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Boundless Lecture Slides
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Pricing
Introduction to Price
Competitive Dynamics and Pricing
Demand Analysis
Inputs to Pricing Decisions
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Pricing ObjectivesSlide3
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Pricing
(continued)
General Pricing Strategies
Specific Pricing Strategies
Pricing Tactics
Pricing Legal Concerns
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Defining Price
Terms Used to Describe Price
The Importance of Price to Marketers Value and Relative Value Introduction to Price
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When you ask about the cost of a good or service, you're really asking how much you will have to give up in order to get it.
For the business to increase value, it can either increase the perceived benefits or reduce the perceived costs. Both of these elements should be considered elements of price.Viewing price from the customer's perspective helps define value -- the most important basis for creating a competitive advantage.
There are two different ways to look at the role price plays in a society; rational man and irrational man.Defining Price
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Pricing > Introduction to PriceSlide6
From a customer's point of view, value is the sole justification for price.
The price of an item is also called the price point, especially when it refers to stores that set a limited number of price points. The words charge and fee are often used to refer to the price of services.The transportation industry charges a fare for its services.
Terms Used to Describe Price
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A London Bus
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Pricing > Introduction to PriceSlide7
Price is important to marketers because it represents marketers' assessment of the value customers see in the product or service and are willing to pay for a product or service.
Adjusting the price has a profound impact on the marketing strategy, and depending on the price elasticity of the product, it will often affect the demand and sales as well.Pricing contributes to how customers perceive a product or a service.
The Importance of Price to Marketers
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Pricing and the Marketing Mix
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Pricing > Introduction to PriceSlide8
Value is the worth of goods and services as determined by markets.
Something is only worth what someone is willing to pay for it.The utility for the seller is not as an object of usage, but as a source of income.In term of pricing, prices of valued items undergo questionable fluctuations.
Value and Relative Value
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Value or Price
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Pricing > Introduction to PriceSlide9
Price Competition
Nonprice Competition
Competitive Dynamics and Pricing
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Price is a very important decision criteria that customers use to compare alternatives. It also contributes to the company's position.
The pricing process normally begins with a decision about the company's pricing approach to the market.In general, a business can price itself to match its competition, price higher, or price lower.
Price Competition
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Kmart
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Pricing > Competitive Dynamics and PricingSlide11
Non-price competition can be contrasted with price competition, which is where a company tries to distinguish its product or service from competing products on the basis of a low price.
Firms will engage in non-price competition, in spite of the additional costs involved, because it is usually more profitable than selling for a lower price and avoids the risk of a price war.Although any company can use a non-price competition strategy, it is most common among oligopolies and monopolistic competition, because these firms can be extremely competitive.
Nonprice Competition
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Amazon.com
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Pricing > Competitive Dynamics and PricingSlide12
The Demand Curve
The Influence of Supply and Demand on Price
Elasticity of Demand Yield Management Systems Demand Analysis
Pricing > Demand Analysis
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Demand does not only have to do with the need to have a product or a service, but it also involves the willingness and ability to buy it at the price charged for it.
The demand curve for all consumers together follows from the demand curve of every individual consumer. The individual demands at each price are added together.The negative slope of the demand curve is often referred to as the "law of demand," which means people will buy more of a service, product, or resource as its price falls.
The Demand Curve
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Figure 2
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Pricing > Demand AnalysisSlide14
There are four basic laws of supply and demand.
Since determinants of supply and demand other than the price of the good in question are not explicitly represented in the supply-demand diagram, changes in the values of these variables are represented by moving the supply and demand curves (often described as "shifts" in the curves).Responses to changes in the price of the good are represented as movements along unchanged supply and demand curves.
The Influence of Supply and Demand on Price
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Supply and Demand
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Pricing > Demand AnalysisSlide15
Price elasticities are almost always negative; only goods which do not conform to the law of demand, such as a Veblen good and a Giffen good, have a positive PED.
In general, the demand for a good is said to be inelastic (or relatively inelastic) when changes in price have a relatively small effect on the quantity of the good demanded.The demand for a good is said to be elastic (or relatively elastic) when changes in price have a relatively large effect on the quantity of a good demanded.
A number of factors can thus affect the elasticity of demand for a good.Elasticity of Demand
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Equation
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Pricing > Demand AnalysisSlide16
Yield management is the process of understanding, anticipating, and influencing consumer behavior to maximize yield or profits from a fixed, perishable resource (such as airline seats or hotel room reservations).
Yield management is particularly suitable when selling perishable products, which are goods that become unsellable at a point in time (for example, airline tickets just after a flight takes off).While yield management systems tend to generate higher revenues, the revenue streams tend to arrive later in the booking horizon as more capacity is held for late sale at premium prices.
Yield Management Systems
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Airline Tickets
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Pricing > Demand AnalysisSlide17
Marginal Analysis
Fixed Costs
Break-Even Analysis Organizational Objectives Other Inputs to Pricing Decisions Inputs to Pricing Decisions
Pricing > Inputs to Pricing Decisions
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Firms tend to accomplish their objective of profit maximization by increasing their production until marginal revenue equals marginal cost.
At the output level at which marginal revenue equals marginal cost, marginal profit is zero and this quantity is the one that maximizes profit.In some cases, a firm's demand and cost conditions are such that marginal profits are greater than zero for all levels of production up to a certain maximum; thus, output should be produced at the maximum level.
Marginal Analysis
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Marginal Profit Maximization
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Pricing > Inputs to Pricing DecisionsSlide19
The distinction between fixed and variable costs is crucial in forecasting the earnings generated by various changes in unit sales and thus the financial impact of proposed marketing campaigns.
Fixed costs are not permanently fixed - they will change over time - but are fixed in relation to the quantity of production for the relevant period.Average fixed cost (AFC) is an economic term that refers to fixed costs of production (FC) divided by the quantity (Q) of output produced.
Fixed Costs
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Fixed Costs and Variable Costs
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Pricing > Inputs to Pricing DecisionsSlide20
In the linear Cost-Volume-Profit Analysis model, the break-even unit of sales can be directly computed in terms of total revenue and total costs.
Unit contribution margin is the marginal profit per unit, or alternatively the portion of each sale that contributes to fixed costs.Break-even analysis is a simple and useful analytical tool, yet has a number of limitations as well.
Break-Even Analysis
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Break-Even Analysis Using Contribution Margin
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Pricing > Inputs to Pricing DecisionsSlide21
A business can cut its costs, it can sell more, or it can find more profit with a better pricing strategy.
When costs are already at their lowest and sales are hard to find, adopting a better pricing strategy is a key option to stay viable.A pivotal factor in determining a price is how consumers will perceive it.
Organizational Objectives
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Oil Price Sensitivity
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Pricing > Inputs to Pricing DecisionsSlide22
Economic Value to Customers (EVC) is based on the insight that a customer will buy a product only if its value to them outweighs the value of the closest alternative.
To sell a product, a firm needs to price at or below its competitor's price plus the value advantage its product has to the customer over the rival product.Price controls are governmental restrictions on the prices that can be charged for goods and services in a market.
Other Inputs to Pricing Decisions
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Price Controls
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Pricing > Inputs to Pricing DecisionsSlide23
Survival
Profit
Return on Investment Market Share/Sales Cash Flow Status Quo Product Quality Pricing Objectives
Pricing > Pricing Objectives
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New and improved products may hold the key to a firm's survival and ultimate success.
All business enterprises must earn a long term profit in order to survive in the long run.Just as survival requires a long term profit for a business enterprise, profit requires sales. Sales patterns should be altered to ensure success.Management of all firms, large and small, are concerned with maintaining an adequate share of the market so their sales volume will enable the firm to survive and prosper. Prices must be set to attract the appropriate market segment in significant numbers.
Survival
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McDonald's Surviving the Recession
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Pricing > Pricing ObjectivesSlide25
In launching new products or considering the pricing of current products, managers often start with an idea of the dollar profit they desire and ask what level of sales will be needed to reach it. This can be done through profit-based sales targets.
Profit is equal to total revenue (TR) minus total cost (TC). The profit maximizing output is the one at which this difference reaches its maximum. The corresponding price will depend on whether the firm is a perfect competitor. This is the TR-TC method.Marginal profit (Mπ) equals marginal revenue (MR) minus marginal cost (MC). If MR is greater than MC at some level of output, marginal profit is positive and thus a greater quantity should be produced. When MR = MC, Mπ is zero and this quantity is the one that maximizes profit.
Profit
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Total Profit Maximization
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Pricing > Pricing ObjectivesSlide26
Return on investment is one way of considering profits in relation to capital invested.
Marketing not only influences net profits but also can affect investment levels, too. New plants and equipment, inventories, and accounts receivable are three of the main categories of investments that can be affected by marketing decisions.ROI provides a snapshot of profitability adjusted for the size of the investment assets tied up in the enterprise.
Return on Investment
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Chart showing ROI
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Pricing > Pricing ObjectivesSlide27
Marketers need to be able to translate sales targets into market share because this will determine whether forecasts are to be attained by growing with the market or by capturing share from competitors.
Market share is a key indicator of market competitiveness—that is, how well a firm is doing compared to its competitors. It enables them to judge not only total market growth or decline but also trends in customers' selections among competitors.Losses in market share can signal serious long-term problems that require strategic adjustments. Firms with market shares below a certain level may not be viable.
Market Share/Sales
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Netflix Pricing Strategies
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Pricing > Pricing ObjectivesSlide28
Some companies will set prices so that they can recover cash flow as quickly as possible. This strategy could be due to the company spending too much of its resources on developing products.
One way to get cash flow quickly is through seasonal discounts. Seasonal discounts are price reductions given on out-of-season merchandise.Another option is cash discounts. Cash discounts are reductions on the base price given to customers for paying cash or within some short time period.
Cash Flow
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Seasonal Sales Generate Cash Flow
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Pricing > Pricing ObjectivesSlide29
A small firm can avoid a price war by setting prices in line with its competition. It is best to respond to changes as quickly as possible or else it could signal to competitors that you are ready to engage in a price war.
