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Chapter14

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Chapter14

  1. 1. Chapter 14 Developing Pricing Strategies and Programs
  2. 2. QUESTION 1 <ul><li>Which of the following is the marketing priority on how do consumers process and evaluate prices? </li></ul><ul><li>Reference Prices </li></ul><ul><li>Price-Quality Inferences </li></ul><ul><li>Price Endings </li></ul><ul><li>A B and C </li></ul><ul><li>None of Them </li></ul>
  3. 3. Answer <ul><li>Which of the following is the marketing priority on how do consumers process and evaluate prices? </li></ul><ul><li>Reference Prices </li></ul><ul><li>Price-Quality Inferences </li></ul><ul><li>Price Endings </li></ul><ul><li>A B and C </li></ul><ul><li>None of Them </li></ul>
  4. 4. Analysis <ul><li>All types of reference like fair price typical price last price paid upper-bound price lower-bound price competitor prices expected future prices and usual discounted price </li></ul><ul><li>W hen alternative information about true quality is available price becomes a less significant indicator of quality. W hen th is information is not available ,price acts as a signal of quality </li></ul><ul><li>Many sellers believe price should end in an odd numberl. A nother explanation for the popularity of “9” ending is that the convey the notion of a discount or bargain. </li></ul>
  5. 5. Question 2 <ul><li>P lease give the proper sequence in setting price initially for the products or services </li></ul><ul><li>1. Deterimne demand 2.select the price objective 3.analyze </li></ul><ul><li>competitor price mix 4.select final price 5.select price method 6.estimate costs </li></ul><ul><li>A 2 1 6 3 5 4 </li></ul><ul><li>B 1 2 6 3 54 </li></ul><ul><li>C 1 2 3 6 5 4 </li></ul><ul><li>D 2 1 3 6 5 4 </li></ul><ul><li>E 1 2 3 6 4 5 </li></ul>
  6. 6. Answer <ul><li>P lease give the proper sequence in setting price initially for the products or services </li></ul><ul><li>1. Deterimne demand 2.select the price objective 3.analyze </li></ul><ul><li>competitor price mix 4.select final price 5.select price method 6.estimate costs </li></ul><ul><li>A 2 1 6 3 5 4 </li></ul><ul><li>B 1 2 6 3 54 </li></ul><ul><li>C 1 2 3 6 5 4 </li></ul><ul><li>D 2 1 3 6 5 4 </li></ul><ul><li>E 1 2 3 6 4 5 </li></ul>
  7. 7. Analysis <ul><li>T he company first decides where it wants to position its market offering. T he clearer a firm’s objectives, the easier it is to set price. </li></ul><ul><li>E ach price will lead to a different level of demand and will therefore have a different impact on a company’s marketing objectives </li></ul><ul><li>D emand sets a ceiling on the price the company can charge for its product. C osts the floor </li></ul><ul><li>T he firm should first consider the nearest competitor’s price </li></ul><ul><li>G iven the customers’ demand schedule,the cost function, and competitors’ prices,the company is now ready to select a price </li></ul><ul><li>P ricing methods narrow the range from which the company must select its final price </li></ul>
  8. 8. Q uestion 3 <ul><li>W hich is not the market skimming makes sense under the following conditions: </li></ul><ul><li>A a sufficient number of buyers have a high current demand </li></ul><ul><li>B the unit costs of producing a big volume are not so high that they cancel the advantage of charging what the traffic will bear </li></ul><ul><li>C the high initial price does not attract more competitors to the market </li></ul><ul><li>D the high price communicates the image of a superior product </li></ul><ul><li>E none of them </li></ul>
  9. 9. answer <ul><li>W hich is not the market skimming makes sense under the following conditions: </li></ul><ul><li>A a sufficient number of buyers have a high current demand </li></ul><ul><li>B the unit costs of producing a big volume are not so high that they cancel the advantage of charging what the traffic will bear </li></ul><ul><li>C the high initial price does not attract more competitors to the market </li></ul><ul><li>D the high price communicates the image of a superior product </li></ul><ul><li>E none of them </li></ul>
