BUAD 332 Exam 3 | Study Guide, Practice Questions & Business Administration
Review
what is a narrow definition for price? - ANS ✔✔price is the *amount of money* charged for a
product or service
what is a more broad definition for price? aka price = ________. - ANS ✔✔price is the *sum* of
all the *values that consumers exchange* for the *benefits of having or using the product*
price = SACRIFICE
there is a pair of boots sold on Amazon and at Dillard's for $88 with the same tax and no
shipping. are they the same price? <-- what question are we really asking here? - ANS ✔✔are
they the same *sacrifice*?
- amazon's pair is cheaper because you dont have to go get them
- dillard's pair is cheaper because you dont hace to wait for them to be delivered, and you can
try them on before you buy them
*marketeres have to consider that customers will pick they product they get for less sacrifice
not always a cheaper price*
what 2 types of factors affect price decisions? what makes up each type? - ANS ✔✔1. internal
factors = marketing objectives, marketing mix strategies, costs, organizational considerations
2. external factors = nature of market and demand, competition, other environmental factors
(economy, government, resellers, social concerns)
what are 4 strategies marketers could use to respond to internal factors when choosing the
price for a product? what characterizes each? what's an example of each? - ANS ✔✔1.
*survival* strategy: low prices with hope it'll increase demand; Amazon
2. *current profit maximization* strategy: choose the price that produces the maximum current
profit
,3. *market share leadership* strategy: low as possible prices to become the market share
leader; Walmart
4. *product quality leadership* strategy: high prices to cover higher performance quality and
R&D; Marriot
what internal factors affect our price? - ANS ✔✔TOTAL COSTS =
1. fixed costs +
2. variable costs
______ determines the floor of our price, but _________ determine the ceiling. - ANS ✔✔cost
-- floor
customers -- ceiling
there is a spectrum of supply and demand situations that affect how a company can set its
prices. what are the 4 different stages on the spectrum and what characterizes each? - ANS
✔✔1. *pure competition*: many buyers and sellers who have little effect on price
2. *monopolistic competition*: many buyers and sellers who trade over a wide range of prices
and quality (blue jeans)
3. *oligopolistic competition*: few sellers who are sensitive to each other's pricing and
marketing (cell phones, airlines)
4. *pure monopoly*: single seller with control over price
what is the goal of marketers when it comes to demand elasticity? why? - ANS ✔✔reduce price
elasticity
- org. doesn't have to compete on cost
- able to compete on quality, brands, etc.
- customer's won't always seek the lowest price = price cuts won't be way to increase demand
- brands aren't perceives as substitutable
- premium price can be charged
, what are 2 the methods companies use for setting prices for new products? which sets the
product at a high price and which at a low price? - ANS ✔✔1. market skimming = high price
2. market penetration = low price
what is goal of market skimming? what conditions must be in place for market skimming to be
effective? what's an example? - ANS ✔✔- set a high price for a new product in order to *skim
max revenues from target market* resulting in fewer but more profitable sales
- certain conditions:
1. product quality and image support price
2. costs aren't too high
3. competitors can't easily enter market to undercut the price
- example: APPLE WATCH is very high price esp. compared to other products in the industry
what is the goal of market penetration? what conditions must be present? what's an example? -
ANS ✔✔- set a low price for a new product in order to *penetrate the market quickly and
deeply*
- certain conditions:
1. market is highly price-sensitive
2. product and distribution costs falls as sales volume increases
3. competition is kept out and low price position maintained
- example: KINDLE FIRE is much cheaper than the iPad and does essentially the same thing
other than market skimming and market penetration, what are 4 other strategies for pricing and
what characterizes each? what's an example of each one? - ANS ✔✔1. *optional-product*:
pricing optional or accessory products sold with main product (Volkswagen)
2. *captive-product*: pricing products high that must be bought with the main product (razor
blades)
Review
what is a narrow definition for price? - ANS ✔✔price is the *amount of money* charged for a
product or service
what is a more broad definition for price? aka price = ________. - ANS ✔✔price is the *sum* of
all the *values that consumers exchange* for the *benefits of having or using the product*
price = SACRIFICE
there is a pair of boots sold on Amazon and at Dillard's for $88 with the same tax and no
shipping. are they the same price? <-- what question are we really asking here? - ANS ✔✔are
they the same *sacrifice*?
- amazon's pair is cheaper because you dont have to go get them
- dillard's pair is cheaper because you dont hace to wait for them to be delivered, and you can
try them on before you buy them
*marketeres have to consider that customers will pick they product they get for less sacrifice
not always a cheaper price*
what 2 types of factors affect price decisions? what makes up each type? - ANS ✔✔1. internal
factors = marketing objectives, marketing mix strategies, costs, organizational considerations
2. external factors = nature of market and demand, competition, other environmental factors
(economy, government, resellers, social concerns)
what are 4 strategies marketers could use to respond to internal factors when choosing the
price for a product? what characterizes each? what's an example of each? - ANS ✔✔1.
*survival* strategy: low prices with hope it'll increase demand; Amazon
2. *current profit maximization* strategy: choose the price that produces the maximum current
profit
,3. *market share leadership* strategy: low as possible prices to become the market share
leader; Walmart
4. *product quality leadership* strategy: high prices to cover higher performance quality and
R&D; Marriot
what internal factors affect our price? - ANS ✔✔TOTAL COSTS =
1. fixed costs +
2. variable costs
______ determines the floor of our price, but _________ determine the ceiling. - ANS ✔✔cost
-- floor
customers -- ceiling
there is a spectrum of supply and demand situations that affect how a company can set its
prices. what are the 4 different stages on the spectrum and what characterizes each? - ANS
✔✔1. *pure competition*: many buyers and sellers who have little effect on price
2. *monopolistic competition*: many buyers and sellers who trade over a wide range of prices
and quality (blue jeans)
3. *oligopolistic competition*: few sellers who are sensitive to each other's pricing and
marketing (cell phones, airlines)
4. *pure monopoly*: single seller with control over price
what is the goal of marketers when it comes to demand elasticity? why? - ANS ✔✔reduce price
elasticity
- org. doesn't have to compete on cost
- able to compete on quality, brands, etc.
- customer's won't always seek the lowest price = price cuts won't be way to increase demand
- brands aren't perceives as substitutable
- premium price can be charged
, what are 2 the methods companies use for setting prices for new products? which sets the
product at a high price and which at a low price? - ANS ✔✔1. market skimming = high price
2. market penetration = low price
what is goal of market skimming? what conditions must be in place for market skimming to be
effective? what's an example? - ANS ✔✔- set a high price for a new product in order to *skim
max revenues from target market* resulting in fewer but more profitable sales
- certain conditions:
1. product quality and image support price
2. costs aren't too high
3. competitors can't easily enter market to undercut the price
- example: APPLE WATCH is very high price esp. compared to other products in the industry
what is the goal of market penetration? what conditions must be present? what's an example? -
ANS ✔✔- set a low price for a new product in order to *penetrate the market quickly and
deeply*
- certain conditions:
1. market is highly price-sensitive
2. product and distribution costs falls as sales volume increases
3. competition is kept out and low price position maintained
- example: KINDLE FIRE is much cheaper than the iPad and does essentially the same thing
other than market skimming and market penetration, what are 4 other strategies for pricing and
what characterizes each? what's an example of each one? - ANS ✔✔1. *optional-product*:
pricing optional or accessory products sold with main product (Volkswagen)
2. *captive-product*: pricing products high that must be bought with the main product (razor
blades)
