Pricing Strategies Quiz
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Questions and Answers

What is Loss Leader Pricing?

  • Pricing products based on their brand reputation.
  • Creating a pricing strategy that eliminates competition.
  • Setting very low prices for some products to attract customers. (correct)
  • Setting prices above market rates to maximize profits.

    • Every Day Low Pricing leads to more predictable consumer demand than Hi-Lo Pricing.

    True

    What is the primary intention behind Price Bundling?

    To get customers to buy more and increase sales of higher margin items.

    Hi-Lo pricing often results in a large ______ segment that enjoys discounts.

    <p>Cherry-pickers</p> Signup and view all the answers

    Match the following pricing strategies with their characteristics:

    <p>Every Day Low Pricing = Constant low price and lower fixed costs Hi-Lo Pricing = Frequent short-term sales and lower variable costs Loss Leader Pricing = Attracts customers with low prices on certain products Price Bundling = Encourages the purchase of multiple items together</p> Signup and view all the answers

    Which of the following is NOT a benefit of Everyday Low Pricing?

    <p>Higher overall price levels.</p> Signup and view all the answers

    The primary goal of Hi-Lo Pricing is to create predictable consumer demand.

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

    What are two main components of Price Bundling?

    <p>Pure Bundling and Mixed Bundling.</p> Signup and view all the answers

    Which of the following is NOT a factor that reduces price sensitivity?

    <p>Buyers can easily compare the quality of substitutes</p> Signup and view all the answers

    Which of the following is a drawback of markup pricing?

    <p>It ignores competition</p> Signup and view all the answers

    Small changes in price have little effect on sales and profit.

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

    What is the primary objective of price elasticity?

    <p>To measure the responsiveness of quantity demanded to a change in price.</p> Signup and view all the answers

    Markups are typically lower for specialty items.

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

    A product is assumed to have more quality, prestige, or __________, which reduces price sensitivity.

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

    What is the formula for calculating Break-Even Quantity (BEQ)?

    <p>BEQ = FC / (Price - UVC)</p> Signup and view all the answers

    Starting at the highest possible price in the introduction stage of a new product and lowering the price later is called ____________ Pricing.

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

    Match the psychological pricing strategies with their descriptions:

    <p>Odd pricing = Setting prices just below round numbers Even pricing = Setting prices at whole numbers Price anchoring = Using a higher priced item to make others appear cheaper Price lining = Offering a product line at different price points</p> Signup and view all the answers

    Which pricing objective focuses on achieving the lowest possible price point to stay in business?

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

    Match the following pricing strategies with their descriptions:

    <p>Bait Pricing = Pricing an item low to sell a higher-price item Captive Pricing = Low pricing for a basic product, high for related items Price Skimming = High initial price reduced over time Penetration Pricing = Low initial price to attract customers quickly</p> Signup and view all the answers

    What does Break-Even Price (BEP) equate to?

    <p>UVC + Quantity</p> Signup and view all the answers

    What defines reference prices in consumer pricing psychology?

    <p>Prices that consumers use to evaluate the fairness or value of a product's price.</p> Signup and view all the answers

    Variable costs include fixed costs like rent and salaries.

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

    Bait-and-Switch advertising is legal as long as the bait item is sold out.

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

    List two advantages of price skimming over penetration pricing.

    <p>Higher initial profits, Allows for investment recovery.</p> Signup and view all the answers

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