its perceived value
  • To create a high-quality image of the product

What is the primary consideration in product line pricing?

  • The geographical market where the products are sold
  • The exclusivity of the products in the line
  • The cost differences, customer evaluations, and competitor prices (correct)
  • The production method used for each product

Which of the following is NOT a characteristic of market-skimming pricing?

  • Skimming revenues from different market layers
  • Targeting price-sensitive customers (correct)
  • Setting high initial prices
  • Supporting product quality and image

Which pricing strategy sets prices for products that must be used with a main product?

<p>Captive product pricing (D)</p> Signup and view all the answers

What is the purpose of by-product pricing?

<p>To assign a price to waste products to enhance the competitiveness of the main product (C)</p> Signup and view all the answers

Which of the following strategies falls under product mix pricing?

<p>Captive product pricing (A)</p> Signup and view all the answers

What is the primary goal of adjusting prices for different types of customers?

<p>To maximize profits from all customer segments (C)</p> Signup and view all the answers

Which of the following is NOT a type of price adjustment strategy mentioned?

<p>Market penetration pricing (B)</p> Signup and view all the answers

What is a seasonal discount?

<p>A price reduction for off-season purchases (C)</p> Signup and view all the answers

Which type of pricing strategy involves setting prices for a set of products that are related to one another?

<p>Product line pricing (A)</p> Signup and view all the answers

Which pricing strategy involves charging customers differently based on their location?

<p>Geographic pricing (A)</p> Signup and view all the answers

What is a key issue related to initiating price changes?

<p>Predicting customer response to price increases (B)</p> Signup and view all the answers

Which of the following pricing strategies allows companies to charge different prices for complementary products?

<p>Captive product pricing (C)</p> Signup and view all the answers

What type of discount is offered for bulk purchases?

<p>Quantity discount (B)</p> Signup and view all the answers

Promotional pricing is primarily used to achieve which of the following?

<p>Encourage immediate sales through limited-time offers (C)</p> Signup and view all the answers

What legislation could significantly impact a company's pricing decisions?

<p>Consumer protection laws (B)</p> Signup and view all the answers

What is a potential drawback of promotional pricing strategies?

<p>They may diminish the perceived value of the brand. (B)</p> Signup and view all the answers

What does FOB-origin pricing indicate about the buyer's responsibilities?

<p>The buyer is responsible once the seller ships the product. (B)</p> Signup and view all the answers

Which geographical pricing strategy involves charging the same price plus freight to all customers?

<p>Uniform-delivered pricing (D)</p> Signup and view all the answers

How does zone pricing function in a pricing strategy?

<p>It creates multiple zones with the same pricing within each zone. (B)</p> Signup and view all the answers

What is one characteristic of freight-absorption pricing?

<p>The seller pays for part or all of the shipping costs. (C)</p> Signup and view all the answers

Which pricing strategy places risk on the buyer for any damage that occurs during transportation?

<p>FOB-origin pricing (D)</p> Signup and view all the answers

In geographical pricing, what does the term 'basing-point pricing' typically refer to?

<p>Using a fixed location to determine shipping charges. (C)</p> Signup and view all the answers

What effect does frequent use of coupons in promotional pricing have on customer perception?

<p>Normalizes discount shopping among consumers. (A)</p> Signup and view all the answers

What is the primary purpose of trade-in allowances in price adjustment strategies?

<p>To incentivize recycling of old products (D)</p> Signup and view all the answers

Which of the following best describes customer-segment pricing?

<p>Charging different prices to different groups for the same product (D)</p> Signup and view all the answers

What is a characteristic feature of psychological pricing?

<p>It emphasizes the psychological perception of prices (D)</p> Signup and view all the answers

Which type of pricing involves selling products at different prices in different geographic areas?

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

What is the main purpose of promotional pricing?

<p>To clear out old inventory (D)</p> Signup and view all the answers

What distinguishes time-based pricing from other segmented pricing strategies?

