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Principles of Marketing, 16e (Kotler) Chapter 11 Pricing Strategies: Additional Considerations 1) Companies set not a single price, but a pricing that covers different items in its line and changes over time as products move through their life cycles. A) B) structure C) loop D) cycle E) bundle Answe...

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Principles of Marketing, 16e (Kotler) Chapter 11 Pricing Strategies: Additional Considerations 1) Companies set not a single price, but a pricing ________ that covers different items in its line and changes over time as products move through their life cycles. A) by-product B) structure C) loop D) cycle E) bundle Answer: B AACSB: Analytical thinking Skill: Concept Objective: LO 11.1: Describe the major strategies for pricing new products. Difficulty: Easy 2) Companies facing the challenge of setting prices for the first time can choose between two broad strategies: market-penetration pricing and ________ pricing. A) comparative B) competitive C) market-skimming D) market-segmentation E) cost-plus Answer: C AACSB: Analytical thinking Skill: Concept Objective: LO 11.1: Describe the major strategies for pricing new products. Difficulty: Easy 3) A market-skimming pricing strategy should NOT be used for a new product when ________. A) the product's quality and image support its higher price B) enough buyers want the products at that price C) competitors are unable to enter the market D) competitors can undercut prices easily E) producing a smaller number of goods is feasible Answer: D AACSB: Application of knowledge Skill: Concept Objective: LO 11.1: Describe the major strategies for pricing new products. Difficulty: Easy

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4) When a company sets a high price for a new product with the intention of reducing the price in the future, it is using the ________ pricing strategy. A) market-skimming B) cost-plus C) market-segmentation D) market-penetration E) competitive Answer: A AACSB: Application of knowledge Skill: Concept Objective: LO 11.1: Describe the major strategies for pricing new products. Difficulty: Easy 5) Midnight Magic, a perfume manufacturing company, plans to release a new fragrance during the holiday season at $99 per bottle. The company intends to bring the price down to $49 within six months of its release to attract buyers who couldn't afford the initial price. Which of the following pricing strategies is Midnight Magic using? A) market-penetration pricing B) market-skimming pricing C) competitive pricing D) cost-plus pricing E) product-line pricing Answer: B AACSB: Application of knowledge Skill: Application Objective: LO 11.1: Describe the major strategies for pricing new products. Difficulty: Moderate 6) Which of the following is true of price skimming? A) It is effective in situations in which competitors are able to undercut prices easily. B) It can be profitably used when the product's quality and image support its price. C) It involves underpricing products so that companies make larger sales. D) It is ineffective in situations in which competitors are unable to enter the market easily. E) It leads to a situation in which the company completes more, though less profitable, sales. Answer: B AACSB: Analytical thinking Skill: Concept Objective: LO 11.1: Describe the major strategies for pricing new products. Difficulty: Moderate

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7) Companies that set a low price for a new product in order to attract a large number of buyers and a large market share are using the ________ strategy. A) market-skimming pricing B) market-penetration pricing C) cost-plus pricing D) inclusive pricing E) exclusive pricing Answer: B AACSB: Application of knowledge Skill: Concept Objective: LO 11.1: Describe the major strategies for pricing new products. Difficulty: Easy 8) A market-penetration pricing policy should LEAST likely be used for a new product when ________. A) the market is highly price sensitive B) production and distribution costs fall as sales volume increases C) the product's quality and image support a high price D) a high price helps keep out the competition E) there are few or no competitors in the market Answer: C AACSB: Application of knowledge Skill: Concept Objective: LO 11.1: Describe the major strategies for pricing new products. Difficulty: Moderate 9) Which of the following is true of market-penetration pricing? A) It should be used when the product's quality and image support a high price. B) It involves setting a high price for a new product to appeal to the elite in society. C) It results in drawing in large numbers of buyers quickly, winning a large market share. D) It is best used in conjunction with a market-skimming pricing strategy. E) It results in the company making fewer and less profitable sales. Answer: C AACSB: Application of knowledge Skill: Concept Objective: LO 11.1: Describe the major strategies for pricing new products. Difficulty: Moderate

