MKTG 361 Exam 3 UPDATED
QUESTIONS AND CORRECT ANSWERS
Cost-Based Pricing Methods - CORRECT ANSWER Determine final price to charge by
starting with the cost; do not recognize the role consumers/competitor's prices play in marketplace;
requires all costs to be identified/calculate on a per-unit basis
Competition Based Pricing Method - CORRECT ANSWER may set prices to reflect the way
they want consumers to interpret their prices
Value-Based Pricing Method - CORRECT ANSWER Setting prices that focus on overall value
of product offering as perceived by consumer
Improvement Value - CORRECT ANSWER Represents an estimate of how much (or less)
consumers are willing to pay for a product relative to other comparable products
Cost of Ownership Method - CORRECT ANSWER Total cost of owning the product over it's
useful life; consumers may be willing to pay more for a particular product b/c over it's entire lifetime
it will eventually cost less to own than a cheaper alternative
Everyday Low Pricing (EDLP) - CORRECT ANSWER Companies stress the continuity of
their retail prices @ a level somewhere between the regular, nonsale price and the deep-discount sale
prices their competitors may offer
High/Low pricing - CORRECT ANSWER Relies on promotion of sales, during which prices
are temporarily reduced to encourage purchases; attracts 2 market segments: 1. those non price
sensitive and willing to pay the "high price" and 2. price sensitive customers who wait for the "low"
sales price
Reference Price - CORRECT ANSWER price against which buyers compare the actual selling
price or a product and that facilitates their evaluation process; "regular price" or "original price"
Market Penetration Strategy - CORRECT ANSWER sets the initial price low for introduction
of the new product or service; discourage competitors from enter the market place b/c the profit
margin is relatively low
, Experience Curve Effect - CORRECT ANSWER Expect unit cost to drop significantly as
accumulated volume sold increase; as sales grow cost drop
Price Skimming - CORRECT ANSWER innovators and early adopters are willing to pay a
higher price to obtain new product/service; willing to pay premium price to have innovation first;
technology markets; competitors cannot be able to enter market easily;
Pricing Strategy - CORRECT ANSWER long-term approach to setting prices broadly in an
integrative effort based on the five C's.
Pricing Tactics - CORRECT ANSWER short-term methods to focus on select components of
five C; represents a short-term response to a competitive threat or a broadly accepted method of
calculating a final price for the customer that is short term in nature
Markdowns - CORRECT ANSWER reductions retailers take on initial selling price; integral
component of high/low pricing strategy
Size Discount - CORRECT ANSWER larger the quantity, the less cost per ounce -
manufacturer is providing quantity discount
Seasonal Discount to Consumers - CORRECT ANSWER price reductions offered on
products/services to stimulate demand during off-peak seasons
Coupons - CORRECT ANSWER offer a discount on price of specific items when they're
purchased; issued by manufacturers and retailers; induce customers to try new products for the 1st
time
Rebates - CORRECT ANSWER manufacturer issues the refund as a portion of the purchase
price is returned to the buyer in the form of cash; as much as 90% of consumers never redeem them
Leasing - CORRECT ANSWER consumers pay a fee to purchase the right to use a product for
a specific amount of time
QUESTIONS AND CORRECT ANSWERS
Cost-Based Pricing Methods - CORRECT ANSWER Determine final price to charge by
starting with the cost; do not recognize the role consumers/competitor's prices play in marketplace;
requires all costs to be identified/calculate on a per-unit basis
Competition Based Pricing Method - CORRECT ANSWER may set prices to reflect the way
they want consumers to interpret their prices
Value-Based Pricing Method - CORRECT ANSWER Setting prices that focus on overall value
of product offering as perceived by consumer
Improvement Value - CORRECT ANSWER Represents an estimate of how much (or less)
consumers are willing to pay for a product relative to other comparable products
Cost of Ownership Method - CORRECT ANSWER Total cost of owning the product over it's
useful life; consumers may be willing to pay more for a particular product b/c over it's entire lifetime
it will eventually cost less to own than a cheaper alternative
Everyday Low Pricing (EDLP) - CORRECT ANSWER Companies stress the continuity of
their retail prices @ a level somewhere between the regular, nonsale price and the deep-discount sale
prices their competitors may offer
High/Low pricing - CORRECT ANSWER Relies on promotion of sales, during which prices
are temporarily reduced to encourage purchases; attracts 2 market segments: 1. those non price
sensitive and willing to pay the "high price" and 2. price sensitive customers who wait for the "low"
sales price
Reference Price - CORRECT ANSWER price against which buyers compare the actual selling
price or a product and that facilitates their evaluation process; "regular price" or "original price"
Market Penetration Strategy - CORRECT ANSWER sets the initial price low for introduction
of the new product or service; discourage competitors from enter the market place b/c the profit
margin is relatively low
, Experience Curve Effect - CORRECT ANSWER Expect unit cost to drop significantly as
accumulated volume sold increase; as sales grow cost drop
Price Skimming - CORRECT ANSWER innovators and early adopters are willing to pay a
higher price to obtain new product/service; willing to pay premium price to have innovation first;
technology markets; competitors cannot be able to enter market easily;
Pricing Strategy - CORRECT ANSWER long-term approach to setting prices broadly in an
integrative effort based on the five C's.
Pricing Tactics - CORRECT ANSWER short-term methods to focus on select components of
five C; represents a short-term response to a competitive threat or a broadly accepted method of
calculating a final price for the customer that is short term in nature
Markdowns - CORRECT ANSWER reductions retailers take on initial selling price; integral
component of high/low pricing strategy
Size Discount - CORRECT ANSWER larger the quantity, the less cost per ounce -
manufacturer is providing quantity discount
Seasonal Discount to Consumers - CORRECT ANSWER price reductions offered on
products/services to stimulate demand during off-peak seasons
Coupons - CORRECT ANSWER offer a discount on price of specific items when they're
purchased; issued by manufacturers and retailers; induce customers to try new products for the 1st
time
Rebates - CORRECT ANSWER manufacturer issues the refund as a portion of the purchase
price is returned to the buyer in the form of cash; as much as 90% of consumers never redeem them
Leasing - CORRECT ANSWER consumers pay a fee to purchase the right to use a product for
a specific amount of time
