MKT 305 Exam questions and
answers graded 100%
5 factors affecting pricing decisions - ANS✅✅1. company objectives (profit, sales & market share,
competitor, customer)
2. costs
3. customer (value equation, prestige products, demand curves, price as signal)
4. competitor (price & non price competition, competitive parity, status quo)
5. channel members (price as incentive, markups, gray market)
3 basic pricing strategies - ANS✅✅1. EDLP (creating value through convenience)
2. High/Low pricing (reference price, creating value through "thrill of the chase")
3. Loss leader (logic of seller, logic of state minimum price laws)
Company Objectives - ANS✅✅Back in the Strategic Planning Process...
- Profit
- Sales (Market Share)
- Competitor (Positioning)
- Customer (value equation)
Market Share - ANS✅✅A company's product sales as a percentage of total sales for that industry
Customer - ANS✅✅With most products: a downward sloping demand curve
- demand increases with lower prices
- demand decreases with higher prices
Demand curves - ANS✅✅- Not all are downward sloping
- Prestigious products or services have upward sloping curves
Costs - ANS✅✅Anything incurred during the production of the good or service to get the output
into the hands of the customer
, Competition - ANS✅✅two forms:
1. non-price competition
2. price competition
Channel members - ANS✅✅manufacturers, wholesalers and retailers can have different
perspectives on pricing strategies
Pricing Strategies - ANS✅✅- Every Day Low Pricing (EDLP)
- High/Low pricing
- Loss leader
- At product introduction
- Market penetration pricing
- Price skimming
Loss Leader - ANS✅✅- Selected products deliberately sold below cost to encourage sales of other
products (typical in supermarkets)
- Purchases of other items more than covers 'loss' on item sold
- Loss leaders are restricted by state minimum price laws (where they exist)
price changes - ANS✅✅Causes: external influences on pricing, product life cycle, responding to
competition
Consumer reaction: price elasticity
Price skimming - ANS✅✅a firm charges a high introductory price, often coupled with heavy
promotion
Penetration pricing - ANS✅✅a firm charges a relatively low price for a product initially as a way to
reach the mass market
factors that affect elasticity of demand - ANS✅✅- availability of substitutes
- price relative to purchasing power or income
- product durability or cross-price elasticity
answers graded 100%
5 factors affecting pricing decisions - ANS✅✅1. company objectives (profit, sales & market share,
competitor, customer)
2. costs
3. customer (value equation, prestige products, demand curves, price as signal)
4. competitor (price & non price competition, competitive parity, status quo)
5. channel members (price as incentive, markups, gray market)
3 basic pricing strategies - ANS✅✅1. EDLP (creating value through convenience)
2. High/Low pricing (reference price, creating value through "thrill of the chase")
3. Loss leader (logic of seller, logic of state minimum price laws)
Company Objectives - ANS✅✅Back in the Strategic Planning Process...
- Profit
- Sales (Market Share)
- Competitor (Positioning)
- Customer (value equation)
Market Share - ANS✅✅A company's product sales as a percentage of total sales for that industry
Customer - ANS✅✅With most products: a downward sloping demand curve
- demand increases with lower prices
- demand decreases with higher prices
Demand curves - ANS✅✅- Not all are downward sloping
- Prestigious products or services have upward sloping curves
Costs - ANS✅✅Anything incurred during the production of the good or service to get the output
into the hands of the customer
, Competition - ANS✅✅two forms:
1. non-price competition
2. price competition
Channel members - ANS✅✅manufacturers, wholesalers and retailers can have different
perspectives on pricing strategies
Pricing Strategies - ANS✅✅- Every Day Low Pricing (EDLP)
- High/Low pricing
- Loss leader
- At product introduction
- Market penetration pricing
- Price skimming
Loss Leader - ANS✅✅- Selected products deliberately sold below cost to encourage sales of other
products (typical in supermarkets)
- Purchases of other items more than covers 'loss' on item sold
- Loss leaders are restricted by state minimum price laws (where they exist)
price changes - ANS✅✅Causes: external influences on pricing, product life cycle, responding to
competition
Consumer reaction: price elasticity
Price skimming - ANS✅✅a firm charges a high introductory price, often coupled with heavy
promotion
Penetration pricing - ANS✅✅a firm charges a relatively low price for a product initially as a way to
reach the mass market
factors that affect elasticity of demand - ANS✅✅- availability of substitutes
- price relative to purchasing power or income
- product durability or cross-price elasticity
