TOP 10 Learning Questions forChapter 14 Developing Pricing Strategies and Programs<br />Zhou Xue (Vicky)<br />Dec.13,2010<...
1. “Estimate costs” is one of the six steps in setting price. In the following steps, _____is the step after “estimate cos...
Steps in Setting Price<br />Select the price objective<br />Determine demand<br />Estimate costs<br />Analyze competitor p...
Step 4: Analyzing competitor price mix<br />Within the range of possible prices determined by market demand and company co...
1. “Estimate costs” is one of the six steps in setting price. In the following steps, _____is the step after “estimate cos...
2.When Sony introduced the world’s first high-definition television (HDTV) to the Japanese market in 1990, it was priced a...
Setting the price objective<br />Survival:if the companies are plagued with overcapacity, intense competition, or changing...
Setting the price objective<br />Maximum market skimming: companies unveiling a new technology favor setting high prices, ...
Maximum market skimming<br />Under the following conditions: <br />(1) A sufficient number of buyers have a high current d...
Maximum market skimming<br />(3) the high initial price does not attract more competitors to the market; <br />(4) the hig...
2.When Sony introduced the world’s first high-definition television (HDTV) to the Japanese market in 1990, it was priced a...
3. nowadays, auction-type pricing is growing more popular, especially with the growth of internet. The followings are majo...
Three major types of auctions<br />
Three major types of auctions<br />
3. nowadays, auction-type pricing is growing more popular, especially with the growth of internet. The followings are majo...
4. Which of the following is NOT true?<br />A. The amount of fixed-cost per unit of activity decrease as volume increase.<...
Types of costs<br />
Types of costs<br />Fixed costs: (also known as overhead) are items of cost that, in total, do not vary at all with volume...
Types of costs<br />Semi-variable costs: those costs include a combination of variable-cost and fixed-cost items. Electric...
4. Which of the following is NOT true?<br />A. The amount of fixed-cost per unit of activity decrease as volume increase.<...
5. Companies often adjust their basic price to accommodate differences in market situations. The following are differentia...
Differentiated pricing<br />Customer-segment pricing  <br />Product-form pricing<br />Channel pricing  <br />Location Pric...
 Differentiated pricing<br />
 Differentiated pricing<br />
5. Companies often adjust their basic price to accommodate differences in market situations. The following are differentia...
6. Many consumers use price as an indicator of ________. Image pricing is especially effective with ego-sensitive products...
Consumer psychology and pricing<br />Three consumer psychology key topics:<br />Reference prices<br />Price-quality infere...
Price-quality inferences<br />Many consumers use price as an indicator of quality. They think if an item has a high price,...
6. Many consumers use price as an indicator of ________. Image pricing is especially effective with ego-sensitive products...
7.Which of the followings is TRUE? <br />A. markup pricing works only if the marked-up price actually brings in the expect...
Selecting a price method<br />Markup pricing<br />Target-return pricing<br />Perceived-value pricing<br />Value pricing<br...
Selecting a price method<br />Markup pricing is the most elementary pricing method which is to add a standard markup to th...
Selecting a price method<br />Value  pricing win loyal customers by charging a fairly low price for a high quality offerin...
7.Which of the followings is TRUE? <br />A. markup pricing works only if the marked-up price actually brings in the expect...
8. Supermarkets and department stores often drop the price on well-known brands to stimulate additional store traffic. Thi...
Promotional pricing tactics<br />Special-event pricing<br />Cash rebates<br />Low-interest financing<br />Psychological di...
Loss-leader pricing<br />One use of a loss leader is to draw customers into a store where they are likely to buy other goo...
8. Supermarkets and department stores often drop the price on well-known brands to stimulate additional store traffic. Thi...
9. A British aircraft manufacture sold planes to Brazil for 70% cash and the rest in coffee. The manufacture applies _____...
Countertrade<br />
Countertrade<br /><ul><li>Barter: the buyer and seller directly exchange goods, with no money and no third party involved.
compensation deal: the seller receives some percentage of the payment in cash and the rest in product.</li></li></ul><li>C...
Offset: the seller receives full payment in cash but agrees to spend a substantial amount of the money in that country wit...
10. Car companies sometimes add antilock brakes and passenger-side airbags as supplementary extras to their vehicles. This...
Increasing prices<br /><ul><li>Delayed quotation pricing
Escalator clauses
Unbundling
Reduction of discount</li></li></ul><li>Increasing prices<br /><ul><li>Delayed quotation pricing: the company does not set...
