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Exam 14: Pricing Strategies

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Question 1

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City Drug is a locally owned, independent pharmacy located in a town where there is also a Wal-Mart pharmacy and a CVS pharmacy. It could potentially be difficult for this small business to compete against these giant chains, but the independent pharmacy is protected against loss-leader pricing by __________.

A) the Fair Packaging and Labeling Act
B) the Robinson-Patman Act
C) unfair trade laws
D) the Price Discrimination Act

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Question 2

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Tiffany, Rolex, Gucci, and Prada represent exclusivity, meaning their prices are mostly inelastic.

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Question 3

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What are the problems associated with product-line pricing?

The owner of BargainSmartphones.com is determined to drive competitors such as CheapPhones.com out of business. He has plenty of money to invest in building his business, so he has instructed his marketing manager to slash prices by 25% to 50% on nearly every product until there aren't any other online cell phone retailers left. Which of the following statements is true about this situation?

You're the marketing manager for Streamline Technology, a company that makes ergonomically designed home office equipment. Six months ago, your firm introduced a new paper shredder that was faster, easier, and more comfortable to use. You priced the paper shredder at $350, which is double and even triple some other models, to reflect its many superior product features. However, sales have been poor. What is the most likely explanation for this situation?

Harry's, your family-owned business, has been serving breakfast, lunch, and dinner in your city for so long that it's practically an institution! Your lunch menu items range in price from $8.99 to $13.99. Recently, your head chef suggested adding a delicious new seafood option to the lunch menu, but the costly ingredients involved will force you to charge $17.99 for it, which is comparable to what you charge for dinner menu items. You're concerned that this will upset your long-time customers. What should you do?

When General Motors introduced the Saturn, it priced the SL sports sedan at $2,000 less than the Toyota Corolla DLX and $1,500 less than comparable Nissan and Honda automobiles. This is an example of the _____ pricing strategy.

The price of products only includes the costs incurred by the manufacturer for procuring the raw material and for processing the products.

A skimming pricing strategy is ineffective in marketing higher-end goods.

Explain the concept of elasticity of demand.

Define the terms supply and demand. Then, choose any product or service and describe what you have observed about supply and demand for this product. Specifically, does supply exceed demand or vice versa, and how have you arrived at this conclusion?

Which of the following is true of promotional pricing?

Psychological pricing is based on the premise that:

Brands that are seeking to be associated with prestige and exclusivity often set higher prices.

Most states supplement federal legislation with their own unfair-trade laws, which require sellers to maintain minimum prices for comparable merchandise.

In the small but growing town where you live, Burke's Fine Furnishings, where you work as the marketing manager, has been the only local choice for consumers for about 20 years. But recently, a new furniture store opened, and they are out to steal your business with incredible deals and "no-interest-for-a-year" credit offers. What's the best way to respond to their penetration pricing strategy?

You are a sales representative for Caterpillar, Inc. You've got two customers who both want to purchase hydraulic shovels, which weigh in at just over 1,000 tons. One of these customers is located in Houston, Texas, not far from the manufacturing plant where the shovels will be made. The other is located in Rockport, Maine. What does the Robinson-Patman Act dictate about the prices you can ask for these two hydraulic shovels?

A penetration pricing strategy is called _____ pricing when it implements the premise that a lower-than-market price will attract buyers and move a brand from an unknown newcomer to brand-recognition or brand-preference stage.

A car manufacturer has developed different models of a car to suit the pricing needs of different classes of customers. It offers a low-end version for price conscious customers and luxury cars for high-end customers. This is an example of _____ pricing.

Consumers today perceive that, within price limits, there is: