Chapter 11 Pricing Strategies

1. Companies facing the challenge of setting prices for the first time can choose between two
broad strategies: market-penetration pricing and ________.
A. market-level pricing
B. market-competitive pricing
C. market-skimming pricing
D. market-price lining
E. market-price filling

Answer: C

2. Of the following, which statement would NOT support a market-skimming policy for a new
product?
A. The product's quality and image support its higher price.
B. Enough buyers want the products at that price.
C. Competitors are not able to undercut the high price.
D. Competitors can enter the market easily.
E. C and D

Answer: D

3. A firm is using ________ when it charges a high, premium price for a new product with the
intention of reducing the price in the future.
A. price skimming
B. trial pricing
C. value pricing
D. market-penetration pricing
E. prestige pricing

Answer: A

4. ________ pricing is the approach of setting a low initial price in order to attract a large
number of buyers quickly and win a large market share.
A. Market-skimming
B. Market-penetration
C. Below-market
D. Value-based
E. Leader

Answer: B

5. Accent Software faces the conditions below, all of which support Accent's use of a market-
penetration pricing strategy EXCEPT that ________.
A. the market is highly price sensitive
B. production and distribution costs will fall as sales volume increases
C. the product's quality and image support a high price
D. a low price would help keep out the competition
E. A and C

Answer: C

6. Which of the following is a reason that a marketer would choose a penetration pricing
strategy?
A. to ensure the company has the ability to increase prices once demand decreases
B. to focus on the rapid achievement of profit objectives
C. to appeal to different consumer segments with different levels of price sensitivity
D. to create markets for highly technical products
E. to discourage competition from entering the market

Answer: E

7. Companies usually develop ________ rather than single products.

A. product families
B. product lines
C. product groupings
D. product brands
E. product images

Answer: B

8. A marketer must be familiar with the five major product mix pricing situations. Which of the
following is NOT one of them?
A. product line pricing
B. optional-product pricing
C. captive-product pricing
D. unbundled product pricing
E. by-product pricing

Answer: D

9. A challenge for management in product line pricing is to decide on the price steps between the
________.
A. various products in a line
B. product mixes
C. product groupings
D. product lines
E. various target markets

Answer: A
10. When using price steps, the seller must establish perceived ________ that support the price
differences.
A. nonprice competitions
B. quality differences
C. quantity levels
D. images
E. strategies

Answer: B

11. Many producers who use captive-product pricing set the price of the main product ________
and set ________ on the supplies necessary to use the product.
A. low; low markups
B. high; low markups
C. low; high markups
D. high; high markups
E. moderately; moderate markups

Answer: C

12. When amusement parks and movie theaters charge admission plus fees for food and other
attractions, they are following a(n) ________ pricing strategy.
A. by-product
B. optional-product
C. captive-product
D. skimming
E. penetration

Answer: C

13. HiPoint Telephone Company uses two-part pricing for its long-distance call charges. Because
this is a service, the price is broken into a fixed rate plus a ________.
A. fixed rate usage
B. variable usage rate
C. standard usage rate
D. market usage rate
E. none of the above

Answer: B

14. Companies involved in deciding which items to include in the base price and which to offer
as options are engaged in ________ pricing.
A. product bundle
B. optional-product
C. captive-product
D. by-product
E. skimming

Answer: B

15. With product bundle pricing, sellers can combine several products and offer the bundle
________.
A. as a working unit
B. at a reduced price
C. as a complete self-service package
D. as a reward to loyal customers
E. as segmented pricing

Answer: B

16. What is a major advantage of product bundle pricing?

A. It can promote the sales of products consumers might not otherwise buy.
B. It offers consumers more value for the money.
C. It combines the benefits of the other pricing strategies.
D. It provides a more complete product experience for consumers.
E. All of the above.