Escalator clauses:the company requires the customers to pay today’s price and all or part of any inflation increase that t...
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Chapter 14 developing pricing strategies and programs zhou

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Chapter 14 developing pricing strategies and programs zhou

  1. 1. TOP 10 Learning Questions forChapter 14 Developing Pricing Strategies and Programs<br />Zhou Xue (Vicky)<br />Dec.13,2010<br />
  2. 2. 1. “Estimate costs” is one of the six steps in setting price. In the following steps, _____is the step after “estimate costs”?<br />A. Determine demand<br />B. Select pricing method<br />C. Analyze competitor price mix<br />D. Select the price objective<br />E. Select final price<br />
  3. 3. Steps in Setting Price<br />Select the price objective<br />Determine demand<br />Estimate costs<br />Analyze competitor price mix<br />Select pricing method<br />Select final price<br />
  4. 4. Step 4: Analyzing competitor price mix<br />Within the range of possible prices determined by market demand and company costs, the firm must take competitors’ costs, price, and possible price relations into account<br />
  5. 5. 1. “Estimate costs” is one of the six steps in setting price. In the following steps, _____is the step after “estimate costs”?<br />A. Determine demand<br />B. Select pricing method<br />C. Analyze competitor price mix<br />D. Select the price objective<br />E. Select final price<br />
  6. 6. 2.When Sony introduced the world’s first high-definition television (HDTV) to the Japanese market in 1990, it was priced at $43,000. Then the price dropped steadily through the years—a 28-inch Sony HDTV cost just over $6,000 in 1993 and a 40-inch Sony HDTV about $1,200 in 2007. This is an example of___? <br />A. Survival<br />B. Maximum current profit<br />C. Maximum market share<br />D. Maximum market skimming<br />E. Product-quality leadership<br />
  7. 7. Setting the price objective<br />Survival:if the companies are plagued with overcapacity, intense competition, or changing consumer wants.<br />Maximum current profit: if the companies estimate the demand and costs associated with alternative prices<br />Maximum market share: if they believe that a higher sales volume will lead to lower unites costs and higher long-run profit.<br />
  8. 8. Setting the price objective<br />Maximum market skimming: companies unveiling a new technology favor setting high prices, and slowly drop price over time.<br />Product-quality leadership: products or services characterized by high levels of perceived quality, taste, and status with a price just high enough not to be out of consumers’ reach.<br />
  9. 9. Maximum market skimming<br />Under the following conditions: <br />(1) A sufficient number of buyers have a high current demand; <br />(2) the unit cost of producing a small volume are not so high that they cancel the advantage of charging what the traffic will bear;<br />
  10. 10. Maximum market skimming<br />(3) the high initial price does not attract more competitors to the market; <br />(4) the high price communicates the image of a superior product. <br />
  11. 11. 2.When Sony introduced the world’s first high-definition television (HDTV) to the Japanese market in 1990, it was priced at $43,000. Then the price dropped steadily through the years—a 28-inch Sony HDTV cost just over $6,000 in 1993 and a 40-inch Sony HDTV about $1,200 in 2007. This is an example of___? <br />A. Survival<br />B. Maximum current profit<br />C. Maximum market share<br />D. Maximum market skimming<br />E. Product-quality leadership<br />
  12. 12. 3. nowadays, auction-type pricing is growing more popular, especially with the growth of internet. The followings are major types of auctions EXCEPT_____?<br />A. English auctions<br />B. French auctions<br />C. Dutch auctions<br />D. Sealed-bid auctions<br />E. None of the above<br />
  13. 13. Three major types of auctions<br />
  14. 14. Three major types of auctions<br />
  15. 15. 3. nowadays, auction-type pricing is growing more popular, especially with the growth of internet. The followings are major types of auctions EXCEPT_____?<br />A. English auctions<br />B. French auctions<br />C. Dutch auctions<br />D. Sealed-bid auctions<br />E. None of the above<br />
  16. 16. 4. Which of the following is NOT true?<br />A. The amount of fixed-cost per unit of activity decrease as volume increase.<br />B. Variable costs, also known as overhead, differ greatly depending upon the level of production.<br />C. The cost of electricity can be viewed as semi-variable cost.<br />D. Total costs consist of the sum of the fixed and variable costs for any given level of production.<br />E. Average cost is the cost per unit at that level production; it equals total costs divided by production.<br />
  17. 17. Types of costs<br />