<p>It changes prices according to seasonal or temporal factors (A)</p> Signup and view all the answers

What is the likely effect of reference prices in psychological pricing?

<p>They assist customers in making decisions based on comparisons (A)</p> Signup and view all the answers

Which of the following pricing strategies involves consciously pricing multiple product versions differently?

<p>Product-form pricing (D)</p> Signup and view all the answers

What is the main purpose of retail price maintenance for manufacturers?

<p>To ensure a consistent pricing strategy across different retailers (D)</p> Signup and view all the answers

Which of the following statements accurately reflects consumer perceptions regarding pharmaceutical pricing?

<p>Consumers understand the necessity of higher prices for beneficial drugs but desire fairness in pricing. (D)</p> Signup and view all the answers

What constitutes deceptive pricing?

<p>Using comparison prices that do not represent actual availability to consumers. (C)</p> Signup and view all the answers

Why might pharmaceutical companies like GSK face challenges in their pricing strategies?

<p>They need to align their pricing with societal expectations and broader considerations. (C)</p> Signup and view all the answers

Which of the following is NOT an example of deceptive pricing?

<p>Offering a genuine discount on a product's normal price (B)</p> Signup and view all the answers

What is the primary reason for implementing discount and allowance pricing strategies?

<p>To reward customer behaviors such as early payment or bulk purchasing (A)</p> Signup and view all the answers

What could be a likely consequence of a company enacting a price cut due to excess capacity?

<p>Possible negative perceptions regarding quality (D)</p> Signup and view all the answers

Which pricing strategy focuses on the psychological impact of pricing rather than the actual cost?

<p>Psychological pricing (C)</p> Signup and view all the answers

Why might a company choose to implement geographical pricing?

<p>To cater specifically to local economic conditions and consumer ability to pay (A)</p> Signup and view all the answers

Which factor is typically NOT a reason for price increases?

<p>Excess inventory (A)</p> Signup and view all the answers

What consideration might a competitor evaluate upon observing a price cut by another company?

<p>Whether the price cut was accompanied by new product announcements (A)</p> Signup and view all the answers

What does dynamic and personalized pricing primarily aim to address?

<p>Tailoring prices based on individual customer characteristics and market conditions (A)</p> Signup and view all the answers

Which of the following strategies would be most appropriate for temporarily boosting sales during a slow season?

<p>Promotional pricing (D)</p> Signup and view all the answers

Flashcards

Market-skimming Pricing

Setting a high initial price to capture initial profits from early adopters. Good for products perceived as premium or with limited demand. It requires a compelling product offering and image to justify the price.

Market-penetration Pricing

A pricing strategy where a low price is set for a new product to gain quick market share and discourage competitors. It requires volume sales and efficient production to be profitable.

Product Line Pricing

Setting prices for a range of products in a product line. Prices are usually based on cost differences, features, and competitors' offers.

Optional Product Pricing

Pricing optional or accessory products that are sold along with the main product.

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Captive Product Pricing

Pricing products that are needed for the main product to work (like printer ink cartridges). Often sold at higher margins to cover costs of the main product.

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By-Product Pricing

Pricing each product individually instead of as a group. This is often used for products with unique costs or market positions.

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Product Bundle Pricing

Pricing a group of products together at a lower price than if purchased individually. This encourages customers to buy more.

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Value-based Pricing

Setting a price based on what customers are willing to pay, rather than focusing on cost. It requires careful market research to understand value perceptions.

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Discount and Allowance Pricing

A price adjustment strategy that reduces prices to reward customer behavior like bulk purchases, early payments, or product promotion.

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Segmented Pricing

A price adjustment strategy that offers different prices to different customer segments based on their willingness to pay.

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Psychological Pricing

A price adjustment strategy that uses psychological factors to influence a customer's perception of price and value.

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Customer-segment pricing

This pricing tactic offers discounts based on the type of customer, like military personnel, veterans, or their families.

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Product-form pricing

Different versions of the same product are priced differently, even if the cost difference is minimal.

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Location-based pricing

The product's price varies based on location, despite having the same cost.

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Time-based pricing

The price changes depending on the time of year, month, or day.

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Reference prices

These are prices that customers generally remember and use as a basis for comparison when evaluating a product's price.

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Promotional pricing

This involves temporarily lowering prices to boost sales in the short term, sometimes even below cost.

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Trade-in allowance

This pricing strategy aims to encourage customer turnover by providing incentives for customers to trade in their old items for new ones.

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Uniform-delivered pricing

A pricing strategy where the seller charges the same price to all customers, regardless of their location. The seller absorbs the freight cost, making the product seem more affordable for distant customers.

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Zone pricing

A pricing strategy where sellers set different prices based on customer's location. Customers closer to the seller pay a lower price than those farther away.

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FOB-origin pricing

A pricing strategy where the seller charges the customer the cost of transporting goods from the factory to the buyer's location. The seller's price does not include freight but charges the exact freight cost.

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Basing-point pricing

A pricing strategy where the seller charges a base price plus a set freight charge from a specific location, regardless of the actual shipping origin. This strategy makes it easier to calculate the final cost.

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Freight absorption pricing

A pricing strategy where the seller absorbs part of the shipping cost to reach distant customers. This strategy aims to attract customers from farther areas by reducing the perceived price difference.

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FOB port

A commonly used shipping term where the seller sets a price including the cost of delivering goods to the nearest port, but the buyer assumes responsibility for any damage or loss during transport.

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Freight pricing

A pricing strategy where the seller charges the customer an additional cost for delivery based on their location. This allows the seller to adjust their prices to better reflect the actual transportation costs.

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Geographical Pricing

A pricing strategy that takes into account the geographical location of customers and adjusts prices accordingly. This aims to balance fairness and profit maximization.

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Retail Price Maintenance

A manufacturer sets a specific retail price for its product, preventing dealers from selling at lower prices. This practice is illegal.

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Pharmaceutical Pricing

Pharmaceutical companies must balance profit with societal considerations when setting prices, ensuring fair treatment for consumers while providing access to essential medicines.

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Deceptive Pricing

This involves misleading consumers by stating false prices or discounts. It includes bogus reference prices and price confusion tactics.

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Dynamic and personalized pricing

Continuously adjusting prices based on individual customer preferences and situations, often using algorithms and data analysis.

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International pricing

Adjusting prices for international markets, considering factors such as currency exchange rates, import duties, and cultural preferences.

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What are the common drivers of price cuts?

A strategy to reduce prices often due to excess inventory, needing to increase market share, or compete with rivals.

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What are the common drivers of price increases?

Common reasons for price increases include higher costs, increased demand, or limited supply.

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Why might a company choose to reduce prices?

Companies might cut prices to eliminate excess inventory, gain market share, or respond to competitor pricing moves.

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Why might a company choose to increase prices?

Reasons for price increases include cost inflation, increased demand, or lack of supply.

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Study Notes

Pricing Strategies: Advanced Topics

  • This chapter covers advanced pricing strategies for new and existing products.
  • It covers pricing strategies for a portfolio of products to maximize profits.
  • The chapter also describes how to adjust prices to cater to various customer types and situations.
  • It discusses the complexities of initiating and responding to price changes, along with relevant public policy considerations and legal frameworks.

Learning Objectives 1-5

  • Objective 1: Outline the major strategies for pricing new products (market-skimming and market-penetration pricing).
  • Objective 2: Explain how companies select a portfolio of prices to maximize total product mix profits.
  • Objective 3: Discuss price adjustment strategies (discount and allowance, segmented, psychological, promotional, geographical, dynamic, and international pricing).
  • Objective 4: Examine the key issues related to initiating and responding to price changes by customers.
  • Objective 5: Understand major public policy issues, and key legislative details influencing pricing decisions (price fixing, predatory pricing, price discrimination, and deceptive pricing).

