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Exam 13: Setting the Right Price

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Question 41

True/False

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Charlene's cable system has offered her a deal for basic cable plus six premium channels for less than she is currently paying for basic cable. The cable system is using price lining to increase its overall profits.

A) True
B) False

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Question 42

Multiple Choice

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Leupold & Stevens Inc. makes scopes for rifles and has introduced a new scope that has the quality and performance for which Leupold & Stevens is famous, at a price much lower than it has ever sold a rifle scope before. Which pricing strategy is Leupold & Stevens using to appeal to a larger market?

A) price skimming
B) status quo pricing
C) penetration pricing
D) demand skimming

E) A) and B)
F) A) and C)

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Question 43

Multiple Choice

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South Africa's Competition Commission accused South African Airways of conspiring with its partner, Germany's Lufthansa, to set prices on flights between Cape Town, Johannesburg, and Frankfurt. As a result, what were the two airlines charged with?

A retail store implements a single-pricing tactic as a way to remove price comparisons from the buyer's decision-making process.

What is price?

When does a penetration pricing strategy tend to be most effective?

Big Sky Brands have introduced Jones Carbonated Candy, a candy that delivers a blast of the most popular Jones soft drink flavours along with an oddly enjoyable tongue-tingling sensation. Which strategy would most likely be used with this product to convince consumers to try it and not buy some other brand?

The Second Cup coffee house prices it products quite close to those offered by its main competitor, Starbucks. Which strategy is Second Cup using?

The DCS Stainless Steel Gas Grill for outside cooking costs $3,995. The market for a grill that could easily replace a kitchen range is limited even though a lot of people have seen articles about this grill in cooking magazines and in the cooking section of newspapers. There is no potential competitor for this grill. Which strategy is probably best?

Which of the following is NOT one of the four steps in the pricing process?

Scenario 13-2 It's September and Sophia wants to buy some arts and crafts supplies for an after-school program she is developing for her daughter's elementary school. In her Saturday newspaper was a flyer from Michael's, an arts and crafts retailer. As she looked through the newspaper insert, she noticed that if she purchased three or more bottles of Alene's Tacky Glue, the regular price of $1.50 each was reduced to $1.15 each. She also saw that the store priced its plastic storage boxes at $1.99, $3.99, and $5.99. She thought they would be useful for storing each individual child's projects. On the front page of the flyer was an ad for Funky Girls Gel Pens, something she knew her daughter would love to use. The price at Michael's was $6.99 lower than the price she had found at the other stores that carried the pens. She thought that some of the older girls might like to start a scrapbook and was pleased to find that Michael's had a scrapbook starter kit, which includes scissors, book, pages, and stickers for only $15. The items could be purchased separately for $19.99. The flyer also announced that all flag-related items left over from its Canada Day sale were reduced by 40 percent. -Refer to the scenario. What pricing practice was used with the scrapbook starter kit?

When Microsoft introduced its Windows NT network operating system, it gave buyers free Web server software. At the same time, Netscape was trying to sell similar Web server software for $4,999. Once Microsoft got a large share of the market, and Netscape's market share declined substantially, Microsoft began charging an above-market price for its Web server software. What did many people think Microsoft was guilty of?

Being a frugal shopper, Tersea decided to buy both shampoo and conditioner in a single package for one price. What is this known as?

Pam was informed by an employee at Altimos Hairdressers that after her ninth haircut, she would receive her tenth for free to show their appreciation. What type of discount was this?

What are two effective pricing tactics that can be used during a recession to hold or build market share?

Kenmore offered purchasers of any Kenmore brand major appliance a refund of $100 if they mailed Kenmore the receipt showing where and when they had purchased the appliance. What was Kenmore offering?

Name five of the special pricing tactics. Give one advantage and one disadvantage associated with using each of the tactics you have named.

Manufacturers know the approximate price level they can expect when establishing a product price. This approximate price is called the base price.

Once the owner of a cleaning service puts together information on pricing objectives, market demand, quantity supplied, and the price elasticity of demand, he will be ready to determine the optimal price for a new service offering.

What are the three basic strategies for setting a price on a new good or service? Briefly describe each strategy.