  18. 18. Types of costs<br />Fixed costs: (also known as overhead) are items of cost that, in total, do not vary at all with volume. The fixed-cost per unit equals total fixed-cost divided by the number of units of volume.<br />Variable costs: are items of cost that vary, in total, directly and proportionately with volume.<br />
  19. 19. Types of costs<br />Semi-variable costs: those costs include a combination of variable-cost and fixed-cost items. Electrical power is essential for the basic operation of the business in lighting and heating - this portion is a sunk cost that is foregone regardless of production. As demand ramps up, more energy is required to ramp up the production process in the use of machinery or large banks of computers for instance. Cost of electrical energy will then rise accordingly as production activities increase.<br />
  20. 20. 4. Which of the following is NOT true?<br />A. The amount of fixed-cost per unit of activity decrease as volume increase.<br />B. Variable costs, also known as overhead, differ greatly depending upon the level of production.<br />C. The cost of electricity can be viewed as semi-variable cost.<br />D. Total costs consist of the sum of the fixed and variable costs for any given level of production.<br />E. Average cost is the cost per unit at that level production; it equals total costs divided by production.<br />
  21. 21. 5. Companies often adjust their basic price to accommodate differences in market situations. The following are differentiated pricings EXCEPT______?<br />A. New-product pricing <br />B. Customer-segment pricing <br />C. Product-form pricing<br />D. Channel pricing <br />E. Location pricing<br />
  22. 22. Differentiated pricing<br />Customer-segment pricing <br />Product-form pricing<br />Channel pricing <br />Location Pricing<br />Image pricing<br />Time pricing<br />
  23. 23. Differentiated pricing<br />
  24. 24. Differentiated pricing<br />
  25. 25. 5. Companies often adjust their basic price to accommodate differences in market situations. The following are differentiated pricings EXCEPT______?<br />A. New-product pricing <br />B. Customer-segment pricing <br />C. Product-form pricing<br />D. Channel pricing <br />E. Location pricing<br />
  26. 26. 6. Many consumers use price as an indicator of ________. Image pricing is especially effective with ego-sensitive products such as perfumes and expensive cars.<br />Status <br />Quality<br />Quantity<br />Ability <br />Capability<br />
  27. 27. Consumer psychology and pricing<br />Three consumer psychology key topics:<br />Reference prices<br />Price-quality inferences<br />Price endings<br />Consumers often actively process price information, interpreting prices in terms of their knowledge<br />
  28. 28. Price-quality inferences<br />Many consumers use price as an indicator of quality. They think if an item has a high price, it has a good quality. <br />Some brands adopt exclusivity and scarcity as a means to signify uniqueness and justify premium pricing. Luxury-goods makers of watches, jewelry, perfume and other products often emphasize exclusivity in their communication massages and channel strategies.<br />
  29. 29. 6. Many consumers use price as an indicator of ________. Image pricing is especially effective with ego-sensitive products such as perfumes and expensive cars.<br />Status <br />Quality<br />Quantity<br />Ability <br />Capability<br />
  30. 30. 7.Which of the followings is TRUE? <br />A. markup pricing works only if the marked-up price actually brings in the expected level of sales.<br />B. Value pricing is made up of several elements, such as the buyers’ image of the product performance, the channel deliverables, the warranty quality, customer support, etc.<br />C. Perceived value win loyal customers by charging a fairly low price for a high quality offering.<br />D. In going-rate pricing, the firm bases its price largely on competitors' prices, charging less price than major competitors.<br />E. In target-return pricing, the firm determines the price that would yield its target rate of return on equity. <br />
  31. 31. Selecting a price method<br />Markup pricing<br />Target-return pricing<br />Perceived-value pricing<br />Value pricing<br />Going-rate pricing<br />Auction-type pricing<br />
  32. 32. Selecting a price method<br />Markup pricing is the most elementary pricing method which is to add a standard markup to the product’s cost.<br />Perceived value is made up of several elements, such as the buyers’ image of the product performance, the channel deliverables, the warranty quality, customer support, etc.<br />
  33. 33. Selecting a price method<br />Value pricing win loyal customers by charging a fairly low price for a high quality offering.<br />In going-rate pricing, the firm bases its price largely on competitors' prices, charging the same, more or less than major competitors.<br />In target-return pricing, the firm determines the price that would yield its target rate of return on investment. <br />