New Product Pricing Strategies

  • Market-skimming pricing: Setting high initial prices to maximize revenue from eager early adopters. -Product quality and image must support the price. -Buyers must want the product at the price.

  • Market-penetration pricing: Setting low initial prices to attract a large customer base quickly. -Gillette's Fusion ProGlide pack uses this strategy to attract a large share, making money on sales of high-margin refill blades.

Product Mix Pricing Strategies

  • Product line pricing: Setting prices across various products in a line taking into account cost differences, customer evaluations of product features, and competitors’ prices.

  • Optional product pricing: Pricing essential accessory products alongside the main product.

  • Captive product pricing: Pricing products intended for use with the main product (e.g., printer cartridges).

  • By-product pricing: Pricing waste products from the production process to make the main product more competitive. (Example: Chicken feet from poultry processing).

-Product bundle pricing: Combining multiple products for a reduced price.

Price Adjustment Strategies

  • Discount and allowance pricing: Reducing prices to respond to customer actions like early payment or high volume purchases; includes cash discounts, quantity discounts, functional discounts, and seasonal discounts. -Trade-in allowances for turning in old items (Example: for electronic goods) -Promotional allowances to reward dealers based on advertising or sales support activities.

  • Segmented pricing: Adjusting prices based on different customers, product versions, locations, and times.

  • Customer-segment pricing: Customers of distinct segments pay different prices for the same product or service.

  • Product-form pricing: Products vary in form and are priced differently.

  • Location-based pricing: Products are differently priced depending on locations.

  • Time-based pricing: Product prices fluctuate based on time of year, day, or the time of day.

  • Psychological pricing: Using prices to create an emotional impact; it is not simply about the cost but also considers buyers' emotional perceptions.

  • Reference pricing: Buyers evaluate products based on reference prices they already have.

  • Promotional pricing: Temporarily pricing products below the listing price, sometimes even below cost to boost short-term sales.

  • Geographical pricing: Adjusting prices based on location, employing FOB (free on board) pricing, Uniform-delivered pricing, Zone pricing, Basing-point pricing and Freight-absorption pricing.

  • Dynamic/Internet pricing: Adjusting prices continually to match customers' situations & needs.

  • International pricing: Setting prices based on many country-specific factors; Example: Apple sells high-end products for affluent customers, while also introducing lower-priced models to appeal to mid-range customers.

Price Changes

  • Initiating pricing changes: Triggered by factors like excess capacity, increased market share, cost inflation, increased demand or lack of supply.

  • Buyer reactions to pricing changes: Buyer reactions to price increases/decreases, (e.g., product popularity, company greed, new models, quality issues).

  • Competitor reactions to pricing changes: Analyzing competitor responses (why, permanent/temporary changes, company objectives).

  • Responding to competitor pricing changes: (e.g., holding current price, reducing/ increasing price, improve quality and increase prices, introduce other models/fighter brand). -The decision of whether to hold current prices, reduce, or raise prices depends on whether a lower price would negatively impact market share and profits.

Public Policy and Pricing

  • Public policy concerns and legislation: Price fixing, predatory pricing, price discrimination, deceptive pricing, Robinson-Patman Act (unfair price discrimination) and retail price maintenance.

  • Pricing within channel levels: Price fixing legislation, predatory pricing legal considerations, and deceptive pricing issues.

  • Ethical considerations: Responsible pharmaceutical pricing; balancing short-term financial goals with societal concerns when pricing pharmaceutical drugs.

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Principles Of Marketing (19th Edition) PDF

Description

Test your knowledge on various pricing strategies used in marketing, from product line pricing to seasonal discounts. This quiz covers essential concepts that will help you understand how businesses develop their pricing models to attract different customer segments. Perfect for students of marketing and business management.

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