Charging what the competition is charging can be quite popular where costs are difficult to measure or where the response of competitors is uncertain.The major advantage of setting prices to maintain the status quo is that is requires little planning. It's pretty much a passive policy.
Status Quo
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Walmart Supercenter
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Pricing > Pricing ObjectivesSlide30
Some of these consequences of poor quality include loss of business, liability, decreased productivity, and increased costs.
Good quality has its own costs, including prevention, appraisal, and failure.Successful management of quality requires that managers have insights on various aspects of quality such as understanding the costs and benefits of quality and recognizing the consequences of poor quality.Understanding the determants of quality, such as design of the product and the "ease of use" of the product, will help managers price the products accordingly.
Product Quality
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High Quality Cars
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Pricing > Pricing ObjectivesSlide31
Cost-Based Pricing
Demand-Based Pricing
Competitor-Based Pricing Markup Pricing Profit-Maximization Pricing General Pricing Strategies
Pricing > General Pricing Strategies
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Implementation of cost-based pricing presents problems in practice.
A company must know its costs to implement cost-based pricing.Costs are a function of sales, which are in turn a function of prices; therefore, the calculation of these values is circular.Cost-based pricing is misplaced in industries where there are high fixed costs and near-zero marginal costs.
Cost-Based Pricing
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Diamond Deliveries bikes
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Pricing > General Pricing StrategiesSlide33
Price skimming is a pricing strategy in which a marketer sets a relatively high price for a product or service at first, then lowers the price over time.
Price discrimination exists when sales of identical goods or services are transacted at different prices from the same provider.Psychological pricing is a marketing practice based on the theory that certain prices have a psychological impact.Bundle pricing is a marketing strategy that involves offering several products for sale as one combined product.
Penetration pricing is the pricing technique of setting a relatively low initial entry price, often lower than the eventual market price, to attract new customers.Value-based pricing sets prices primarily on the value, perceived or estimated, to the customer rather than on the cost of the product or historical prices.Demand-Based Pricing
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Price Skimming
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Pricing > General Pricing StrategiesSlide34
Sometimes this simply takes the form of a firm copying their competitor's pricing and not conducting their own pricing research.
Sometimes such pricing can take the form of a firm setting a market share objective and discounting their price relative to their competitor until they attain it.Its main advantage is ease of use. Extensive marketing research and statistical analysis are not required.Instead of setting market share objectives, firms should focus on identifying the most profitable segments to serve, and finding ways of profitably serving them while protecting themselves from price wars.
Competitor-Based Pricing
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Competitor Analysis
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Pricing > General Pricing StrategiesSlide35
Markup pricing is used primarily because it is easy to calculate and requires little information.
The first step to determine markup price involves calculation of the cost of production, and the second step is to determine the markup over costs.In markup pricing, we use quantity to calculate price, but price is the determinant of quantity. To avoid this problem, the quantity is assumed.
Markup Pricing
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Cost-Plus Price Equation
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Pricing > General Pricing StrategiesSlide36
Fixed costs, which occur only in the short run, are incurred by the business at any level of output, including zero output.
Variable costs change with the level of output, increasing as more product is generated.The profit-maximizing output is the one at which the difference between total cost and total revenue reaches its maximum.If a firm is not a perfect competitor in the output market, the price to sell the product at can be read off the demand curve at the firm's optimal quantity of output.
Profit-Maximization Pricing
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Total Profit Maximization
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Pricing > General Pricing StrategiesSlide37
New Product Pricing
Product Line Pricing
Psychological Pricing Pricing During Difficult Economic Times Everyday Low Pricing High/Low Pricing Other Pricing Strategies
Specific Pricing Strategies
Pricing > Specific Pricing Strategies
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Penetration pricing is the pricing technique of setting a relatively low initial entry price, often lower than the eventual market price, to attract new customers. The strategy works on the expectation that customers will switch to the new brand because of the lower price.
Skimming involves goods being sold at higher prices so that fewer sales are needed to break even. By selling a product at a high price, sacrificing high sales to gain a high profit is therefore "skimming" the market.The decision of best strategy to use depends on a number of factors. A penetration strategy would generally be supported by the opportunity to keep costs low, and the anticipation of quick market entry by competitors. A skimming strategy is most appropriate when the opposite conditions exist.
New Product Pricing
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Pricing > Specific Pricing StrategiesSlide39
Line pricing is beneficial to customers because they want and expect a wide assortment of goods, particularly shopping goods. Many small price differences for a given item can be confusing.
From the seller's point of view, line pricing is simpler and more efficient to use. The product and service mix can then be tailored to select price points.Line pricing suffers during inflationary periods, where such a strategy can be inflexible.
Product Line Pricing
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Traditional five and dime stores
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Pricing > Specific Pricing StrategiesSlide40
Products and services frequently have customary prices in the minds of consumers. A customary price is one that customers identify with particular items.
Odd prices appear to represent bargains or savings and therefore encourage buying. Thus, marketers often use odd prices that end in figures such as 5, 7, 8, or 9.A somewhat related pricing strategy is combination pricing, such as two-for-one or buy-one-get-one-free. Consumers tend to react very positively to these pricing techniques.
Psychological Pricing
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Odd Pricing
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Pricing > Specific Pricing StrategiesSlide41
Many companies are tempted to slash prices during a recession, but this strategy should be carefully considered.
Cutting prices can degrade the value of the brand, lead to a price war, and also lead customers to put off buying when times are good in expectation of price cuts when times are bad.Unlike traditional brands that are designed with target consumers in mind, fighter brands are created specifically to combat a competitor that is threatening to take market share away from a company's main brand.
When the strategy works, a fighter brand not only defeats a low-priced competitor, but also opens up a new market.Pricing During Difficult Economic Times
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Price cuts during a recession
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Pricing > Specific Pricing StrategiesSlide42
Every day low pricing saves retail stores the effort and expense needed to mark down prices in the store during sale events, as well as to market these events.
One 1994 study of an 86-store supermarket grocery chain in the United States concluded that a 10% EDLP price decrease in a category increased sales volume by 3%, while a 10% Hi-Low price increase led to a 3% sales decrease.Trader Joe's is an example of successful EDLP. It is unique because it does not market itself like other grocery stores do, nor are customers required to obtain membership to enjoy its low prices - at Trader Joe's, its everyday low prices are available to everyone.
Everyday Low Pricing
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Everyday Low Pricing at Trader Joe's
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Pricing > Specific Pricing StrategiesSlide43
The lower promotional prices are designed to bring customers to the organization where the customer is offered the promotional product as well as the regular higher priced products.
The basic type of customers for the firms adopting high-low price do not have a clear idea about what a product's price would typically be or have a strong belief that "discount sales = low price".The way competition prevails in the shoe and fashion industry is through high-low price strategies.
High/Low Pricing
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High-Low Pricing Strategies
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Pricing > Specific Pricing StrategiesSlide44
Cost-plus pricing is the simplest pricing method. The firm calculates the cost of producing the product and adds on a percentage (profit) to that price to give the selling price.
Dynamic pricing allows online companies to adjust the prices of identical goods to correspond to a customer's willingness to pay. The airline industry is often cited as a success story. Most of the passengers on any given airplane have paid different ticket prices for the same flight.Non-price competition means that organizations use strategies other than price to attract customers. Advertising,credit, delivery, displays, private brands, and convenience are all examples of tools used in non-price competition.
Other Pricing Strategies
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Airlines and Dynamic Pricing
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Pricing > Specific Pricing StrategiesSlide45
Discounting
Value-Based Pricing
Geographic Pricing Transfer Pricing Consumer Penalties Pricing Tactics
Pricing > Pricing Tactics
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Seasonal discounts are price reductions given for out-of-season merchandise.
Cash discounts are reductions on base price given to customers for paying cash or within some short time period.Senior discounts are discounts offered to customers who are above a certain age, typically a round number such as 50, 55, 60, 65, 70, and 75.Educational or student discounts are price reductions given to members of educational institutions, usually students but possibly also to educators and to other institution staff.
Quantity discounts are reductions in base price given as the result of a buyer purchasing some predetermined quantity of merchandise. A noncumulative quantity discount applies to each purchase and is intended to encourage buyers to make larger purchases.Discounting
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Discounts
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Pricing > Pricing TacticsSlide47
Value-based pricing is most successful when products are sold based on emotions (fashion), in niche markets, in shortages (e.g., drinks at open air festival at a hot summer day), or for indispensable add-ons (e.g., printer cartridges, headsets for cell phones).
Although it would be nice to assume that a business has the freedom to set any price it chooses, this is not always the case. Firms are limited by constraints such as government restrictions.Value-based pricing is predicated upon an understanding of customer value. In many settings, gaining this understanding requires primary research through interviews with customers and various surveys. The results of such surveys often depict a customer's willingness to pay.
Value-Based Pricing
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Value based pricing
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Pricing > Pricing TacticsSlide48
Zone pricing is a pricing tactic where prices increase as shipping distances increase. This is sometimes done by drawing concentric circles on a map with the plant or warehouse at the center and each circle defining the boundary of a price zone.
FOB origin (Free on Board origin) is a pricing tactic where the shipping cost from the factory or warehouse is paid by the purchaser. Ownership of the goods is transferred to the buyer as soon as it leaves the point of origin.Freight-absorption pricing is where the seller absorbs all or part of the cost of transportation. This amounts to a price discount and is used as a promotional tactic.
Geographic Pricing
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Pricing > Pricing TacticsSlide49
Transfer pricing refers to the setting, analysis, documentation, and adjustment of charges of goods and services within a multi-divisional organization, particularly in regard to cross-border transactions.
Intra-company transactions across borders are growing rapidly and are becoming much more complex. Compliance with the differing requirements of multiple overlapping tax jurisdictions is a complicated and time-consuming task.Division managers are provided incentives to maximize their own division's profits. The firm must set the optimal transfer prices to maximize company profits or each division will try to maximize their own profits leading to lower overall profits for the firm.
Transfer Pricing
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Optimal Transfer Pricing Diagram
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Pricing > Pricing TacticsSlide50
Most organizations reserve the right to restrict a user's access to the service if they violate the terms in the agreement.