Answer: A

17. Which of the following is NOT a price adjustment strategy?

A. segmented pricing
B. promotional pricing
C. free samples
D. geographical pricing
E. seasonal pricing

Answer: C

18. Service Industries, Inc., plans to offer a price-adjustment strategy in the near future. They
could consider each of the following EXCEPT ________.
A. discount and allowance pricing
B. segmented pricing
C. physiological pricing
D. promotional pricing
E. location pricing

Answer: C

19. A quantity discount is a price reduction to buyers who purchase ________.

A. frequently
B. large volumes
C. close outs
D. inferior merchandise
E. superior merchandise

Answer: B

20. Trade or functional discounts are offered by manufacturers to which of the following?
A. channel members who perform tasks that the manufacturer would otherwise have to perform
B. consumers who earn a price reduction for buying in bulk
C. intermediaries such as financing institutions as a cost of doing business with them
D. manufacturers that agree to exclusive distribution contracts
E. the government market and other organizations that require bid proposals

Answer: A

21. When General Motors provides payments or price reductions to its new car dealers as
rewards for participating in advertising and sales support programs, it is granting a(n) ________.
A. trade discount
B. functional discount
C. allowance
D. promotional allowance
E. trade credit

Answer: D

22. Quantity discounts provide an incentive to the customer to buy ________.

A. more products or services from a variety of sellers
B. less from another competitor
C. more from one given seller, rather than from many different sources
D. more than he or she needs
E. bundled merchandise

Answer: C

23. By definition, this type of pricing is used when a firm sells a product or service at two or
more prices, even though the difference in price is not based on differences in cost.
A. segmented pricing
B. variable pricing
C. flexible pricing
D. cost-plus pricing
E. reference pricing

Answer: A

24. When a firm varies its price by the season, month, day, or even hour, it is using ________
pricing.
A. revenue management
B. penetration
C. variable
D. time
E. value-added

Answer: D

25. Consumers usually perceive higher-priced products as ________.

A. not within reach of most people
B. having a higher quality
C. having high profit margins
D. popular brands
E. being in the introductory stage of the product life cycle

Answer: B

26. Consumer use price less to judge the quality of a product when they ________.
A. lack information
B. lack skills to use the product
C. have experience with the product
D. are shopping for a specialty item
E. cannot physically examine the product

Answer: C

27. Michael and John both own leather jackets and are currently shopping for two new ones.
They both have prices in mind and refer to them when shopping. These prices are termed
________.
A. psychological prices
B. reference prices
C. comparison prices
D. price points
E. skimmed prices

Answer: B

28. Which of the following refers to the prices that a buyer carries in his or her mind and refers
to when looking at a given product?
A. target prices
B. reference prices
C. promotional prices
D. geographical prices
E. dynamic prices

Answer: B
29. When consumers cannot judge quality because they lack the information or skill, price
becomes ________.
A. less important
B. insignificant
C. an important quality signal
D. the only driver of the purchase
E. none of the above

Answer: C

30. All of the following are typical ways a reference price might be formed in a buyer's mind
EXCEPT ________.
A. noting current prices
B. remembering past prices
C. assessing the buying situation
D. comparing it to a new product
E. influences from sellers

Answer: D

31. What type of pricing is being used when a company temporarily prices it product below the
list price or even below cost to create buying excitement and urgency?
A. segmented pricing
B. psychological pricing
C. referent pricing
D. promotional pricing
E. dynamic pricing

Answer: D

32. Durango China Company charges all customers within a given geographical area a single
total price. The more distant the area, the higher the price. This is ________.
A. freight-absorption pricing
B. zone pricing
C. uniform-delivered pricing
D. FOB-origin pricing
E. bulk rate pricing

Answer: B

33. Under which type of geographic pricing strategy does each customer pay the exact freight for
the product from the factory to its destination?
A. zone pricing
B. basing-point pricing
C. uniform-delivered pricing
D. FOB-origin pricing
E. dynamic pricing

Answer: D

34. Which of the following is the opposite of FOB-origin pricing?

A. basing-point pricing
B. freight-absorption pricing
C. uniform-delivered pricing
D. freight-absorption pricing
E. zone pricing

Answer: C

35. When a company charges the same rate to ship a product anywhere in the United States, it is
using which form of geographic pricing?
A. F.O.B. delivered
B. F.O.B. factory
C. F.O.B. origin
D. uniform delivered
E. basing-point

Answer: D

36. The Internet offers ________, where the price can easily be adjusted to meet changes in
demand.
A. captive pricing
B. dynamic pricing
C. basing-point pricing
D. price bundling
E. cost-plus pricing

Answer: B

37. Some companies are reversing the fixed pricing trend and using ________.
A. captive pricing
B. segmented pricing
C. promotional pricing
D. dynamic pricing
E. geographical pricing

Answer: D