MKT 300 Exam 4 Eaton |Questions and Answers
Price - -what you pay for something; value you exchange for the benefits of having or using
the product/service
-Value = - -Benefits - Costs
-Internal Factors that affect pricing decisions - -Marketing Objectives: maximize profit or
gain market share
Marketing Mix Strategy: price needs to be consistent with other 3P's
Costs: set optimal price
-External factors that affect pricing decisions - -Demand for your product
Competition: competitor's price & strength of competition
Economy: cost of components (natural resources) and economic conditions
-Price elasticity - -how much the demand for a product will change with a change in price
-E (elasticity) = - -(% change in quantity demanded for good A) / (% change in price of
good A)
-Elastic - -consumers buy more or less of a product when the price changes
-Inelastic - -an increase or decrease in price will not significantly affect demand
-Unitary elasticity - -an increase in sales exactly offsets a decrease in prices, and revenue is
unchanged
-Products that are price sensitive, have many substitutes, and relatively small decreases in
price result in large increases in quantity demanded are price:
a. elastic
b. inelastic - -elastic (E is greater than 1.0)
-Products that are less price-sensitive, have few substitutes, and large increases in price
result in only a small decrease in quantity demanded are:
a. elastic
b. inelastic - -inelastic (E is less than 1.0)
-When demand is elastic, price goes _______ and revenue goes _______. - -up, down
and
down, up
, -When demand is inelastic, price goes _______ and revenue goes _______. - -up, up
and
down, down
-When demand is unitary elasticity, price goes _______ and revenue goes _______. - -up or
down, stays the same
-If demand for a good is extremely elastic, raising the price of that good typically has what
effect on total revenue? - -decreases
-stages for establishing prices - -1. Development of pricing objectives
2. Assessment of target market's evaluation of price
3. Evaluation of competitors' prices
4. Selection of a basis for pricing
5. Selection of a pricing strategy
6. Determination of a specific price
-Profit - -identify price and cost levels that allow the firm to maximize profit per product
-status quo - -identify price levels similar to competitor average price
-market share - -adjust price levels so that the firm can maintain or increase sales relative
to competitors' sales
-assess target market's evaluation of price: importance of price - -type of product, type of
target market, purchase situation
-evaluate competitors' price - -sources of competitors' pricing info: comparative shoppers
importance of knowing competitors' prices: helps to know how important price is to
customers and helps marketers in setting competitive prices for their products
customer view of pricing and marketing: pricing above/below competition
-adjusting your price levels so that your company can maintain or increase sales relative to
competitors' sales best described with pricing objective? - -market share
-Select a basis for pricing: cost
cost-plus pricing - -adding a specified dollar amount to the seller's cost
-markup - -adding to the price of the product a predetermined percentage of the variable
cost
-margin - -adding to the price of the product a predetermined percentage of the total price
Price - -what you pay for something; value you exchange for the benefits of having or using
the product/service
-Value = - -Benefits - Costs
-Internal Factors that affect pricing decisions - -Marketing Objectives: maximize profit or
gain market share
Marketing Mix Strategy: price needs to be consistent with other 3P's
Costs: set optimal price
-External factors that affect pricing decisions - -Demand for your product
Competition: competitor's price & strength of competition
Economy: cost of components (natural resources) and economic conditions
-Price elasticity - -how much the demand for a product will change with a change in price
-E (elasticity) = - -(% change in quantity demanded for good A) / (% change in price of
good A)
-Elastic - -consumers buy more or less of a product when the price changes
-Inelastic - -an increase or decrease in price will not significantly affect demand
-Unitary elasticity - -an increase in sales exactly offsets a decrease in prices, and revenue is
unchanged
-Products that are price sensitive, have many substitutes, and relatively small decreases in
price result in large increases in quantity demanded are price:
a. elastic
b. inelastic - -elastic (E is greater than 1.0)
-Products that are less price-sensitive, have few substitutes, and large increases in price
result in only a small decrease in quantity demanded are:
a. elastic
b. inelastic - -inelastic (E is less than 1.0)
-When demand is elastic, price goes _______ and revenue goes _______. - -up, down
and
down, up
, -When demand is inelastic, price goes _______ and revenue goes _______. - -up, up
and
down, down
-When demand is unitary elasticity, price goes _______ and revenue goes _______. - -up or
down, stays the same
-If demand for a good is extremely elastic, raising the price of that good typically has what
effect on total revenue? - -decreases
-stages for establishing prices - -1. Development of pricing objectives
2. Assessment of target market's evaluation of price
3. Evaluation of competitors' prices
4. Selection of a basis for pricing
5. Selection of a pricing strategy
6. Determination of a specific price
-Profit - -identify price and cost levels that allow the firm to maximize profit per product
-status quo - -identify price levels similar to competitor average price
-market share - -adjust price levels so that the firm can maintain or increase sales relative
to competitors' sales
-assess target market's evaluation of price: importance of price - -type of product, type of
target market, purchase situation
-evaluate competitors' price - -sources of competitors' pricing info: comparative shoppers
importance of knowing competitors' prices: helps to know how important price is to
customers and helps marketers in setting competitive prices for their products
customer view of pricing and marketing: pricing above/below competition
-adjusting your price levels so that your company can maintain or increase sales relative to
competitors' sales best described with pricing objective? - -market share
-Select a basis for pricing: cost
cost-plus pricing - -adding a specified dollar amount to the seller's cost
-markup - -adding to the price of the product a predetermined percentage of the variable
cost
-margin - -adding to the price of the product a predetermined percentage of the total price