Other forms of penalties can exist as fees. An early-termination fee is charged by a company when a customer wants or needs to be released from a contract before it expires.Early payment penalties and fees also exist when people pay off a loan earlier than expected, making a firm lose out on interest fees. The fees typically negate this advantage at least in part.
Consumer Penalties
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Mobile phones
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Pricing > Pricing TacticsSlide51
Unfair Trade Practices
Illegal Price Advertising
Predatory Pricing Price Discrimination Price Fixing Pricing Legal Concerns
Pricing > Pricing Legal Concerns
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Unfair business acts are generally prohibited by law, so committing them may force a company to provide for the award of compensatory damages, punitive damages, and payment of the plaintiff's legal fees.
Two major forms of unfair trade practice are fraud and misrepresentation.Unfair trade practices not only affect consumers, but may affect other stakeholders as well, such as competitors and investors.
Unfair Trade Practices
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Pricing > Pricing Legal ConcernsSlide53
While deceptive price advertising is usually illegal, in practice, it can be difficult to stop or difficult to enforce any law relating to it.
False and deceptive advertising methods include hidden fees and surcharges, "going out of business" sales, manipulation of measurement units, fillers, oversized packaging, bait and switch, etc.Advertising need not be proven to be deceptive for it to be illegal. What matters is the potential to deceive, which happens when consumers see the advertising to be stating to them, explicitly or implicitly, a claim that they may not realize is false and material.
Illegal Price Advertising
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Listerine advertisement, 1932
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Pricing > Pricing Legal ConcernsSlide54
After the weaker competitors are driven out, the surviving business can raise prices to supra competitive levels. The predator hopes to generate revenues and profits in the future that will more than offset the losses it incurred during the predatory pricing period.
While predatory pricing is illegal in many countries, it is very difficult to prove that a company has undertaken a strategy of predatory pricing rather than competitive pricing.Critics argue that the prey know that the predator cannot sustain low prices forever, so it is essentially a game of chicken: if they can ride it out, they will survive.
Predatory Pricing
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Oil refinery
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Pricing > Pricing Legal ConcernsSlide55
In theoretical markets there exists perfect information, no transaction costs, and perfect substitutes, and in these cases price discrimination can only exist in monopolistic or oligopolistic markets.
For price discrimination to take place, companies must be able to identify market segments by their price elasticity of demand, and they must be able to enforce the scheme.There are four degrees of price discrimination (including reverse price discrimination), that all occur under slightly different circumstances, depending on the market structure and the company's ability to discriminate.
Price Discrimination
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Third degree price discrimination
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Pricing > Pricing Legal ConcernsSlide56
Price fixing is inefficient, transferring some of the consumer surplus to producers and results in a deadweight loss.
Price fixing is illegal in most developed countries. In the US, price fixing can be prosecuted as a criminal federal offense. However, price fixing is perfectly legal in many countries.When sovereign nations rather than individual firms come together to control prices, the cartel may be protected from lawsuits and criminal antitrust prosecution.
Price Fixing
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Heineken cans
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Pricing > Pricing Legal ConcernsSlide57
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AppendixSlide58
Key terms
accounts receivable Accounts receivable refers to the money owed to a business by its clients (customers) and shown on its balance sheet as an asset.Activity-Based Pricing Pricing based on all costs such as labor, building, and administration instead of only fixed costs.
bait-and-switch Relating to use of bait and switch (offering one attractive exchange initially, but not honoring the offer) in business, politics, and elsewhere.bartering system Barter is a medium of exchange by which goods or services are directly exchanged for other goods or services without using a medium of exchange, such as money.basing-point pricing goods shipped from a designated city are charged the same amountbelief
mental acceptance of a claim as truth regardless of supporting or contrary empirical evidencebenefit an advantage, help or aid from somethingbreak-even point The point where total costs equal total revenue and the organization neither makes a profit nor suffers a loss.cash flow The movement of money into or out of a business.collusion A secret agreement for an illegal purpose; conspiracy.competitor A person or organization against whom one is competing.conjoint analysis
Conjoint analysis is a statistical technique used in market research to determine how people value different features that make up an individual product or service.
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PricingSlide59
consumer buying process There are 5 stages of a consumer buying process. They are: The problem recognition stage, the search for information, the possibility of alternative options, the choice to purchase the product, and then finally the actual purchase of the product. This shows the complete process that a consumer will most likely, whether recognizably or not, go through when they go to buy a product.
consumer surplus The monetary gain obtained by consumers because they are able to purchase a product for a price that is less than the highest price that they would be willing to pay.
customary price A price that customers identify with particular items.deadweight loss a loss of economic efficience that can occur when equilibrium for a good or service is not Pareto optimal.demand curve The graph depicting the relationship between the price of a certain commodity and the amount of it that consumers are willing and able to purchase at that given price.derived demand
when demand for a factor of production or intermediate good occurs as a result of the demand for another intermediate or final gooddiscretion The freedom to make one's own judgements.discretionary Available at one's discretion; able to be used as one chooses; left to or regulated by one's own discretion or judgment.Economic Value for the Customer (EVC) Criteria used by marketers to determine price, based on the insight that a customer will only buy a product if its value to them outweighs the value of the closest alternative.economies of scale The cost advantages that an enterprise obtains due to expansion. As the scale of output is increased, factors such as facility size and usage levels of inputs cause the producer's average cost per unit to fall.equilibrium price
The price of a commodity at which the quantity that buyers wish to buy equals the quantity that sellers wish to sell.everyday low price Everyday low price ("EDLP") is a pricing strategy promising consumers a low price without the need to wait for sale price events or comparison shop.
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PricingSlide60
fighter brand A pricing strategy where a company prices items lower than the competition in order to protect or gain market share.
forecast An estimation of a future condition.fraud Any act of deception carried out for the purpose of unfair, undeserved, or unlawful gain.fringe
Outside the mainstream.functional discount payments to distribution channel members for performing some servicegame theory A branch of applied mathematics that studies strategic situations in which individuals or organizations choose various actions in an attempt to maximize their returns.generic Not having a brand name.Giffen good
A good which people consume more of as the price rises; Having a positive price elasticity of demand. As price rises, more is consumed which increases demand.Giffen good A good which people consume more of as the price rises; Having a positive price elasticity of demand. As price rises, more is consumed which increases demand.heterogeneity This term describes the uniqueness of service offerings.Hi-low price High-low pricing (or hi-low pricing) is a type of pricing strategy adopted by companies, usually small- and medium-sized retail firms, where a firm charges a high price for an item and later sells it to customers by giving discounts or through clearance sales.inventory The stock of an item on hand at a particular location or business.
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PricingSlide61
lease A contract granting use or occupation of property during a specified period in exchange for a specified rent.
List Price The manufacturer's suggested retail price (MSRP), list price or recommended retail price (RRP) of a product is the price which the manufacturer recommends that the retailer sell the product.List Price The manufacturer's suggested retail price (MSRP), list price or recommended retail price (RRP) of a product is the price which the manufacturer recommends that the retailer sell the product.
low-cost signalling A strategy of signalling to competitors that you intend to pursue a low-cost strategy.marginal cost The increase in cost that accompanies a unit increase in output; the partial derivative of the cost function with respect to output. The additional cost associated with producing one more unit of output.marginal cost The increase in cost that accompanies a unit increase in output; the partial derivative of the cost function with respect to output. The additional cost associated with producing one more unit of output.
marginal cost Marginal cost is the change in total cost that arises when the quantity produced changes by one unit. That is, it is the cost of producing one more unit of a good.marginal revenue Marginal revenue is the additional revenue that will be generated by increasing product sales by one unit.marginal revenue Marginal revenue is the additional revenue that will be generated by increasing product sales by one unit.marginal utility The additional utility to a consumer from an additional unit of an economic good.market penetration having gained part of a market in which similar products already exist
Market Share The percentage of a market (defined in terms of either units or revenue) accounted for by a specific entity.
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PricingSlide62
Market Share The percentage of some market held by a company.
Market Share The percentage of a market (defined in terms of either units or revenue) accounted for by a specific entity.marketing mix A business tool used in marketing products; often crucial when determining a product or brand's unique selling point. Often synonymous with the four Ps: price, product, promotion, and place.
marketing mix A business tool used in marketing products; often crucial when determining a product or brand's unique selling point. Often synonymous with the four Ps: price, product, promotion, and place.misrepresentation A false statement of fact made by one party to another party, which has the effect of inducing that party into the contract.off-price retailer firms that purchase goods below wholesale cost and sell below normal retail priceoligopolies
An oligopoly is a market form in which a market or industry is dominated by a small number of sellers (oligopolists). Because there are few sellers, each oligopolist is likely to be aware of the actions of the others.Opportunity Costs The costs of activities measured in terms of the value of the next best alternative forgone (that is not chosen).perishable That which perishes or is short-lived.predatory pricing A strategy of selling goods or services at a very low price in order to drive one's competitors out of business (at which point one can raise one's prices more freely).price The cost required to gain possession of something.price discrimination Occurs when sales of identical goods or services are transacted at different prices from the same provider.
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PricingSlide63
price fixing In antitrust law, collusion between competitors in order to raise prices, at the expense of competitive pricing.
price point The price of an item, especially seen as one of a number of pricing options.price point Price points are prices at which demand for a given product is supposed to stay relatively high.
Price Points Price points are prices at which demand for a given product is supposed to stay relatively high.price war Price war is a term used in the economic sector to indicate a state of intense competitive rivalry accompanied by a multi-lateral series of price reductions. One competitor will lower its price, then others will lower their prices to match. If one of them reduces their price again, a new round of reductions starts.product line pricing the practice of charging different amount for goods or services that are variations on a base good or service
psychological pricing a marketing practice based on the theory that nominally different prices may be perceived differentlyquality the ability of a product or service to consistently meet or exceed customer requirements or expectations.quantity discount price reductions given for large purchasesreceivables All the debts owed to a company by its debtors or customers.recession A period of reduced economic activityreturn on quality An internal management approach that evaluates the financial return of investments in quality.