  34. 34. 7.Which of the followings is TRUE? <br />A. markup pricing works only if the marked-up price actually brings in the expected level of sales.<br />B. Value pricing is made up of several elements, such as the buyers’ image of the product performance, the channel deliverables, the warranty quality, customer support, etc.<br />C. Perceived value win loyal customers by charging a fairly low price for a high quality offering.<br />D. In going-rate pricing, the firm bases its price largely on competitors' prices, charging less price than major competitors.<br />E. In target-return pricing, the firm determines the price that would yield its target rate of return on equity. <br />
  35. 35. 8. Supermarkets and department stores often drop the price on well-known brands to stimulate additional store traffic. This is an example of ____?<br />A. Special-event pricing<br />B. Cash rebates<br />C. Low-interest financing<br />D. Psychological discounting<br />E. Loss-leader pricing<br />
  36. 36. Promotional pricing tactics<br />Special-event pricing<br />Cash rebates<br />Low-interest financing<br />Psychological discounting<br />Loss-leader pricing<br />Longer payment terms<br />Warranties and service contracts<br />
  37. 37. Loss-leader pricing<br />One use of a loss leader is to draw customers into a store where they are likely to buy other goods. The vendor expects that the typical customer will purchase other items at the same time as the loss leader and that the profit made on these items will be such that an overall profit is generated for the vendor.<br />A loss leader or leaderis a product sold at a low price (at cost or below cost) to stimulate other, profitable sales. It is a kind of sales promotion.<br />
  38. 38. 8. Supermarkets and department stores often drop the price on well-known brands to stimulate additional store traffic. This is an example of ____?<br />A. Special-event pricing<br />B. Cash rebates<br />C. Low-interest financing<br />D. Psychological discounting<br />E. Loss-leader pricing<br />
  39. 39. 9. A British aircraft manufacture sold planes to Brazil for 70% cash and the rest in coffee. The manufacture applies ______ as a countertrade form?<br />A. Barter<br />B. compensation deal<br />C. Buyback arrangement<br />D. Offset<br />E. Allowance<br />
  40. 40. Countertrade<br />
  41. 41. Countertrade<br /><ul><li>Barter: the buyer and seller directly exchange goods, with no money and no third party involved.
  42. 42. compensation deal: the seller receives some percentage of the payment in cash and the rest in product.</li></li></ul><li>Countertrade<br /><ul><li>Buyback arrangement: the seller sales a plant, equipment or technology in other country and agrees to accept as partial payment products manufactured with the supplied equipment.
  43. 43. Offset: the seller receives full payment in cash but agrees to spend a substantial amount of the money in that country within a stated time period.</li></li></ul><li>9. A British aircraft manufacture sold planes to Brazil for 70% cash and the rest in coffee. The manufacture applies ______ as a countertrade form?<br />A. Barter<br />B. compensation deal<br />C. Buyback arrangement<br />D. Offset<br />E. Allowance<br />
  44. 44. 10. Car companies sometimes add antilock brakes and passenger-side airbags as supplementary extras to their vehicles. This is used ____ way to increase their price?<br />A. Delayed quotation pricing<br />B. Escalator clauses<br />C. Unbundling<br />D. Reduction of discount<br />E. Anticipatory pricing<br />
  45. 45. Increasing prices<br /><ul><li>Delayed quotation pricing
  46. 46. Escalator clauses
  47. 47. Unbundling
  48. 48. Reduction of discount</li></li></ul><li>Increasing prices<br /><ul><li>Delayed quotation pricing: the company does not set a final price until the product is finished or delivered.
  49. 49. Escalator clauses:the company requires the customers to pay today’s price and all or part of any inflation increase that takes place before delivery.</li></li></ul><li>Increasing prices<br /><ul><li>Unbundling: the company maintains its price but removes or price separately one or more elements that are part of the former offer, such as free delivery or installation.
  50. 50. Reduction of discount: the company instructs its sales force not to offer its normal cash and quality discount. </li></li></ul><li>10. Car companies sometimes add antilock brakes and passenger-side airbags as supplementary extras to their vehicles. This is used ____ way to increase their price?<br />A. Delayed quotation pricing<br />B. Escalator clauses<br />C. Unbundling<br />D. Reduction of discount<br />E. Anticipatory pricing<br />
  51. 51. TOP 10 Learning Questions forChapter 14 Developing Pricing Strategies and Programs<br />Zhou Xue (Vicky)<br />Dec.13,2010<br />

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