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10) In a bid to attract more customers in a market that has several competitors, Barrymore's Bakery slashed the prices of all its products by 50 percent. Managers at the firm reasoned that lower prices would draw in even more customers, making up for the reduction in price several times over. Which of the following pricing strategies are they using? A) market-skimming pricing B) market-penetration pricing C) captive-product pricing D) cash discount pricing E) by-product pricing Answer: B AACSB: Application of knowledge Skill: Application Objective: LO 11.1: Describe the major strategies for pricing new products. Difficulty: Challenging 11) Whizz Corp. wishes to introduce a new hybrid car into mature markets in developed countries with the goal of gaining mass-market share quickly. Which of the following pricing strategies would help the firm meet its goal? A) market-skimming pricing B) market-penetration pricing C) market-segmentation pricing D) cost-plus pricing E) captive-product pricing Answer: B AACSB: Application of knowledge Skill: Application Objective: LO 11.1: Describe the major strategies for pricing new products. Difficulty: Challenging 12) Electrowhip, a company that manufacturers blenders and electric whisks, has decided to use a market penetration pricing strategy. Which of the following, if true, proves their decision to be a wise one? A) Electrowhip's competitors utilize social media for marketing their products. B) Electrowhip sells products whose image and quality support high prices. C) Electrowhip operates in a market with many competitors. D) Electrowhip does not operate in a price sensitive market. E) Electrowhip's products are intended to appeal to the elite in society. Answer: C AACSB: Reflective thinking Skill: Application Objective: LO 11.1: Describe the major strategies for pricing new products. Difficulty: Challenging

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Refer to the scenario below to answer the following question(s). Champion, Inc. is a manufacturer of lunch boxes, school bags, and school stationery. Charles Payton, the CEO of Champion, hopes to sell the products at a low price to penetrate the market quickly. 13) Which of the following best supports a market-penetration strategy for Champion? A) Production costs increase as sales volume increases. B) It is very difficult for competitors to enter the market. C) The cost of producing a smaller volume is negligible. D) The quality of the products supports high initial prices. E) The market for the products is highly price sensitive. Answer: E AACSB: Reflective thinking Skill: Critical Thinking Objective: LO 11.1: Describe the major strategies for pricing new products. Difficulty: Challenging 14) Pricing strategies tend to change and evolve as the average product passes through its life cycle. Answer: TRUE Skill: Concept Objective: LO 11.1: Describe the major strategies for pricing new products. Difficulty: Easy 15) For market skimming to be successful, the costs of producing a smaller volume cannot be so high that they cancel the advantage of charging more. Answer: TRUE AACSB: Analytical thinking Skill: Concept Objective: LO 11.1: Describe the major strategies for pricing new products. Difficulty: Easy 16) When The Candy Store sets a low initial price in order to get its "foot in the door" and to quickly attract a large number of buyers, the company is using market-skimming pricing. Answer: FALSE AACSB: Analytical thinking Skill: Application Objective: LO 11.1: Describe the major strategies for pricing new products. Difficulty: Moderate

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17) Differentiate between market-skimming and market-penetration pricing strategies. Explain the conditions within which they are effective. Answer: Market-skimming is used to skim revenues layer by layer from the market by entering the market with high initial prices. The product's quality and image must support its higher price, and enough buyers must want the product at that price. The costs of producing a smaller volume cannot be so high that they cancel the advantage of charging more. Competitors should not be able to enter the market easily and undercut the high price. Market penetration is used to penetrate the market quickly and deeply to attract a large number of buyers quickly and win a large market share by setting a low price initially when it enters the market. The market must be highly price sensitive so that a low price produces more market growth. Production and distribution costs must fall as sales volume increases. Also, the low price must help keep out competition and be maintained over time. AACSB: Application of knowledge; Written and oral communication Skill: Synthesis Objective: LO 11.1: Describe the major strategies for pricing new products. Difficulty: Challenging 18) For what types of products might marketers use market-skimming pricing? Answer: Market-skimming pricing works when the product's quality and image support the higher price. For example, companies selling high-tech electronics may use market-skimming pricing successfully. AACSB: Application of knowledge Skill: Application Objective: LO 11.1: Describe the major strategies for pricing new products. Difficulty: Moderate 19) Why might marketers use market-penetration pricing? Answer: Marketers use such pricing when attempting to attract a large number of buyers quickly and win a large market share; such pricing may be common when competition for products is high. AACSB: Application of knowledge Skill: Application Objective: LO 11.1: Describe the major strategies for pricing new products. Difficulty: Moderate