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PricingSlide64
seasonal discount price reductions given when an order is placed in a slack period
shopping goods Goods that require more thought and comparison than convenience goods. Consumers compare multiple attributes such as price, style, quality, and features.status quo The state of things; the way things are, as opposed to the way they could be; the existing state of affairs.
straight rebuy the repurchase of a good with no changes to the details of the orderstrategy a plan of action intended to accomplish a specific goalsupermarket a large self-service store that sells groceries and, usually, medications, household goods and/or clothingsurcharge An addition of extra charge on the agreed or stated price.
surcharge An addition of extra charge on the agreed or stated price.Surplus value The part of the new value made by production that is taken by enterprises as generic gross profit.target market a group of people whose needs and preferences match the product range of a company and to whom those products are marketedTotal cost Total cost (TC) describes the total economic cost of production and is made up of variable costs, which vary according to the quantity of a good produced and include inputs such as labor and raw materials, plus fixed costs, which are independent of the quantity of a good produced and include inputs (capital) that cannot be varied in the short term, such as buildings and machinery.Total Revenue Total revenue is the total receipts of a firm from the sale of any given quantity of a product.
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PricingSlide65
utility The ability of a commodity to satisfy needs or wants; the satisfaction experienced by the consumer of that commodity.
value a customer's perception of relative price (the cost to own and use) and performance (quality)value a customer's perception of relative price (the cost to own and use) and performance (quality)
Veblen good A good for which people's preference for buying them increases as a direct function of their price, as greater price confers greater status. As the price gets higher, demand rises.Veblen good A good for which people's preference for buying them increases as a direct function of their price, as greater price confers greater status. As the price gets higher, demand rises.viable Able to be done, possible.willingness to pay
The willingness to pay (WTP) is the maximum amount a person would be willing to pay, sacrifice, or exchange in order to receive a good or to avoid something undesired, such as pollution.zone pricing the practice of modifying a basic list price based on the geographical location of the buyer
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PricingSlide66
Discounts
Discounts, such as 75% off, are used to draw customers to purchase items.
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Wikimedia.
"Even 75% off does not bring in the crowds."
CC BY
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PricingSlide67
Airlines and Dynamic Pricing
Dynamic pricing allows online companies to adjust the prices of identical goods to correspond to a customer's willingness to pay.
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Wikimedia.
"Aircanada.a340.c-gdvw.arp."
Public domain
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PricingSlide68
High Quality Cars
The Mercedes-Benz SLR McLaren has a reputation for extremely high quality, and it's hand made engine is a sign of this quality. Customers are willing to pay a very steep price for this product.
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Wikipedia.
"Mercedes-Benz SLR McLaren 2 cropped."
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PricingSlide69
Value based pricing
Value-based pricing focuses entirely on the customer as a determinant of the total price/value package.
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"Figure 2 Value Based Pricing."
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PricingSlide70
Third degree price discrimination
Third degree price discrimination: Instead of supplying one price and taking the profit (labelled "old profit"), the total market is broken down into two sub-markets, and these are priced separately to maximize profit. For example, tourist and business airline passengers.
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Wikipedia.
"Price discrimination (third degree)."
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PricingSlide71
High-Low Pricing Strategies
There are many big firms using this type of pricing strategy, especially in the shoe industry (ex: Reebok, Nike, Adidas).
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"Nike swoosh on the tongue of a shoe (blue on white)."
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PricingSlide72
Mobile phones
Mobile phone service providers often charge an early termination fee on their service, which is a form of consumer penalty.
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Fotopedia.
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PricingSlide73
Competitor Analysis
Companies that employ competitor-based pricing can use computer programs such as this to analyze market share.
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Flickr.
"All sizes | Market Research Competitor Analysis Worksheet Templates - MS Word+Excel Screenshots | Flickr - Photo Sharing!."
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PricingSlide74
Heineken cans
Heineken were fined €219.3m for their role in a price fixing cartel in Holland in 2007.
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Fotopedia.
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PricingSlide75
Netflix Pricing Strategies
The decision to change pricing strategy may be part of a longer-term strategy to increase market share in on-line video streaming.
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"Netflixenvelope."
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PricingSlide76
Total Profit Maximization
This linear total revenue curve represents the case in which the firm is a perfect competitor in the goods market, and thus cannot set its own selling price.
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"Profit max total small."
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PricingSlide77
Seasonal Sales Generate Cash Flow
A quick way to generate cash flow is to offer seasonal discounts.
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"Sales, solden soldes....."
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PricingSlide78
Walmart Supercenter
Walmart and Amazon are engaged in a price war with online books.
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Fotopedia.
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PricingSlide79
Price Skimming
These are graphical representations of price skimming. Price skimming is sometimes referred to as riding down the demand curve.
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"Price skimming small."
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PricingSlide80
Traditional five and dime stores
Traditional five and dime stores followed a line pricing strategy, where all goods were either 5 cents or 10 cents. The dollar store is a modern equivalent.
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"The nickel and dime store, WPA poster, ca. 1941."
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PricingSlide81
Pricing and the Marketing Mix
Pricing might not be as glamorous as promotion, but it is the most important decision a marketer can make.
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Flickr.
"All sizes | 1961 Sears: Tower Automatic 127 | Flickr - Photo Sharing!."
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PricingSlide82
Price Controls
An example of a poster declaring regulatory pricing in the United States.
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Wikimedia.
""Prices charged in this store will not exceed those indicated in the most recent list of Fair Prices applicable to this - NARA - 512556."
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PricingSlide83
Fighter Brands
The Celeron microprocessor is a case study of a successful fighter brand.
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"Slocket PCB Slot 1 to PGA370."
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PricingSlide84
McDonald's Surviving the Recession
Pricing plays a significant role in attracting and retaining market share during tough economic times.
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"McDonald's - BarraShopping."
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PricingSlide85
Optimal Transfer Pricing Diagram
From marginal price determination theory, the optimum level of output is where marginal cost equals marginal revenue.
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"Price trans-no ext-small."
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PricingSlide86
Total Average Cost Equation
The total average cost for a product is determined by dividing the total fixed costs (TFC) and total variable costs (TVC) by the quantity of the product produced, and then summing these together.
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"Cost-plus pricing."
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PricingSlide87
Cost-Plus Price Equation
A cost-plus price will equal average variable costs plus average fixed costs plus markup per unit.
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PricingSlide88
Figure 2
Demand Curve
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Connexions.
"The price factor."
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PricingSlide89
Chart showing ROI
This chart shows the rate of return on investments after training teachers.
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"ROI per person over 3 years."
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PricingSlide90
Equation
This is the price elasticity of demand equation.
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"Price elasticity of demand."
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PricingSlide91
Airline Tickets
Your ticket may cost more or less than mine due to yield management.
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Flickr.
"All sizes | My airline ticket hisses at me | Flickr - Photo Sharing!."
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PricingSlide92
Total Profit Maximization
This linear total revenue curve represents the case in which the firm is a perfect competitor in the goods market, and thus cannot set its own selling price.
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"Profit max total small."
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PricingSlide93
Value or Price
This chart attempts to highlight the fact that commonly valued items of constant utility tend to vary in price over time.
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PricingSlide94
Price cuts during a recession
Slashing prices on low value goods (while maintaining prices on high value goods) is a potential pricing strategy during difficult economic times.
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Geograph.
"Woolworths Closing-down Sale, Grimsby (C) David Wright :: Geograph Britain and Ireland."
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PricingSlide95
Listerine advertisement, 1932
From 1921 until the mid-1970s, Listerine was also marketed as a preventive and remedy for colds and sore throats. In 1976, the Federal Trade Commission ruled that these claims were misleading, and that Listerine had "no efficacy" at either preventing or alleviating the symptoms of sore throats and colds. Warner-Lambert was ordered to stop making the claims, and to include in the next $10.2 million dollars' of Listerine ads specific mention that "contrary to prior advertising, Listerine will not help prevent colds or sore throats or lessen their severity. "
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"Listerine advertisement, 1932."
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PricingSlide96
Diamond Deliveries bikes
Our hypothetical company, Diamond Deliveries, delivers packages on bicycles.
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OpenCage Systems.
"Flood of bicycle.Nagoya is strange!by OpenCage - 2014/02/03."
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PricingSlide97
Amazon.com
Amazon.com makes shopping and researching products, prices, and seller reliability quick and easy for its customers. Its prices are low, but not necessarily the lowest.
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Flickr.
"2010_01_08_amazon_1 | Flickr - Photo Sharing!."
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PricingSlide98
Odd Pricing
Odd pricing involves using a number such as $8.99.
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"Evangelion Portraits barcode."
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PricingSlide99
Everyday Low Pricing at Trader Joe's
Trader Joe's is not an ordinary store. It is unique because it doesn't require membership for its customers to enjoy its low prices. Its everyday low prices are available to everyone.
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"Trader Joe's at the Hampshire Mall."
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PricingSlide100
Oil Price Sensitivity
This graph depicts the price fluctuation of oil once consumers began having significant access to information regarding the commodity.
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"Oil price chronology."
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PricingSlide101
Kmart
Kmart discovered that it is hard to go upscale when you're known for low prices.
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Flickr.
"All sizes | Kmart Goldsboro, NC | Flickr - Photo Sharing!."
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PricingSlide102
Oil refinery
Low oil prices in the 1990's were considered a case of alleged predatory pricing.
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Geograph.
"Fawley Oil Refinery at dusk © Peter Facey :: Geograph Britain and Ireland."
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PricingSlide103
Fixed Costs and Variable Costs
This graph breaks down the difference between fixed costs and variable costs.
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"CVP-TC-FC-VC."
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PricingSlide104
A London Bus
The price to ride a bus is expressed by the term "fare. "
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Flickr.
"London Bus RouteMaster Route15 | Flickr - Photo Sharing!."
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PricingSlide105
Marginal Profit Maximization
This series of cost curves shows the implementation of profit maximization using marginal analysis.
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"Profit max marginal small."
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PricingSlide106
Break-Even Calculation
We can derive the calculation for the break-even quantity from the relation of total revenue to total costs.
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"Break-even (economics)."