  10. 10. A nalysis <ul><li>the unit costs of producing a small volume are not so high </li></ul><ul><li>that they cancel the advantage of charging what the traffic will bear </li></ul>
  11. 11. Q uestion 4 <ul><li>S uppose a toaster manufacturer has the following costs and sales expectations: </li></ul><ul><li>variable cost per unit $10 </li></ul><ul><li>fixed costs $300,000 </li></ul><ul><li>expected unit sales 50,000 </li></ul><ul><li>Now suppose the manufacturer wants to earn a 20% markup on sales. W hat is the makeup price should be given by the manufacturer? </li></ul>
  12. 12. A nswer <ul><li>U nit cost = variable cost+ fixed cost/unit sales </li></ul><ul><li>=$10+$300,000/50,000 </li></ul><ul><li>=$16 </li></ul><ul><li>Markup price=unit cost/(1-desired return on sales) </li></ul><ul><li>= $16/(1-0.2) </li></ul><ul><li>=$20 </li></ul>
  13. 13. Q uestion 5 <ul><li>S uppose the toaster manufacturer has invested $1 million in the business and wants to set a price to earn a 20% ROI, specifically $200,000. What is the target-return price and break-even point? </li></ul>
  14. 14. A nswer <ul><li>T arget-return pricing =unit cost +desired return *invested capital/unit sales </li></ul><ul><li>=$16+(0.2*$1,000,000)/50,000 </li></ul><ul><li>=$16+$4 </li></ul><ul><li>=$20 </li></ul><ul><li>Break-even volume =fixed cost/(price-variable cost) </li></ul><ul><li>=300,000/($20-$10) </li></ul><ul><li>=30,000 </li></ul>
  15. 15. Q uestion 6 <ul><li>W hich of the following is correct? </li></ul><ul><li>A Dutch auctions is the seller puts up an item and bidders raise the offer price until the highest price is reached </li></ul><ul><li>B English auctions is one seller and many buyers, or one buyer and many sellers. I n the first kind, an auctioneer announces a high price for a product and then slowly decrease the price until an bidder accepts the price </li></ul><ul><li>C Sealed-bid auctions would-be suppliers can submit only one bid and cannot know the other bids. </li></ul><ul><li>D Dispose of excess inventories or used goods is not one major purpose of auctions. </li></ul>
  16. 16. answer <ul><li>W hich of the following is correct? </li></ul><ul><li>A Dutch auctions is the seller puts up an item and bidders raise the offer price until the highest price is reached </li></ul><ul><li>B English auctions is one seller and many buyers, or one buyer and many sellers. I n the first kind, an auctioneer announces a high price for a product and then slowly decrease the price until an bidder accepts the price </li></ul><ul><li>C Sealed-bid auctions would-be suppliers can submit only one bid and cannot know the other bids. </li></ul><ul><li>D Dispose of excess inventories or used goods is not one major purpose of auctions. </li></ul>
  17. 17. A nalysis <ul><li>A English auctions is the seller puts up an item and bidders raise the offer price until the highest price is reached </li></ul><ul><li>B Dutch auctions is one seller and many buyers, or one buyer and many sellers. I n the first kind, an auctioneer announces a high price for a product and then slowly decrease the price until an bidder accepts the price </li></ul><ul><li>C Sealed-bid auctions would-be suppliers can submit only one bid and cannot know the other bids. </li></ul><ul><li>D Dispose of excess inventories or used goods is one major purpose of auctions. </li></ul>
  18. 18. Q uestion 7 <ul><li>W hich of the following is not the price-adaptation strategies? </li></ul><ul><li>A geographical pricing </li></ul><ul><li>B price discounts and allowances </li></ul><ul><li>C promotional pricing </li></ul><ul><li>D differentiated pricing </li></ul><ul><li>E auction pricing </li></ul>
  19. 19. A nswer <ul><li>W hich of the following is not the price-adaptation strategies? </li></ul><ul><li>A geographical pricing </li></ul><ul><li>B price discounts and allowances </li></ul><ul><li>C promotional pricing </li></ul><ul><li>D differentiated pricing </li></ul><ul><li>E auction pricing </li></ul>