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20) Which of the following product mix pricing strategies involves setting prices across an entire product range based on cost differences between the products, customer evaluations of different features, and competitors' prices? A) by-product pricing B) product bundle pricing C) optional product pricing D) captive product pricing E) product line pricing Answer: E AACSB: Analytical thinking Skill: Concept Objective: LO 11.2: Explain how companies find a set of prices that maximizes the profits from the total product mix. Difficulty: Easy 21) Tone Zone plans to introduce four mp3 player models over the next year. These models range from basic players at $99 per unit, to more sophisticated players at $399 per unit. The more features a model has, the more expensive it is. What pricing strategy is Tone Zone using for its range of mp3 players? A) product line pricing B) product bundle pricing C) captive product pricing D) by-product pricing E) optional product pricing Answer: A AACSB: Analytical thinking Skill: Concept Objective: LO 11.2: Explain how companies find a set of prices that maximizes the profits from the total product mix. Difficulty: Moderate 22) Which of the following is true of product line pricing? A) The price steps take cost differences between products in the line into account. B) The pricing strategy cannot be used by companies in developed countries. C) The price steps do not account for the prices of similar products from competitors. D) The pricing strategy involves overpricing products so that they appeal to the elite. E) The customer's perception of the value of different features is considered irrelevant. Answer: A AACSB: Analytical thinking Skill: Concept Objective: LO 11.2: Explain how companies find a set of prices that maximizes the profits from the total product mix. Difficulty: Moderate

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23) Which of the following companies uses product line pricing? A) Photo Genie, which sells inexpensive cameras that run only on their own expensive batteries B) Mobile Point, which launched a range of cell phone models, each priced according to its features C) Penguin's Parlor, which offers customers a 20-percent discount on their birthdays and certain holidays D) Green Thumb, which gives away free watering cans with the purchase of certain potted plants E) Panizza, whose combo meals are priced lower than the individual components sold together Answer: B AACSB: Analytical thinking Skill: Application Objective: LO 11.2: Explain how companies find a set of prices that maximizes the profits from the total product mix. Difficulty: Challenging 24) Which of the following product mix pricing strategies involves pricing additional or accessory products sold along with the main product? A) inclusive product pricing B) exclusive product pricing C) by-product pricing D) product bundle pricing E) optional-product pricing Answer: E AACSB: Analytical thinking Skill: Concept Objective: LO 11.2: Explain how companies find a set of prices that maximizes the profits from the total product mix. Difficulty: Easy 25) Which of the following is true of optional-product pricing? A) It involves capitalizing on low value by-products. B) It involves pricing products that can be added to the base product. C) It is used to price a company's main product. D) It involves setting geographically-specific prices. E) It is used to price products that must be used with the company's main product. Answer: B AACSB: Analytical thinking Skill: Concept Objective: LO 11.2: Explain how companies find a set of prices that maximizes the profits from the total product mix. Difficulty: Moderate

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26) Which of the following product mix pricing strategies involves pricing products that can only be used with the main product? A) by-product pricing B) product bundle pricing C) captive product pricing D) product line pricing E) optional product pricing Answer: C AACSB: Analytical thinking Skill: Concept Objective: LO 11.2: Explain how companies find a set of prices that maximizes the profits from the total product mix. Difficulty: Easy 27) Multiprint, a printer manufacturing firm, sells ink cartridges for each of its specific models. Only Multiprint cartridges are compatible with Multiprint printers, and no two models share the same specifications. What type of pricing does Multiprint use? A) product line pricing B) captive product pricing C) optional product pricing D) by-product pricing E) product bundle pricing Answer: B AACSB: Application of knowledge Skill: Application Objective: LO 11.2: Explain how companies find a set of prices that maximizes the profits from the total product mix. Difficulty: Challenging 28) Which of the following product mix pricing strategies did Polaroid use when it set the general price range of its cameras low and the markup on its film high? A) product-segmented pricing B) by-product pricing C) customer-segmented pricing D) captive product pricing E) product bundling pricing Answer: D AACSB: Application of knowledge Skill: Application Objective: LO 11.2: Explain how companies find a set of prices that maximizes the profits from the total product mix. Difficulty: Challenging