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PricingSlide107
Supply and Demand
The price P of a product is determined by a balance between production at each price (supply S) and the desires of those with purchasing power at each price (demand D). The diagram shows a positive shift in demand from D1 to D2, resulting in an increase in price (P) and quantity sold (Q) of the product.
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"Supply and demand."
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PricingSlide108
Break-Even Analysis Using Contribution Margin
A break-even quantity can also be found using contribution margin.
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"Break-even (economics)."
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PricingSlide109
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Pricing
All of the following are possible perceived benefits directly related to a product's price and value EXCEPT
A) status
B) convenience
C) rationality
D) choiceSlide110
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Pricing
All of the following are possible perceived benefits directly related to a product's price and value EXCEPT
A) status
B) convenience
C) rationality
D) choiceSlide111
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Pricing
Price is the ______________ marketing variable to change and the ______________ to copy.
A) Easiest, longest
B) Easiest, hardest
C) Hardest, easiest
D) Easiest, EasiestSlide112
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Saylor OER.
"Business Administration « Saylor.org – Free Online Courses Built by Professors."
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http://www.saylor.org/majors/Business/
Pricing
Price is the ______________ marketing variable to change and the ______________ to copy.
A) Easiest, longest
B) Easiest, hardest
C) Hardest, easiest
D) Easiest, EasiestSlide113
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Pricing
Which of the following is NOT an example of an organization that would use "fare" to describe their pricing?
A) An airline company
B) A taxi company
C) A rail company
D) A car rental companySlide114
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Pricing
Which of the following is NOT an example of an organization that would use "fare" to describe their pricing?
A) An airline company
B) A taxi company
C) A rail company
D) A car rental companySlide115
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Pricing
Why does a company's survival or demise depend on a company's pricing strategy?
A) Pricing is the only marketing mix element that affects consumer demand and sales.
B) Pricing is the only marketing mix element that affects a firm's revenues and profits.
C) Pricing represents customers' perception of a product or service.
D) Pricing represents marketers' assessment of product or service value.Slide116
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Pricing
Why does a company's survival or demise depend on a company's pricing strategy?
A) Pricing is the only marketing mix element that affects consumer demand and sales.
B) Pricing is the only marketing mix element that affects a firm's revenues and profits.
C) Pricing represents customers' perception of a product or service.
D) Pricing represents marketers' assessment of product or service value.Slide117
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Pricing
Two men assess a pair of shoes displayed in a store window. The first man immediately walks away when he realizes the price tag is $250. The second man glances at the price tag, and decides that the shoes are worth trying on and adding to his shoe collection.Which of the following measures of value did the two men use in their buying decision?
A) The buyer's utility
B) The seller's utility
C) Exchange value
D) Subjective valueSlide118
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Pricing
Two men assess a pair of shoes displayed in a store window. The first man immediately walks away when he realizes the price tag is $250. The second man glances at the price tag, and decides that the shoes are worth trying on and adding to his shoe collection.Which of the following measures of value did the two men use in their buying decision?
A) The buyer's utility
B) The seller's utility
C) Exchange value
D) Subjective valueSlide119
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Pricing
Relative value can be best described as
A) the level of attractiveness measured in terms of the utility of one product relative to another.
B) the level of attractiveness placed by the person who appraises the value of the product.
C) the level of attractiveness based on the ability to resell the product.
D) the level of attractiveness based on the product's ability to increase in utility for customers.Slide120
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Pricing
Relative value can be best described as
A) the level of attractiveness measured in terms of the utility of one product relative to another.
B) the level of attractiveness placed by the person who appraises the value of the product.
C) the level of attractiveness based on the ability to resell the product.
D) the level of attractiveness based on the product's ability to increase in utility for customers.Slide121
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Pricing
A telecommunications company is selling its latest smartphone at the price of $249. Despite its device having more features than competing smartphones, it has decided to price below its competitors. Which of the following best explains the reasoning behind this approach?
A) The company has a clear advantage on some non-price element of the marketing mix.
B) The company is using price as an indicator or baseline.
C) The company wishes to carve out a market niche and realize a large sales volume.
D) The company is using price to increase its market share.Slide122
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Pricing
A telecommunications company is selling its latest smartphone at the price of $249. Despite its device having more features than competing smartphones, it has decided to price below its competitors. Which of the following best explains the reasoning behind this approach?
A) The company has a clear advantage on some non-price element of the marketing mix.
B) The company is using price as an indicator or baseline.
C) The company wishes to carve out a market niche and realize a large sales volume.
D) The company is using price to increase its market share.Slide123
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Pricing
Two competing consumer product companies want to avoid the risks of a price war. Which of the following non-price competitive tactics could they use in their marketing strategies?
A) Distribute coupons
B) Offer free samples
C) Place products in more store locations
D) All of these answers.Slide124
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Pricing
Two competing consumer product companies want to avoid the risks of a price war. Which of the following non-price competitive tactics could they use in their marketing strategies?
A) Distribute coupons
B) Offer free samples
C) Place products in more store locations
D) All of these answers.Slide125
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Pricing
The constant “a” in the demand curve represents
A) the effects of all non-price determinants that influence consumer demand.
B) the willingness of consumers to buy more of a good or service as its price falls.
C) how the price of the good influences consumer demand.
D) the effects of all price-related determinants that influence consumer demand.Slide126
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Pricing
The constant “a” in the demand curve represents
A) the effects of all non-price determinants that influence consumer demand.
B) the willingness of consumers to buy more of a good or service as its price falls.
C) how the price of the good influences consumer demand.
D) the effects of all price-related determinants that influence consumer demand.Slide127
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Pricing
If the poultry market experiences a decrease in the supply of healthy chickens, but market demand remains unchanged, it can be concluded that
A) it will lead to a higher equilibrium price and higher quantity of poultry products.
B) it will lead to a lower equilibrium price and lower quantity of poultry products.
C) it will lead to a lower equilibrium price and higher quantity of poultry products.
D) it will lead to a higher equilibrium price and lower quantity of poultry products.Slide128
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Pricing
If the poultry market experiences a decrease in the supply of healthy chickens, but market demand remains unchanged, it can be concluded that
A) it will lead to a higher equilibrium price and higher quantity of poultry products.
B) it will lead to a lower equilibrium price and lower quantity of poultry products.
C) it will lead to a lower equilibrium price and higher quantity of poultry products.
D) it will lead to a higher equilibrium price and lower quantity of poultry products.Slide129
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Pricing
Which of the following best describes why a broad definition of a consumer good would cause it to have a low elasticity of demand in the market?
A) Goods with low price elasticity due to broad definitions tend to have few or no market substitutes.
B) Goods with low price elasticity due to broad definitions tend to have numerous substitutes.
C) Goods with low price elasticity due to broad definitions tend to represent only a negligible portion of a consumer's budget.
D) Goods with low price elasticity due to broad definitions tend to have price changes that hold for long periods for time.Slide130
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Pricing
Which of the following best describes why a broad definition of a consumer good would cause it to have a low elasticity of demand in the market?
A) Goods with low price elasticity due to broad definitions tend to have few or no market substitutes.
B) Goods with low price elasticity due to broad definitions tend to have numerous substitutes.
C) Goods with low price elasticity due to broad definitions tend to represent only a negligible portion of a consumer's budget.
D) Goods with low price elasticity due to broad definitions tend to have price changes that hold for long periods for time.Slide131
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Pricing
Yield management is particularly suitable for maximizing profits in the airline industry because airline seats are
A) a fixed, perishable resource.
B) a large revenue generator.
C) sold at premium prices.
D) sold at different price points.Slide132
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Pricing
Yield management is particularly suitable for maximizing profits in the airline industry because airline seats are
A) a fixed, perishable resource.
B) a large revenue generator.
C) sold at premium prices.
D) sold at different price points.Slide133
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Pricing
When a company sets a price that includes the cost to produce a unit of output, the company has conducted a __________.
A) Demand curve study.
B) Profit maximization study.
C) Negative gradient study.
D) Marginal analysis.Slide134
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Pricing
When a company sets a price that includes the cost to produce a unit of output, the company has conducted a __________.
A) Demand curve study.
B) Profit maximization study.
C) Negative gradient study.
D) Marginal analysis.Slide135
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Pricing
Which of the following is closest to the meaning of fixed costs?
A) Output costs that enable a company to manufacture the product with all features requested by consumer studies.
B) Costs that are directly related to the ecomonies of scale principal.
C) Costs that effect the marketing campaign and unit sales volume.
D) Operational costs that remain constant no matter how many products are sold or how much the product costs to produce. Slide136
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Pricing
Which of the following is closest to the meaning of fixed costs?
A) Output costs that enable a company to manufacture the product with all features requested by consumer studies.
B) Costs that are directly related to the ecomonies of scale principal.
C) Costs that effect the marketing campaign and unit sales volume.
D) Operational costs that remain constant no matter how many products are sold or how much the product costs to produce. Slide137
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What problems exist with pricing based upon break even points?
A) All of these answers.
B) It does not provide sales projection information relative to pricing and makes assumptions about fixed costs.
C) It does not take into consideration the fact that costs increase as sales increase and suggests that suppler and product related costs will remain the same.
D) It is based upon the assumption that all products made will be sold and that sales across a company's entire line of products is constant. Slide138
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Pricing
What problems exist with pricing based upon break even points?
A) All of these answers.
B) It does not provide sales projection information relative to pricing and makes assumptions about fixed costs.
C) It does not take into consideration the fact that costs increase as sales increase and suggests that suppler and product related costs will remain the same.
D) It is based upon the assumption that all products made will be sold and that sales across a company's entire line of products is constant. Slide139
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When a company recoups through sales, all product related costs it is said to have reached the product's _____________.
A) Linear cost volume.
B) Total fixed cost point.
C) Unit variable cost point.
D) Break even point.Slide140
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When a company recoups through sales, all product related costs it is said to have reached the product's _____________.
A) Linear cost volume.
B) Total fixed cost point.
C) Unit variable cost point.
D) Break even point.Slide141
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What can a company do to meet its ultiamate objective; to increase its profits?
A) It can review its operational costs and adjust accordingly, it can increase sales or it can analyze and improve on its pricing strategy.
B) It can increase or change the features of its product to make competitive comparision difficult.
