Download Chapter 9 - Napa Valley College

CHAPTER 9
CRS Questions & Answers
PRICING: Understanding
and Capturing Customer
Value
Setting price based on buyers’ perceptions
of value rather than on the seller’s cost is
called:
1.
2.
3.
4.
Value-based pricing
Customer-based pricing
Non-cost pricing
Competitive-based pricing
©2011 Pearson Education, Inc. publishing as Prentice Hall
9-2
Setting price based on buyers’ perceptions
of value rather than on the seller’s cost is
called:
1.
2.
3.
4.
Value-based pricing
Customer-based pricing
Non-cost pricing
Competitive-based pricing
Value-based pricing begins with a complete understanding
of the value that a product or service creates for customers.
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9-3
Monthly costs such as rent, interest, and
salaries that must be paid regardless of output
each month are:
1.
2.
3.
4.
Nonvariable costs
Commitment costs
Fixed costs
Variable costs
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9-4
Monthly costs such as rent, interest, and
salaries that must be paid regardless of output
each month are:
1.
2.
3.
4.
Nonvariable costs
Commitment costs
Fixed costs
Variable costs
Fixed costs (also known as overhead) are costs that do
not vary with production or sales level.
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9-5
A manufacturer of bicycles has fixed costs of
$500,000 and variable costs of $30 per bicycle.
If the company sells the bicycle for $80, how
many bicycles must be sold to break even?
1.
2.
3.
4.
6,250
10,000
16,667
20,000
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9-6
A manufacturer of bicycles has fixed costs of
$500,000 and variable costs of $30 per bicycle.
If the company sells the bicycle for $80, how
many bicycles must be sold to break even?
1.
2.
3.
4.
6,250
10,000
16,667
20,000
Breakeven volume = fixed cost ÷ (price –
variable costs) = $500,000 ÷ ($80 - $30) =
10,000 bicycles.
©2011 Pearson Education, Inc. publishing as Prentice Hall
9-7
Initially, you price your new motorcycle at
$30,000, but then drop the price to $27,000.
Consequently, demand for the new motorcycle
jumps by 40%. In this case, demand is:
1.
2.
3.
4.
Highly inelastic
Highly unpredictable
Highly elastic
Highly variable
©2011 Pearson Education, Inc. publishing as Prentice Hall
9-8
Initially, you price your new motorcycle at
$30,000, but then drop the price to $27,000.
Consequently, demand for the new motorcycle
jumps by 40%. In this case, demand is:
1.
2.
3.
4.
Highly inelastic
Highly unpredictable
Highly elastic
Highly variable
When the percentage change in price (10%) is
smaller than the corresponding percentage
change in demand (40%), demand is elastic.
©2011 Pearson Education, Inc. publishing as Prentice Hall
9-9
Market penetration pricing works best when all
EXCEPT which the following conditions are met?
1. Consumers are price sensitive.
2. Per unit production and distribution costs
fall as sales volume rises.
3. The low prices keep competitors at bay.
4. The product has a premium image.
©2011 Pearson Education, Inc. publishing as Prentice Hall
9-10
Market penetration pricing works best when all
EXCEPT which the following conditions are met?
1. Consumers are price sensitive.
2. Per unit production and distribution costs
fall as sales volume rises.
3. The low prices keep competitors at bay.
4. The product has a premium image.
As consumers often equate high prices with high
quality, market skimming would be the preferred
strategy when a product has a premium image.
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9-11
Computer printers have become very
inexpensive. However, the replacement ink
cartridges can cost almost as much as the
printer. What product mix pricing strategy is
being used?
1.
2.
3.
4.
Everyday low pricing
Competition-based pricing
Captive-product pricing
High-low pricing
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9-12
Computer printers have become very
inexpensive. However, the replacement ink
cartridges can cost almost as much as the
printer. What product mix pricing strategy is
being used?
1.
2.
3.
4.
Everyday low pricing
Competition-based pricing
Captive-product pricing
High-low pricing
Companies that make products (e.g., cartridges) that
must be used along with a main product (e.g.,
printer) are using captive-product pricing.
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9-13
Discounts offered to channel members for
services they provide are called:
1.
2.
3.
4.
Functional discounts
Quantity discounts
Cash discounts
Seasonal discounts
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9-14
Discounts offered to channel members for
services they provide are called:
1.
2.
3.
4.
Functional discounts
Quantity discounts
Cash discounts
Seasonal discounts
Wholesalers, distributors, and retailers earn functional
discounts as a reward for storing and selling the
product, and for their record keeping activities.
©2011 Pearson Education, Inc. publishing as Prentice Hall
9-15
Priceway grocery stores frequently advertise
some products at very low prices to attract
customers to the store in the hope that they will
buy other items at normal markups. What priceadjustment strategy is Priceway using?
1.
2.
3.
4.
Promotional pricing
Reference pricing
Low-High pricing
Segmented pricing
©2011 Pearson Education, Inc. publishing as Prentice Hall
9-16
Priceway grocery stores frequently advertise
some products at very low prices to attract
customers to the store in the hope that they will
buy other items at normal markups. What priceadjustment strategy is Priceway using?
1.
2.
3.
4.
Promotional pricing
Reference pricing
Low-High pricing
Segmented pricing
Promotional pricing involves temporarily pricing products
below the list price, and sometimes even below cost, to
increase short-run sales. This specific type of promotion
pricing is called loss leader.
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9-17
Charging the same price plus freight to all
customers, regardless of their location, is
called:
1.
2.
3.
4.
Nonpromotional pricing
Uniform-delivered pricing
Zone pricing
Price conformity
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9-18
Charging the same price plus freight to all
customers, regardless of their location, is
called:
1.
2.
3.
4.
Nonpromotional pricing
Uniform-delivered pricing
Zone pricing
Price conformity
When using uniform-delivered pricing, the company
charges the same price plus freight to all customers,
regardless of their location. The freight charge is set at
the average freight cost.
©2011 Pearson Education, Inc. publishing as Prentice Hall
9-19
Amanda was checking airline prices on the
Internet and noticed that prices changed
throughout the day and on different days when
she checked. This type of pricing routinely
practiced by industries such as airlines and
hotels is called:
1.
2.
3.
4.
Reference pricing
Dynamic pricing
Captive-product pricing
Zone pricing
©2011 Pearson Education, Inc. publishing as Prentice Hall
9-20
Amanda was checking airline prices on the
Internet and noticed that prices changed
throughout the day and on different days when
she checked. This type of pricing routinely
practiced by industries such as airlines and
hotels is called:
1.
2.
3.
4.
Reference pricing
Dynamic pricing
Captive-product pricing
Zone pricing
Dynamic pricing is the adjusting of prices continually to meet
the characteristics and needs of individual customers and
situations.
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9-21
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Copyright © 2009 Pearson Education, Inc.
Publishing as Prentice Hall
©2011 Pearson Education, Inc. publishing as Prentice Hall
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