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29) In the case of services, captive product pricing is called ________ pricing. A) by-product B) optional product C) two-part D) bundle E) segmented Answer: C Skill: Concept Objective: LO 11.2: Explain how companies find a set of prices that maximizes the profits from the total product mix. Difficulty: Easy 30) Which of the following companies uses captive product pricing? A) Photo Genie, which sells inexpensive cameras that run only on their own expensive batteries B) Tune Zone, which launched a range of mp3 player models, each priced according to its features C) Penguin's Parlor, which offers customers a 20-percent discount on their birthdays D) Sportsprint, which prices sports equipment according to customer evaluations E) Burger Den, whose combo meals are priced lower than its individual components sold together Answer: A AACSB: Application of knowledge Skill: Application Objective: LO 11.2: Explain how companies find a set of prices that maximizes the profits from the total product mix. Difficulty: Challenging 31) When amusement parks charge customers for admission and later for food and beverages, they are following a ________ pricing strategy. A) by-product B) product line C) penetration D) skimming E) two-part Answer: No Correct Answer Was Provided. AACSB: Application of knowledge Skill: Concept Objective: LO 11.2: Explain how companies find a set of prices that maximizes the profits from the total product mix. Difficulty: Moderate

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32) Cellpoint uses two-part pricing for its long-distance call charges. Because this is a service, the price is broken into a fixed fee plus a(n) ________ usage rate. A) fixed B) variable C) standard D) market E) optional Answer: B AACSB: Application of knowledge Skill: Concept Objective: LO 11.2: Explain how companies find a set of prices that maximizes the profits from the total product mix. Difficulty: Moderate 33) Using ________ pricing, companies are able to turn their trash into cash, allowing them to make the price of their main product more competitive. A) product bundle B) optional product C) captive product D) by-product E) product line Answer: D AACSB: Application of knowledge Skill: Concept Objective: LO 11.2: Explain how companies find a set of prices that maximizes the profits from the total product mix. Difficulty: Easy 34) Which of the following product mix pricing strategies involves pricing multiple products to be sold together? A) product line pricing B) product bundle pricing C) optional product pricing D) by-product pricing E) captive product pricing Answer: B AACSB: Analytical thinking Skill: Concept Objective: LO 11.2: Explain how companies find a set of prices that maximizes the profits from the total product mix. Difficulty: Easy

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35) Which of the following is true of product bundle pricing? A) It promotes the sale of products that consumers might not otherwise buy. B) It is used to set prices across an entire product range based on customer evaluations. C) It forces customers to buy product parts that are only compatible with the main product. D) It results in companies making fewer—though more profitable—sales. E) It involves pricing the main product low and setting high markups on the supplies. Answer: A AACSB: Analytical thinking Skill: Concept Objective: LO 11.2: Explain how companies find a set of prices that maximizes the profits from the total product mix. Difficulty: Moderate 36) Which of the following companies uses product bundle pricing? A) Photo Genie, which sells inexpensive cameras that run only on their own, expensive, batteries B) Tune Zone, which launched a range of mp3 player models, each priced according to its features C) Penguin's Parlor, which offers customers a 20 percent discount on their birthdays D) Green Thumb, which gives away free watering cans with the purchase of certain potted plants E) Panizza, whose combo meals are priced lower than its individual components sold together Answer: E AACSB: Application of knowledge Skill: Application Objective: LO 11.2: Explain how companies find a set of prices that maximizes the profits from the total product mix. Difficulty: Challenging

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Refer to the scenario below to answer the following question(s). Champion, Inc. is a manufacturer of lunch boxes, school bags, and school stationery. Charles Payton, the CEO of Champion, hopes to sell the prod...