C) It can sell products that are not too expensive and do not use a high percentage of the consumer's total income.
D) It can make sure all of its products represent a gain rather than a loss for the consumer.Slide142
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Pricing
What can a company do to meet its ultiamate objective; to increase its profits?
A) It can review its operational costs and adjust accordingly, it can increase sales or it can analyze and improve on its pricing strategy.
B) It can increase or change the features of its product to make competitive comparision difficult.
C) It can sell products that are not too expensive and do not use a high percentage of the consumer's total income.
D) It can make sure all of its products represent a gain rather than a loss for the consumer.Slide143
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Which of the following statements about consumer needs and the competitive environment is TRUE?
A) Needs are based upon the lowest price for the product and the company that offers it.
B) Needs are fulfilled by perceived value and value is based upon comparative competitive analysis.
C) Needs are based upon a product's feature and the different features offered by each competitor.
D) Needs are based upon differentiated value and the sales incentives offered by competitors.Slide144
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Pricing
Which of the following statements about consumer needs and the competitive environment is TRUE?
A) Needs are based upon the lowest price for the product and the company that offers it.
B) Needs are fulfilled by perceived value and value is based upon comparative competitive analysis.
C) Needs are based upon a product's feature and the different features offered by each competitor.
D) Needs are based upon differentiated value and the sales incentives offered by competitors.Slide145
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Prices are regulated by government in order to_________.
A) All of these answers.
B) Keep costs proportional to incomes earned.
C) Prevent excessive price increases when shortages occur and maintain income levels for suppliers of certain goods.
D) To maintain proportion with regards to price and value of good.Slide146
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Prices are regulated by government in order to_________.
A) All of these answers.
B) Keep costs proportional to incomes earned.
C) Prevent excessive price increases when shortages occur and maintain income levels for suppliers of certain goods.
D) To maintain proportion with regards to price and value of good.Slide147
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Which of the following is considered most important factor in the survival of a company?
A) Successful new products
B) High profit margins
C) Desirable sales patterns
D) Brand imageSlide148
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Which of the following is considered most important factor in the survival of a company?
A) Successful new products
B) High profit margins
C) Desirable sales patterns
D) Brand imageSlide149
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A company produces 100,000 pairs of shoes at a marginal cost of $10 million. The company's marginal revenue is currently $20 million. Based on the marginal cost perspective, which of the following is true?
A) Marginal profit is negative and a lesser quantity should be produced.
B) Marginal profit is zero and a higher level output gives lower profit levels.
C) Marginal profit is positive and a greater quantity should be produced.
D) Marginal profit is zero and a lower level output gives higher profit levels.Slide150
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A company produces 100,000 pairs of shoes at a marginal cost of $10 million. The company's marginal revenue is currently $20 million. Based on the marginal cost perspective, which of the following is true?
A) Marginal profit is negative and a lesser quantity should be produced.
B) Marginal profit is zero and a higher level output gives lower profit levels.
C) Marginal profit is positive and a greater quantity should be produced.
D) Marginal profit is zero and a lower level output gives higher profit levels.Slide151
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The return on investment metric measures which of the following?
A) The per period rates of return on dollars invested in an economic entity
B) The asset usage and capital requirements of an economic entity
C) The expected or required rates of return on dollars invested in an economic entity
D) The overall financial, marketing, and strategic objectives of an economic entitySlide152
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The return on investment metric measures which of the following?
A) The per period rates of return on dollars invested in an economic entity
B) The asset usage and capital requirements of an economic entity
C) The expected or required rates of return on dollars invested in an economic entity
D) The overall financial, marketing, and strategic objectives of an economic entitySlide153
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Pricing
Pricing strategy is significant in creating and sustaining market share BECAUSE
A) modifying prices may prevent a competitive response.
B) modifying prices helps drive strategic or tactical performance.
C) modifying prices may increase demand and lead to higher market share.
D) modifying prices works in tandem with macro environmental and economic variables.Slide154
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Pricing strategy is significant in creating and sustaining market share BECAUSE
A) modifying prices may prevent a competitive response.
B) modifying prices helps drive strategic or tactical performance.
C) modifying prices may increase demand and lead to higher market share.
D) modifying prices works in tandem with macro environmental and economic variables.Slide155
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Pricing
A company trying to set prices in a way that allows them to capture a large share of the sales in their industry is utilizing which type of pricing objective? Choose one answer.
A) Maximizing profits
B) Maintaining status quo
C) Maximizing market share
D) Targeted return on investmentSlide156
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Pricing
A company trying to set prices in a way that allows them to capture a large share of the sales in their industry is utilizing which type of pricing objective? Choose one answer.
A) Maximizing profits
B) Maintaining status quo
C) Maximizing market share
D) Targeted return on investmentSlide157
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Which of the following is a common strategy for generating cash flow in an organization?
A) Funding new investments
B) Issuing seasonal discounts
C) Hiring employees
D) None of these answers.Slide158
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Which of the following is a common strategy for generating cash flow in an organization?
A) Funding new investments
B) Issuing seasonal discounts
C) Hiring employees
D) None of these answers.Slide159
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Which of the following companies would be best positioned to implement a status quo pricing strategy?
A) A company with limited financial resources
B) A company with limited visibility into operating costs
C) A company with limited visibility into the competitive landscape
D) All of these answers.Slide160
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Which of the following companies would be best positioned to implement a status quo pricing strategy?
A) A company with limited financial resources
B) A company with limited visibility into operating costs
C) A company with limited visibility into the competitive landscape
D) All of these answers.Slide161
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Pricing
A firm that sets out to maintain its current prices and/or its competitors’ prices is utilizing which type of pricing objective? Choose one answer.
A) Maximizing profits
B) Targeted return on investment
C) Maximizing market share
D) Maintaining the status quoSlide162
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Pricing
A firm that sets out to maintain its current prices and/or its competitors’ prices is utilizing which type of pricing objective? Choose one answer.
A) Maximizing profits
B) Targeted return on investment
C) Maximizing market share
D) Maintaining the status quoSlide163
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Which aspect of product quality determines the useful life of a product?
A) Reliability
B) Performance
C) Conformance
D) DurabilitySlide164
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Which aspect of product quality determines the useful life of a product?
A) Reliability
B) Performance
C) Conformance
D) DurabilitySlide165
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What type of quality costs are associated with activities designed to ensure quality or uncover defects?
A) Appraisal costs
B) Failure costs
C) Return on quality costs
D) Prevention costsSlide166
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What type of quality costs are associated with activities designed to ensure quality or uncover defects?
A) Appraisal costs
B) Failure costs
C) Return on quality costs
D) Prevention costsSlide167
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Pricing
Which of the following statements about cost based pricing is TRUE?
A) It is predicated on knowing exactly how much it costs to produce the product being sold.
B) It is based on high variable costs and near-zero marginal costs.
C) Costs go up when sales increase because variable costs are impacted.
D) The amount of sales is proportional to proper cost based pricing.Slide168
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Which of the following statements about cost based pricing is TRUE?
A) It is predicated on knowing exactly how much it costs to produce the product being sold.
B) It is based on high variable costs and near-zero marginal costs.
C) Costs go up when sales increase because variable costs are impacted.
D) The amount of sales is proportional to proper cost based pricing.Slide169
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Factors that affect pricing strategies include which of the following?
A) customers and competitors
B) customers and competitors, government regulations, production costs
C) government regulation
D) production costsSlide170
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Pricing
Factors that affect pricing strategies include which of the following?
A) customers and competitors
B) customers and competitors, government regulations, production costs
C) government regulation
D) production costsSlide171
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Pricing
Afrin offers a regular and extra strength version of a nasal spray for the same price. The ingredients are exactly the same but the dosage per tablet has changed. This is an example of _______.
A) Psychological Pricing.
B) Price Descrimination.
C) Value based Pricing.
D) Penetration Pricing.Slide172
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Pricing
Afrin offers a regular and extra strength version of a nasal spray for the same price. The ingredients are exactly the same but the dosage per tablet has changed. This is an example of _______.
A) Psychological Pricing.
B) Price Descrimination.
C) Value based Pricing.
D) Penetration Pricing.Slide173
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Pricing
A new sugar substitute is cutting into the market share of its competitors. It is selling at a price that is 25% lower than most other brands . This is an example of ____________.
A) Psychological Pricing
B) Penetration Pricing.
C) Price Skimming
D) Price Descrimination.Slide174
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Pricing
A new sugar substitute is cutting into the market share of its competitors. It is selling at a price that is 25% lower than most other brands . This is an example of ____________.
A) Psychological Pricing
B) Penetration Pricing.
C) Price Skimming
D) Price Descrimination.Slide175
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Pricing
Sony's pricing on 3D televisions is high but will be lowered as more competition enters the marketing. This is an example of ________.
A) Psychological Pricing.
B) Price Skimming.
C) Value based Pricing.
D) Fixed cost Pricing.Slide176
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Pricing
Sony's pricing on 3D televisions is high but will be lowered as more competition enters the marketing. This is an example of ________.
A) Psychological Pricing.
B) Price Skimming.
C) Value based Pricing.
D) Fixed cost Pricing.Slide177
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Pricing
Marketers who start with the price demanded by consumers and then create offerings to meet the price are utilizing which pricing strategy? Choose one answer.
A) Forward pricing
B) Price lining
C) Demand backward (or demand based) pricing
D) Premium pricingSlide178
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Pricing
Marketers who start with the price demanded by consumers and then create offerings to meet the price are utilizing which pricing strategy? Choose one answer.
A) Forward pricing
B) Price lining
C) Demand backward (or demand based) pricing
D) Premium pricingSlide179
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Pricing
Pop's Root Beer has decided to use A&W Root Beer pricing in the marketplace. Why?
A) Pop's is a small company and cannot afford to spend a great deal of money on market research.
B) It believes its product is as good a value if not better than A&W's product.
C) It wants to safeguard against price wars.
D) It wants to make the most profit by cutting into A&W's market share.Slide180
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Pop's Root Beer has decided to use A&W Root Beer pricing in the marketplace. Why?
A) Pop's is a small company and cannot afford to spend a great deal of money on market research.
B) It believes its product is as good a value if not better than A&W's product.
C) It wants to safeguard against price wars.
D) It wants to make the most profit by cutting into A&W's market share.Slide181
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Pricing
When a buyer pays the same price regardless of where they purchase the product the situation describes __________.
A) cost-plus pricing
B) going-rate pricing
C) leader pricing
D) penetration pricing strategySlide182
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Pricing
When a buyer pays the same price regardless of where they purchase the product the situation describes __________.
A) cost-plus pricing
B) going-rate pricing
C) leader pricing
D) penetration pricing strategySlide183
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Pricing
When markup pricing is used, a company can easily justify its pricing to consumers and competitors. Why?
A) It is calculated on historical data rather than variable costs.
B) It is based upon a predictable demand curve and the response to historical pricing.
C) It is based upon the set rate of total cost increases and an average annual percentage of output.
D) It is calculated on data that is quantifiable and readily available; the desired amount of profit the company wants to earn combined with fixed and variable costs of production.Slide184
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Pricing
When markup pricing is used, a company can easily justify its pricing to consumers and competitors. Why?
A) It is calculated on historical data rather than variable costs.
B) It is based upon a predictable demand curve and the response to historical pricing.
C) It is based upon the set rate of total cost increases and an average annual percentage of output.
D) It is calculated on data that is quantifiable and readily available; the desired amount of profit the company wants to earn combined with fixed and variable costs of production.Slide185
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Pricing
Fill in the blank: _____ is when a company take the cost of the product and then add a profit to determine the price.
A) going-rate pricing
B) leader pricing
C) penetration pricing strategy
D) cost-plus pricingSlide186
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Pricing
Fill in the blank: _____ is when a company take the cost of the product and then add a profit to determine the price.
A) going-rate pricing
B) leader pricing
C) penetration pricing strategy
D) cost-plus pricingSlide187
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Pricing
What factors must a company control in order to maximize profits?
A) Fixed costs in the short run and proper pricing.
B) Variable costs to insure the ideal output level and proper pricing.
C) Total costs in the short run and maintaining the lowest price possible.
D) They must increase variable costs to maximize output and price the product as high as possible.Slide188
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Pricing
What factors must a company control in order to maximize profits?
A) Fixed costs in the short run and proper pricing.
B) Variable costs to insure the ideal output level and proper pricing.
C) Total costs in the short run and maintaining the lowest price possible.
D) They must increase variable costs to maximize output and price the product as high as possible.Slide189
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Pricing
A new product pricing strategy that tends to block competition and deplete inventory quickly is called ________.
A) Fixed price.
B) Penetration pricing.
C) Hi-lo pricing.
D) Skimming.Slide190
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Pricing
A new product pricing strategy that tends to block competition and deplete inventory quickly is called ________.
A) Fixed price.
B) Penetration pricing.
C) Hi-lo pricing.
D) Skimming.Slide191
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Pricing
A new pricing strategy that is used to recoup the cost to invent the product and may allow competition to gain market share is called ________.
A) Penetration pricing.
B) Fractional pricing.
C) Hi-lo pricing.
D) Skimming.Slide192
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Pricing
A new pricing strategy that is used to recoup the cost to invent the product and may allow competition to gain market share is called ________.
A) Penetration pricing.
B) Fractional pricing.
C) Hi-lo pricing.
D) Skimming.Slide193
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Pricing
Fill in the blank: _____ is when a company sets a high initial price for a product in order to recoup its investment in the product faster.
A) going-rate pricing
B) leader pricing
C) penetration pricing strategy
D) skimming pricing strategySlide194
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Pricing
Fill in the blank: _____ is when a company sets a high initial price for a product in order to recoup its investment in the product faster.
A) going-rate pricing
B) leader pricing
C) penetration pricing strategy
D) skimming pricing strategySlide195
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Pricing
Fill in the blank: _____ is when a low initial price is set in order to get as much of the market as possible to try to product.
A) cost-plus pricing
B) going-rate pricing
C) leader pricing
D) penetration pricingSlide196
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Pricing
Fill in the blank: _____ is when a low initial price is set in order to get as much of the market as possible to try to product.
A) cost-plus pricing
B) going-rate pricing
C) leader pricing
D) penetration pricingSlide197
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Pricing
What characteristic associated with line pricing is TRUE?
A) Shopping is less confusing to the customers and quality perceived as consistent.
B) All of these answers.
C) The quality of products can change but pricing remain constant.
D) Prices are compatible with the products offered and inventory levels are is easily controlled.Slide198
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Pricing
What characteristic associated with line pricing is TRUE?
A) Shopping is less confusing to the customers and quality perceived as consistent.
B) All of these answers.
C) The quality of products can change but pricing remain constant.
D) Prices are compatible with the products offered and inventory levels are is easily controlled.Slide199
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Pricing
When a product is offered at a price that causes the customer to react or feel a certain way about the product or price itself it is called __________.
A) Price points.
B) Customary pricing.
C) Fractional pricing.
D) Psychological pricing.Slide200
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Pricing
When a product is offered at a price that causes the customer to react or feel a certain way about the product or price itself it is called __________.
A) Price points.
B) Customary pricing.
C) Fractional pricing.
D) Psychological pricing.Slide201
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Which of the following occurs when a company prices a product a few cents or a few dollars below the next dollar amount? Choose one answer.
A) Odd-even pricing
B) Demand backward pricing
C) Cost-plus pricing
D) Forward pricingSlide202
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Pricing
Which of the following occurs when a company prices a product a few cents or a few dollars below the next dollar amount? Choose one answer.
A) Odd-even pricing
B) Demand backward pricing
C) Cost-plus pricing
D) Forward pricingSlide203
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Pricing
What impact does a successful fighter brand strategy have on a company?
A) It causes customers to delay buying until a new fighter brand is introduced.
B) Creates new sales, new markets and wipes out a competitor using a lower pricing strategy.
C) It causes a reduction in all company pricing.
D) The value of the brand goes down. Slide204
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Pricing
What impact does a successful fighter brand strategy have on a company?
A) It causes customers to delay buying until a new fighter brand is introduced.
B) Creates new sales, new markets and wipes out a competitor using a lower pricing strategy.
C) It causes a reduction in all company pricing.
D) The value of the brand goes down. Slide205
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Pricing
What factors must be considered before cutting prices in difficult economic times?
A) All of these answers.
B) Its effect on profitability and the strength of the brand's image.
C) Its impact on customer buying habits in the short and long term.
D) The actual perceived product value in the customer's eyes before cutting prices.Slide206
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Pricing
What factors must be considered before cutting prices in difficult economic times?
A) All of these answers.
B) Its effect on profitability and the strength of the brand's image.
C) Its impact on customer buying habits in the short and long term.
D) The actual perceived product value in the customer's eyes before cutting prices.Slide207
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Pricing
What aspect of EDLP strategy causes the cost of sales to be lower than in a hi-lo pricing stratgey?
A) Advertising is minimized or costs less because it can be bought on a long term basis.
B) Staffing in the stores is more flexible.
C) The company does not have to offer a wide variety of products.
D) It only works for companies that offer niche producSlide208
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Pricing
What aspect of EDLP strategy causes the cost of sales to be lower than in a hi-lo pricing stratgey?
A) Advertising is minimized or costs less because it can be bought on a long term basis.
B) Staffing in the stores is more flexible.
C) The company does not have to offer a wide variety of products.
D) It only works for companies that offer niche producSlide209
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Pricing
Which of the following statements about a high/low pricing strategy is FALSE?
A) Customers understand a great deal about the product being sold.
B) The strategy is based upon customer loyalty to a company as opposed to a specific product sold.
C) The lower priced products are offered to customers through ads, coupons and special promotions.
D) Some goods or services offered by the company are priced higher than competitor's. Slide210
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Pricing
Which of the following statements about a high/low pricing strategy is FALSE?
A) Customers understand a great deal about the product being sold.
B) The strategy is based upon customer loyalty to a company as opposed to a specific product sold.
C) The lower priced products are offered to customers through ads, coupons and special promotions.
D) Some goods or services offered by the company are priced higher than competitor's. Slide211
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Pricing
Which pricing strategy is most difficult for companies to compete against and why?
A) Pricing Above Competitors because of a sales environment that is full of comparative price information.
B) Non-Price Competition because it is based on characteristics that competitive products may possess.
C) Dynamic pricing for identical goods that correspond to a customer's willingness to pay.
D) Cost-Plus Pricing due to its vulnerability to demand. Slide212
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Pricing
Which pricing strategy is most difficult for companies to compete against and why?
A) Pricing Above Competitors because of a sales environment that is full of comparative price information.
B) Non-Price Competition because it is based on characteristics that competitive products may possess.
C) Dynamic pricing for identical goods that correspond to a customer's willingness to pay.
D) Cost-Plus Pricing due to its vulnerability to demand. Slide213
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Pricing
What is the primary purpose of a Trade Discount?
A) To increase the liquidity of a company.
B) To increase the list price of products.
C) To encourage buyers to make larger purchases.
D) Business to business sales incentives involving powerful retailers.Slide214
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Pricing
What is the primary purpose of a Trade Discount?
A) To increase the liquidity of a company.
B) To increase the list price of products.
C) To encourage buyers to make larger purchases.
D) Business to business sales incentives involving powerful retailers.Slide215
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Pricing
Which of the following statements about discounts is TRUE?
A) Discounts are social policy and are mandatory sales tools.
B) Retailers insist upon discounts from manufacturers. to increase their profit.
C) Discounts can be applied to the manufacturer's, retail or list price of a product.
D) Discounts are used exclusively at the consumer level.Slide216
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Pricing
Which of the following statements about discounts is TRUE?
A) Discounts are social policy and are mandatory sales tools.
B) Retailers insist upon discounts from manufacturers. to increase their profit.
C) Discounts can be applied to the manufacturer's, retail or list price of a product.
D) Discounts are used exclusively at the consumer level.Slide217
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Pricing
What type of discount is predicated on regulating the volume of sales or production over a specific period of time of the year?
A) Quantity.
B) Seasonal.