  20. 20. A nalysis <ul><li>I n geographical pricing, the company decides how to price its products to different customers in different locations and countries </li></ul><ul><li>D iscounting can be a useful tool if a company can gain concessions in return. </li></ul><ul><li>P romotional-pricing strategies are often a zero-sum game </li></ul><ul><li>C ompanies often adjust their basic price to accommodate differences in customers, products, locations, and so on. </li></ul><ul><li>A uction pricings is a pricing method </li></ul>
  21. 21. Question 8 <ul><li>W hich of the following is not true? </li></ul><ul><li>A excess the plant capacity might lead a firm to cut price. </li></ul><ul><li>B companies sometimes initiate price cuts in a drive to dominate the market through lower cost </li></ul><ul><li>C a major circumstance provoking price increases is a cost inflation </li></ul><ul><li>D one factor leading to price cuts is overdemand </li></ul><ul><li>E creating new economy brands is one of popular way to avoid increasing price </li></ul>
  22. 22. A nswer <ul><li>W hich of the following is not true? </li></ul><ul><li>A excess the plant capacity might lead a firm to cut price. </li></ul><ul><li>B companies sometimes initiate price cuts in a drive to dominate the market through lower cost </li></ul><ul><li>C a major circumstance provoking price increases is a cost inflation </li></ul><ul><li>D one factor leading to price cuts is overdemand </li></ul><ul><li>E creating new economy brands is one of popular way to avoid increasing price </li></ul>
  23. 23. A nalysis <ul><li>one factor leading to price increase is overdemand. W hen a company cannot supply all its customers, it can raise its prices, ration supplies to customers, or both. </li></ul>
  24. 24. Q uestion 9 <ul><li>In nonhomogeneous product markets, a firm has more latitude. It needs to consider the following issues except: </li></ul><ul><li>A if the firm can search for ways to enhance its augmented product? </li></ul><ul><li>B why did the competitor change the price? </li></ul><ul><li>C does the competitor plan to make the price change temporary or permanent </li></ul><ul><li>D what will happen to the company’s market shar and profits if it does not respond </li></ul><ul><li>E what are the competitors’ and other firms’ responses likely to be to each possible reaction </li></ul>
  25. 25. A nswer <ul><li>In nonhomogeneous product markets, a firm has more latitude. It needs to consider the following issues except: </li></ul><ul><li>A if the firm can search for ways to enhance its augmented product? </li></ul><ul><li>B why did the competitor change the price? </li></ul><ul><li>C does the competitor plan to make the price change temporary or permanent </li></ul><ul><li>D what will happen to the company’s market shar and profits if it does not respond </li></ul><ul><li>E what are the competitors’ and other firms’ responses likely to be to each possible reaction </li></ul>
  26. 26. Analysis <ul><li>In markets characterized by high product homogeneity, the firm can search for ways to enhance its augmented product </li></ul>
  27. 27. Q uestion 10 <ul><li>W hich of the following is a pricing objective </li></ul><ul><li>A survival </li></ul><ul><li>B maximum current profit </li></ul><ul><li>C Maximum market share </li></ul><ul><li>D maximum market skimming and product-quality leadship </li></ul><ul><li>E all of above </li></ul>
  28. 28. A nswer <ul><li>W hich of the following is a pricing objective </li></ul><ul><li>A survival </li></ul><ul><li>B maximum current profit </li></ul><ul><li>C Maximum market share </li></ul><ul><li>D maximum market skimming and product-quality leadship </li></ul><ul><li>E all of above </li></ul>
  29. 29. FINAL <ul><li>W hatever the specific objective, businesses that use price as a strategic tool will profit more than those simply let costs or the market determine their pricing </li></ul>

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