C) Supply.
D) Cash Flow.Slide218
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Pricing
What type of discount is predicated on regulating the volume of sales or production over a specific period of time of the year?
A) Quantity.
B) Seasonal.
C) Supply.
D) Cash Flow.Slide219
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Pricing
Value based pricing is ______.
A) Driven by the customer's perceived or estimated value.
B) Often used when targeting a highly knowledgeable customer in a large market.
C) Based upon information gathered through customer research, surveys and historical information.
D) All of these answers.Slide220
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Pricing
Value based pricing is ______.
A) Driven by the customer's perceived or estimated value.
B) Often used when targeting a highly knowledgeable customer in a large market.
C) Based upon information gathered through customer research, surveys and historical information.
D) All of these answers.Slide221
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Pricing
What type of geographic pricing tactic is based upon competitive pricing specific to an industry?
A) Basing point.
B) Zone.
C) Uniform Delivery.
D) FOB Origin.Slide222
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Pricing
What type of geographic pricing tactic is based upon competitive pricing specific to an industry?
A) Basing point.
B) Zone.
C) Uniform Delivery.
D) FOB Origin.Slide223
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Pricing
What type of geographic pricing tactic refers to the location where goods are shipped from?
A) FOB Origin.
B) Basing Point.
C) Zone Pricing.
D) Uniform Delivery.Slide224
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Pricing
What type of geographic pricing tactic refers to the location where goods are shipped from?
A) FOB Origin.
B) Basing Point.
C) Zone Pricing.
D) Uniform Delivery.Slide225
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Pricing
Which of the following statements about transfer pricing is TRUE?
A) A company must comply with the tax codes of the country in which the subsidiary is located.
B) When using transfer pricing the demand curve, optimum price and quantities change radically.
C) Transfer pricing puts pressure on the external market for the product.
D) Marginal price determination theory is not involved.Slide226
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Pricing
Which of the following statements about transfer pricing is TRUE?
A) A company must comply with the tax codes of the country in which the subsidiary is located.
B) When using transfer pricing the demand curve, optimum price and quantities change radically.
C) Transfer pricing puts pressure on the external market for the product.
D) Marginal price determination theory is not involved.Slide227
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Pricing
Consumer penalties exist to __________.
A) To create different income streams for the company and to insure customer loyalty.
B) To brand the company as a conservative and serious organization and garner new customers.
C) Insure that policy serving a company's interest is followed and/or to recapture profit lost if a contract is terminated earlier than its term.
D) To differentiate companies from their competitors by having a strict policy.Slide228
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Pricing
Consumer penalties exist to __________.
A) To create different income streams for the company and to insure customer loyalty.
B) To brand the company as a conservative and serious organization and garner new customers.
C) Insure that policy serving a company's interest is followed and/or to recapture profit lost if a contract is terminated earlier than its term.
D) To differentiate companies from their competitors by having a strict policy.Slide229
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Pricing
Unfair business practices often involve oppressive or unconscionable acts by companies against consumers. Which is the best example?
A) A construction company that is using materials that are less expensive and do not meet required safety codes but is charging for the higher quality and alleging the use of safe "code" materials.
B) An appliance company that is advertising a model of appliance as the "best" in its classification when there is no evidence to support that claim.
C) A gas station slashing its price per gallon to a low point that makes it impossible for the competitor across the street to compete, sustain and survive.
D) A deli located in a very remote location has increased all of its prices by 40% because a large construction crew has broken ground just down the road.Slide230
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Pricing
Unfair business practices often involve oppressive or unconscionable acts by companies against consumers. Which is the best example?
A) A construction company that is using materials that are less expensive and do not meet required safety codes but is charging for the higher quality and alleging the use of safe "code" materials.
B) An appliance company that is advertising a model of appliance as the "best" in its classification when there is no evidence to support that claim.
C) A gas station slashing its price per gallon to a low point that makes it impossible for the competitor across the street to compete, sustain and survive.
D) A deli located in a very remote location has increased all of its prices by 40% because a large construction crew has broken ground just down the road.Slide231
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Pricing
Illegal price advertising misleads or predicates sales on false information. Which of the following are examples of illegal price advertising?
A) A "Closing Our Doors Discounts" where prices have actually increased prior to the discount days to compensate for the deep discounts advertised.
B) All of these answers.
C) Dawn's Appliances Ads offer 32" flat screen TVs at a $299 each with no stock available at that price. Customers are pitched other, higher priced TVs once they are in the store.
D) Gilda's Meat Market is offering 95% ground sirloin at a low sale price.However the actual sirloin content is about 75% with chuck steak making up 15% rather than the 5% difference.Slide232
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Pricing
Illegal price advertising misleads or predicates sales on false information. Which of the following are examples of illegal price advertising?
A) A "Closing Our Doors Discounts" where prices have actually increased prior to the discount days to compensate for the deep discounts advertised.
B) All of these answers.
C) Dawn's Appliances Ads offer 32" flat screen TVs at a $299 each with no stock available at that price. Customers are pitched other, higher priced TVs once they are in the store.
D) Gilda's Meat Market is offering 95% ground sirloin at a low sale price.However the actual sirloin content is about 75% with chuck steak making up 15% rather than the 5% difference.Slide233
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Pricing
Which of the following statements about predatory pricing is TRUE?
A) In countries where the practice is illegal, a predatory pricing strategy is easy to substantiate in a court of law.
B) A company incorporating predatory pricing hopes to generate profit from the volume of product sold during the strategy.
C) The ability to sustain low prices for as long as it takes to defeat competitors is key to a successful predatory pricing strategy.
D) It doesn't matter if the company using a predatory pricing strategy is stronger or weaker than its competitors. Slide234
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Pricing
Which of the following statements about predatory pricing is TRUE?
A) In countries where the practice is illegal, a predatory pricing strategy is easy to substantiate in a court of law.
B) A company incorporating predatory pricing hopes to generate profit from the volume of product sold during the strategy.
C) The ability to sustain low prices for as long as it takes to defeat competitors is key to a successful predatory pricing strategy.
D) It doesn't matter if the company using a predatory pricing strategy is stronger or weaker than its competitors. Slide235
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Pricing
All of the following are examples of price descrimination EXCEPT_______.
A) The neighborhood deli, located near the main branch of the US Post Office, offers a low cost lunch special to anyone with a Post Office I.D.
B) Tylenol offers Extra Strength at a higher price but ingredients are the same as regular, the suggested daily dose is 2 instead of 3 times a day yet ingredient amounts administered are the same.
C) Coca Cola and Pepsi set a maximum price for glass bottles purchased from suppliers.
D) A dry cleaner charges $5.00 to launder, starch and press women's blouses while the same service on men's shirts costs $2.00 per shirt.Slide236
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Pricing
All of the following are examples of price descrimination EXCEPT_______.
A) The neighborhood deli, located near the main branch of the US Post Office, offers a low cost lunch special to anyone with a Post Office I.D.
B) Tylenol offers Extra Strength at a higher price but ingredients are the same as regular, the suggested daily dose is 2 instead of 3 times a day yet ingredient amounts administered are the same.
C) Coca Cola and Pepsi set a maximum price for glass bottles purchased from suppliers.
D) A dry cleaner charges $5.00 to launder, starch and press women's blouses while the same service on men's shirts costs $2.00 per shirt.Slide237
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Pricing
Price fixing is legal in certain countries. They cannot be prosecuted under the same national and antitrust laws that exist in developed countries. What motivates companies in these countries to fix prices?
A) They want to systematically carve up the business from a supply, demand, cost and profit perspective and reduce competitive pressures.
B) They want to offer stable pricing so that consumers will budget and have enough to buy their products.
C) They to stabilize the industry so that other companies are able to enter the marketplace.
D) They want to increase competitive pressures and create a healthier environment for consumers to buy at the lowest possible price. Slide238
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Pricing
Price fixing is legal in certain countries. They cannot be prosecuted under the same national and antitrust laws that exist in developed countries. What motivates companies in these countries to fix prices?
A) They want to systematically carve up the business from a supply, demand, cost and profit perspective and reduce competitive pressures.
B) They want to offer stable pricing so that consumers will budget and have enough to buy their products.
C) They to stabilize the industry so that other companies are able to enter the marketplace.
D) They want to increase competitive pressures and create a healthier environment for consumers to buy at the lowest possible price. Slide239
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Pricing
Which of the following scenarios illustrates examples of price fixing?
A) Bayer Aspirin, Tylenol and Advil agree to the same wholesale price when selling to drugstore chains Rite Aide, Walgreen and Duane Reade.
B) Goodyear and Bridgestone Tires enter into an agreement with the vulcanized rubber industry to buy raw materials at a set maximum price.
C) All major computer manufacturers, Apple, IBM, Toshiba, Dell, Asus and HP decide to discontinue the one year free service warranty policy and charge for all customer technical support needs.
D) All of these answers. Slide240
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Pricing
Which of the following scenarios illustrates examples of price fixing?
A) Bayer Aspirin, Tylenol and Advil agree to the same wholesale price when selling to drugstore chains Rite Aide, Walgreen and Duane Reade.
B) Goodyear and Bridgestone Tires enter into an agreement with the vulcanized rubber industry to buy raw materials at a set maximum price.
C) All major computer manufacturers, Apple, IBM, Toshiba, Dell, Asus and HP decide to discontinue the one year free service warranty policy and charge for all customer technical support needs.
D) All of these answers. Slide241
Attribution
Wikispaces. "resourcesforhistoryteachers - E.3.7 Explain the ways that firms engage in price and nonprice competition.."
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Wikipedia. "Non-price competition." CC BY-SA 3.0 http://en.wikipedia.org/wiki/Non-price_competitionWikipedia. "oligopolies."
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Wiktionary. "surcharge." CC BY-SA 3.0 http://en.wiktionary.org/wiki/surcharge
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CC BY-SA 3.0 http://en.wikipedia.org/wiki/Pricing_strategiesWiktionary. "viable."
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CC BY http://dl.dropbox.com/u/31779972/Introducing%2520Marketing.pdfWikipedia. "Fighter brand." CC BY-SA 3.0
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